Buyers Guide for Realty in USA

The house buying process is very different in the USA from what you have been used to in the UK.. In the UK, in order to check out all the properties on the market it is usually necessary to visit all the estate agents in your chosen area, then sift through the newspapers and the web. Although, in the UK estate agents markets properties, it is normal practice to be shown around a property by the sellers who are usually the current owners and this is very rarely done in a pressurized manner.

The system is totally different in the USA and you are very vulnerable to making a costly mistake if you are not adequately briefed on the differences. One of the most frequent mistakes made by a British buyer is to approach the Realtor (Estate Agent) who is listing (selling) the property. The buyer has usually seen the property advertised in a magazine or newspaper, on a sign-board outside the house, or on the web, and reacts exactly as they would in Britain, and contacts the Realtor named in the advert.

All too often it is not realized that this Agent is acting by law solely on behalf of the seller and if you use them to buy the property they are listing, they are legally not able to disclose to you certain vital factors affecting the price you might pay on that property. As an example, if the seller has specific financial reasons why they are selling, if the seller would accept a lower price, indeed anything that might be detrimental to the seller, or be advantageous to you, as the buyer, cannot ever be disclosed to you by the agent listing that property. As you can see, if you buy a property through the seller's agent, not only do you lose valuable legal rights, but the seller's agent also benefits from receiving all the commission. This obviously helps explain why there is so much pressure on you to buy directly from the adverts you see in the papers and magazines or on the signboards outside properties that are for sale. However, if you choose your own Agent, exclusively to represent you, the commission that the sellers pay to have their home listed for sale is then split between their Agent and yours.

Differences between the British and American housing process and market. It is beneficial to your interests and protection when an agent acting on your behalf, has a full understanding of all the differences between the British and American house-buying process and housing markets. The implications of these differences can be of major significance. Some agents will say the differences are not important. They are and it certainly helps to safeguard your interests if your agent has this additional level of expertise and experience. A couple of examples below illustrate the importance of this.

New Developments

Suppose you have selected an agent to work with (you may even have signed an agency agreement), but on a free day you decide to visit a new development on your own or you have requested an information pack while in Britain.

You have to be particularly careful when visiting a new home in certain states, such as Florida. Otherwise it can end up unnecessarily costing you thousands of extra dollars. Developers have large advertising budgets to attract you to their show houses. The agent present at the development you visit is working solely for the builder or developer. Whatever they may say, they are not independent and do not, and indeed, legally cannot act exclusively on your behalf. A number have very extensive sales experience, including training in the psychological reaction of buyers in every conceivable scenario! With some builders many of the features included in the show house are extras, not included in the price, including items you may assume at first glance are included.

With some builders the list of extras sometimes resembles the casting list of Ben Hur, and the base model is very basic. The builder's agents can be very persuasive in suggesting a whole stack of additional mod cons that you apparently require to maintain the value of the home. They are very often on a higher level of commission for these extras, which can cover hundreds of items; from sinks, tiles, carpets to even grade of paint! This is not always the case and selecting the wrong options, can actually lead to a loss if you sell the house in a short period of time. Other builders offer very competitive homes with many features included as standard, but being new to America, how can you tell which builders properties will have the best resale value in 5 years time?

Some of the other areas that need to be discussed are, for example, is your plot going to be developed several months or years ahead of neighbouring plots? What are the implications in terms of eventual resale value of selecting a particular plot? Your reasons for the selection of a particular plot could have a significant financial affect on the resale value later on.

The builder's agent may need to sell a few remaining plots from a particular phase before the next selection are released, and offers what appears to be at first glance an attractive discount. However, the new phase may have significantly better resale potential. When it comes to eventual resale, the chances are that you will be selling to an American and their criteria for home selection has subtle differences to that of the British. Is your agent going to advise you of these cultural differences?

Some additional points, is that lovely lake at the back of your house going to be dry in the winter? What are the positive and negative implications of maintenance free homes? Do you have the knowledge or experience to know which questions to ask? If you have registered when you walked into that development or have given your personal details you may have lost your exclusive Agent representation. The commission for your agent was included in the selling price of the house. You will not obtain the property at a lower price by buying it directly from the builder, instead the builder benefits. Therefore you forgo your agent's exclusive representation of your interests. This has happened all too frequently to unsuspecting Brits, so please be careful.

The same is true if in certain states you drive past a house you like and call the agent on the sales board, without going through your own agent. If your own agent is working specifically for you he/she is legally bound to tell you information he/she is aware of which could affect the selling price. For example, the seller may require a quick sale for financial reasons. However, if you are dealing directly with the seller's agent they are legally bound not to give you that information, if it affects their client, which in the example above, it would.

Is new better than old?

A pre owned house can often be purchased more quickly, completion usually takes between thirty and sixty days, this varies from State to State. A new house can take up to a year to complete and offers you the opportunity to select your own choice of decorations and fittings, it will require a greater initial outlay for all the items you may need to add though. However if you want a property sooner, builders often have a number of inventory properties available. Some builders only require a 10% deposit before building your house with no other payment until completion; this can represent a significant saving as other builders can require substantial stage payments.

An older home can have implications as I discovered a few years ago when new to Florida, I purchased my ideal waterfront property, from the agent who was listing it, yes it is very easy to make that mistake!!!! Years of living in England in both new and Victorian houses combined with a satisfactory building inspection on the house in question did not prepare me for the water pipes bursting under the ground a few months after moving in, or the air conditioning requiring complete replacement. I had not been warned that 1960 houses were often constructed using metal pipes under the foundations; newer houses are built to higher standards. It was not the greatest moment of my life having the recently laid ceramic tiles dug up to reach the pipes, or holes cut into the ceiling to gain access to the air conditioning. It is recommended home warranty cover is taken out, I can advise how, in certain circumstances, this can be added at no cost to you. Another area to be aware of, if buying a resale property is properties that have been altered without the owner or his builder obtaining the necessary licences. In effect these areas are in violation of the building code and subject to a citation (fine). This is at the very least a problem in the future if you decide to sell the property. Common examples of code violations are extensions, conversions, enclosure of lanais and a new bathroom.

How easy is it to obtain a mortgage?

The minimum Overseas Investor deposit requirement is 20% down, but can vary up to 35%. As a general rule the higher the deposit made the lower the mortgage interest rate. A number of different mortgages are available with a summary below of the main types:

• A UK Sterling mortgage, available from a major UK bank allows the mortgage to be converted from dollars to sterling at the time of buying and therefore reduces certain exchange rate risks.
• A US dollar mortgage is usually at a fixed rate for a 5, 15, or 30 year term. Beware of the implications of an up-front payment, referred to as points, which can have a significant effect on the cost of your mortgage. For more information on mortgages and the pitfalls you need to be aware of, I can put you in touch with a number of mortgage specialists who can also pre-qualify you for a loan before you buy. This will greatly increase your buying power

For more details on Mortgages in America see our Mortgage Page