The Home-Buying Process in 12 Easy (?) Steps

This blog will cover the basic home-purchasing process, start to finish, in very simple terms but don't be fooled. Purchasing a home requires your time and attention, care, diligence, thoroughness, seeking out the best professionals to work with and proper preparation. The basic steps are laid out below but be sure to consult with a professional working on your behalf and ask questions, plenty of questions all along the way.

Think carefully about your options.

Typically this is the rent vs. own analysis. Consider your other obligations, the time it can take to properly care for a home of your own vs. letting the landlord do all the work. Review your basic finances and whether owning is in your budget. Consider how long you intend to remain in the area; if short term, buying is probably not a good idea due to the costs of purchasing the later selling but if you expect to remain in the area for at least the next five years or longer, owning makes more and more sense.

Get prequalified by a local lender.

We do not recommend online financing ventures – far too many surprises and frustrations in many cases. Work with a local bank with a strong reputation. In the prequalification process, the bank will determine on the basis of your income and credit history how much loan you can manage. Some people find they may have to clean up some credit issues before they can qualify. Better to learn this right from the start.
    
Link up with an experienced and dedicated realtor.

A realtor is a member of the professional association of the National Association of Realtors. Commit to working with a licensee who has a proven track record of success and commitment to the business. As with anything in life, some licensees simply do a better job. The entire purchase process has many hurdles and challenges so working with the best you can find will absolutely make a substantial difference in the outcome of the entire transaction.

Now the house hunting begins in earnest.

You and your real estate professional, whether an agent or a facilitator, will begin the process of sifting and sorting through all the properties that fit your criteria from price range to size, location, lot size, school district, distance to employment, age, condition, amenities etc. etc. There may be only a handful at first or there may be a dozen or more and you will want to take the time to look first at all the information available through your realtor through the Multiple Listing Service and do some drive-bys as well. An experienced realtor member of MLS can present to you any property listing so no need to go bouncing around from one firm to another. Find that good agent and stick with them. That way they will commit to you just as you commit to them.

After making your initial selection, head out on the road and see the properties. At this stage it's time to check out the houses you have narrowed down in your initial search. You're going to get emotional impressions of homes, pro and con, so pay attention to that. Let's face it, for 90 percent of all purchasers, the emotions rule and take precedence. Pay attention to those feelings. However, be sure to be practical as well. Maybe you fell in love with the view but the house is way too small or needs too much work. Pass that one up unless you can spend the added money to fix it the way you need it to be.

Do your due diligence once you narrow the options to a few top choices.

Besides the home itself and property, it is almost as important to investigate the surrounding area checking to see if you would feel comfortable with neighbors, the general area, highways, sources of noise or any negatives that might impact the property from your perspective. One couple purchased a home they fell in love with only to discover to their alarm on moving in that there was a model airplane club nearby and the sound was very disturbing to them. Neither of the agents, theirs or the sellers had mentioned this and neither did the seller.

Once you've settled on the house now put your realtor to work on value.

Every property has an asking price but how that price relates to value is a whole other topic. Your representative needs to do his/her homework including checking the deed, gathering the information available from the town or city, checking the public record for debts and liens as well as preparing a thorough comparative market analysis of comparable properties that have sold in order to provide you with a sound basis for making a judgment about value. In the end, however, value really is "in the eye of the beholder" and that's you.

The negotiating process. 

Some licensees are better at this than others, that is for certain and the difference can mean thousands of dollars to you. Here again, experience and ability really make a big difference. Your representative, be they an agent or facilitator will do the talking back and forth with the other side but you will need to make the crucial decisions. Here's also where one other element comes into play and also makes a potentially HUGE difference. As a buyer, ideally you will need and want a realtor who is independent of the seller. This means you need to either find a buyer's agent or a neutral facilitator who can work independently for both buyer and seller. This subject is covered in more detail in other blog posts.

The contract to purchase.

This is the very important document that spells out all the vital terms and conditions of the purchase including price of course, down payment, financing details, closing date and any conditions or "contingencies" to your purchase such as inspection and financing, plus personal property that may be included. You'll definitely want and need your agent, facilitator or attorney to prepare this. In most areas, realtors have forms approved by the bar association that are in common use.

Inspections, appraisal, financing, contingencies.

Now you're under contract on the house and property you want to purchase and this is time within which the property is poked and prodded, inspected inside and out, appraised and everything checked to insure the property is what you expect and there are no problems you either can't get resolved or repaired and the property value is confirmed by the appraisal. Assuming this part of the process works out successfully … .

This is the interim period while the property is firmly under contract. Now is the time to make those final preparations for the move, contacting and establishing accounts with the various utilities for the day you take ownership. This period of time may be as brief as a few weeks or as long as a month. Longer times may require a larger deposit to reassure the seller.

THE CLOSING!

The big day has finally arrived. First you need to meet at the bank or your attorney's or broker's office, wherever the parties all agreed to conduct the closing and handle all the paperwork. This typically will take about an hour if there is a lender. If by chance you're paying cash the closing might be a mere half hour. At the closing, you'll be signing lots of papers and the sellers will sign a few documents. Finally, when all the paperwork is completed, forms passed around, last-minute details settled, the funds will be distributed to the sellers, the brokers and smaller checks written to cover recording costs etc. Now you'll receive the keys to the property and it's yours!  

Of course it isn't quite official until the deed is recorded so one of the attorneys heads off to handle that detail. You meanwhile, having shaken hands and gotten over your jitters at realizing that yes, you really did it, you have actually made the commitment to purchase a house which soon becomes your HOME.

Congratulations!
 

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

What If: Engineer a New Use for North Adams Hospital

What if there was actually an exciting new use for the existing hospital building?

What if BMC and decisionmakers determine that the present North Adams Regional Hospital structure is simply too large for the present and declining population in North Adams and Northern Berkshire?

Besides the difficult road to recovery for all of the displaced employees for whom we as a community will need to do our very best to help become either re-employed elsewhere within the region or re-trained for new opportunities, there would then be the enormous task of re-utilizing the existing hospital structure.

What if we as a community and as a county were to re-imagine something radically new, something so fresh and different that, like Mass MoCA which was, let's face it, at the time, an extraordinary dream of seeming impossibility, it could actually work?

Quite a few years back Peter Fohlin, the town manager from Williamstown, shared with me an idea I always thought brilliant and have since shared in conversations with a number of leaders in our area, an idea whose time may really have arrived if indeed it is determined the hospital as it is can no longer be justified due to its size and the changes in health delivery today.

The idea is to establish an engineering college here in the Berkshires.

Until now, the idea didn't appear to be taken too seriously or was treated as too far-fetched. But with the looming possibility facing us that the hospital could end up empty and even emergency services might have to move due to the way in which the utilities are all tied in together with the entire building, now may be the time — just like when Sprague left.

What is needed when something as huge as the closure of the hospital is upon us is not to wring our hands and throw in the towel but instead to think new, bold and affirmative ideas. Out of every seeming problem is invariably an opportunity and quite possibly now is the time to seize upon this idea which has lain dormant and to run with it.

Boston has a state engineering school as does Worcester. North Adams has MCLA, Williamstown has Williams College and to build upon the educational and arts orientation of the northern area the  addition of a state engineering school could be the shot in the arm (pun intended) that is needed with the closure of the hospital.

Others may have alternative suggestions but I can't think of another possible use that could bring more high paying jobs, more general employment and more income to the area than an engineering college and the spinoffs would be equally impressive. Such a school would not only help stem the tide of population decline due to the aging of the baby boomer generation in general but would bring youth and revitalization to the area so badly needed.

One need only look over the mountain at Northampton as an example of how much vitality and prosperity is brought to an area from education. Mass MoCA for all its extraordinary qualities primarily brings temporary visitor traffic. An engineering school would bring permanent change and activity and help rebuild our communities and local economy.

The hospital building, if re-utilized for an engineering school, might also be able to accommodate the emergency services area without disrupting that from the present location. The two uses could be entirely compatible. In fact it could even be quite feasible to reconfigure the hospital down to a manageable size, a fraction of what it now is, so that the city could in fact maintain a small local hospital alongside this proposed engineering school.

Peter Fohlin's idea may well have found its right time and place in the form of an engineering school in place of the hospital. What could be more vital in today’s world than a place to educate the nation's future for the needs and world of the future.

I put this out therefore to the public and to leaders and decision makers to discuss, on the local, regional and state level. We cannot allow this extraordinary event and the opportunity it presents to slip through our hands. The time is now to focus not just on the loss but more importantly, too, on the opportunity to transform the loss into something even better.

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

Investors Taking Advantage of the Real Estate Market

I've been reading recently of the very significant volume of residential purchasing being done by hedge funds and investors in general and, while we live in a democratic capitalist society, it troubles me.

Here we are just four years out from the devastating effects of the derivatives scandals and excesses and once more big money is manipulating and disrupting another part of American life, purely for profit.

Housing was once just that, a house, a place of comfort and refuge but now it's treated like an entire market to be manipulated, used by big-money interests for their gains regardless of the impact on the average American.

What's worse is that the hedge-fund buying is gathering up thousands and thousands of low-end real estate that otherwise would have been available as starter homes for Americans looking to establish credit, build some equity, join in the "American Dream." Instead, they are now in many cases forced to rent from these investor funds the very homes they might otherwise have been able to purchase. Worse, they may be renting the houses they once owned but were foreclosed on due to the abusive lending practice of putting people in submarket rates that escalated rapidly to excessive levels.

Who cares and why should we?  Anytime a 400-pound gorilla enters the ring, it's clear who's going to win: The gorilla every time. In this case it's again the hedge funds that are intending to skim the profits — first from rental income and later from the theoretical appreciation that will occur with time that otherwise could have helped lift tens of thousands of Americans to a better living standard. Now these Americans will pay rent and get nothing for it.

A recent Goldman Sachs study estimates that 60 percent of all real estate transactions are now in cash. Apart from a small percentage of the very wealthy who may purchase real estate for their personal use with cash, the balance of all these cash transactions are by hedge funds that have bought up masses of foreclosures from lenders. The proof of this trend is starkly evident when only as recently as five years ago the level of cash purchases was 5 percent.

It is a cruel and perverse irony that the very firms and individuals who brought the house of cards they erected down in the great financial meltdown of 2008 are now the ones picking apart the leftovers again for their gain, at the expense of the common American.

So the next time you read a news article about the shortage of inventory of homes for sale or price increases you will now remember that the cause is hedge-fund buying and not necessarily a sign of a robust and rebounding market based on average Americans getting back into their dream home.  

It's also important to realize that the shortage of listings on the market is not spread evenly around the nation. Those markets that were at the epicenter of the bubble-up and then the crash, like cities in Nevada, Florida, California and Arizona for example, are also now where the hedge funds have focused and are impacting the markets the most by buying a high percentage of the formerly troubled real estate.

In our region, the Boston market is bucking the trends and demonstrating strength from conventional buying. The greater Boston area thrives and continues to witness strong real estate trends due to the education, medical and technology base of its economy. New York City benefits as the financial capital of the world and as a magnet for a very high degree of foreign wealth as purchasers of high-end real estate.

Berkshire County, I am happy to say, typically doesn't experience the extremes of highs and lows of racier markets around the country but we are not immune to the trends either. There is very little speculative buying for flipping any longer but there has been a slight uptick in purchasing lower-end real estate for renting as an investment. Those buyers hope to achieve a positive cash flow in the short term and expect appreciation to yield a nice payday when they cash out. Time will tell how that works out.

There is very little spec building at present but a few courageous builders are doing that as a way to keep their crews going and to make up for a drop in new contract building.

With vast sums of money sloshing around in the banks and investment houses it's no wonder they keep looking for places to put their cash to work. Quantitative easing has pumped billions into the hands of these powerful firms and, as always, it works to their benefit and not typically for the benefit of the common man, the 99 percent and certainly not the bottom 20 percent.

Here in Berkshire County the majority are enjoying their homes as homes and not trying to turn them into cash machines. That's another reason I enjoy the Berkshires so much!

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

Real Estate and Attorneys

Here in the Northeast, attorneys are an integral part of virtually every real estate transaction from the simplest to the more complex. In other regions of the nation, however, known as title states, attorneys are much less frequently involved in the normal residential transaction. Those are handled through the real estate licensees and title companies.

The primary reason we have attorneys engaged in the real estate transactions here in the Northeast is to handle the title searches, banking and the closing documents. Could title companies do those, yes, but it is not the present customary practice in the Northeast.

In the larger metropolitan areas like Boston, Hartford and New York City, real estate brokers most commonly prepare offers but then the process is turned over to the attorneys who draw up the purchase agreements. This is a widespread practice in much of New York State but none of these practices are required under the law, they have just evolved.

In Berkshire County and over the border in Vermont, most brokers still prepare the purchase and sales agreements using forms created by boards of realtors, although some of the newer younger agents appear to be leaning toward bringing lawyers into the transaction sooner.

A real estate transaction evolves out of negotiation and then transforms into a process of handling documents and this is where the attorneys spend the majority of their time, unless of course there is some controversy or problem that arises that is legal in nature in which case, by definition, the real estate licensee must step back and allow the lawyers to handle it.

Attorneys are by training advocates for their client, they are not negotiators per se but of course some lawyers will profess to be "deal makers and not deal breakers." Nevertheless, so much rides on the personality and style of the attorney or attorneys involved as to how things turn out, whereas with the real estate licensees, their training is to do all they can to put a deal together through give-and-take negotiation. I have seen significant terms in a previously negotiated agreement changed by an attorney for one side or the other that then kills the sale. It doesn't happen very often but it can.

Attorneys often step into a transaction very far into a listing and negotiation and as such they don't know the personalities of their client very well or the history of the listing process or negotiation and thus they may be tempted to make snap recommendations or assert a view or position that is out of sync with the entire process.

Of course, clients don't have to follow their attorney's advice when it comes to optional matters but they often do, thinking the attorney somehow knows best. Some attorneys will even act without the knowledge or consent of their client because they believe they know what is best. That may or may not be the case so consider carefully the style of the attorney you select and weigh your attorney's advice just as you should weigh the advice and input from everyone your hire whether it is the real estate agent, an inspector, bank lender, or contractor.

In brief, be a fully informed and engaged consumer of all professional services.

When is it the right time to hire your attorney? Whenever you feel the need for legal advice is the simple answer or whenever you don't understand any aspect of the transaction and particularly when it has legal implications. Keep in mind that every document you are asked to sign regarding a real estate transaction is potentially legally binding and as such you need to take full responsibility for fully comprehending the document or for seeking the advice of an attorney if you don't.

Safe is far better than sorry in matters as important as these.

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.

High End Sales, Williamstown and Berkshire County

The first million-plus sale in the county was recorded in 1996 and three years later the first one in Williamstown. In the ensuing years there have been a total of 280 countywide, of which 21 have sold in Williamstown. Three each sold in 2002, 2007 and 2012 with none in 2013 and one so far in 2014. Countywide, the number of million-plus sales peaked in 2004 and 2006 at 31 each down to 21 in 2013.

Meanwhile the inventory of high-end real estate listings reached around 14 or 15 in recent years in Williamstown and 83 countywide. At the current rate that means 14 years of million-dollar inventory in Williamstown and four year's worth in the county as a whole.

What has happened in the high end of the market?

Million-dollar sales are here to stay and in fact the top-end selling prices will also tend to edge higher as well. Let's face it, we have some fabulous real estate in Berkshire County and people keep adding more as well so I foresee a continued market for high-end properties, as with all price ranges of course, but at a muted level in the near term as the economy works its way back out of the great recession of 2008-09.

Berkshire County has lost population over the years, everyone knows that is due to a combination of job shrinkage as well as retirements to sunnier climes. The Berkshires will never lose its most valuable assets, however, and those we consider to be our scenery, our cultural assets (which keep growing) and our more reasonable pace of life as compared to the major cities in the Northeast. No one can take these treasures from us and these are the attractions that will continue to draw second-home owners who will purchase our high-end real estate.

We are blessed with a relatively benign climate where hurricanes, tornadoes, earthquakes, and persistent deep snows and sub-zero temperatures are either non-existent or of a moderate level so as to produce little if any damage. We are typically spared the most severe effects of hurricanes, we manage our snow easily, and the region is not expecting any earthquake or volcanic activity, at least none that would cause damage or injury.

Thanks to our relatively sparse populations we don't have concerns for the urban problems of civil unrest, traffic snarls, municipal worker strikes, breakdowns in public transit, major utility failures and we are not likely to be a target we hope, for any sort of terror act. This is why, as an example, the Clarks built the world renowned Clark Art Institute here, because they wanted to house their collection far from any potential nuclear strike zone (this was during the height of the Cold War with Russia) and yet be within a reasonable distance from New York City and Boston.

In short, the Berkshires are a fabulous place to live or have a second home and these are among the many reasons our second-home market will remain strong in the years to come and we hope, return at some point to the level of activity it once reached. Perhaps we need to wait a few more years for a more complete economic recovery and perhaps there are some listings which are priced too ambitiously and which would do better to be under the million-dollar level but of one thing we can be certain, million-dollar sales are here to stay in the Berkshires.

Paul Harsch, president and founder of Harsch Associates, a Berkshire County based real estate brokerage firm, is a licensed real estate broker in Massachusetts, New York and Vermont, serving a diverse residential, business, commercial and land client base for 40 years.