What is real estate?
Any piece of land can be considered real estate. Land, along with everything attached to it – whether natural or man-made – is real estate. These attachments could include rocks, minerals, streams, fences, buildings, trees, etc. The higher the value of these attachments, the higher the price of the real estate. This is the origin of the term “prime real estate”.
Because of how valuable real estate is and its enduring nature and ability to appreciate over time, ownership of real estate is considered an investment. Not only would you recover the money spent on the purchase, but you also have the opportunity for a hefty profit.
Some people buy real estate to sell off after some time for profit. They stand to make good money doing so too. Such people are called real estate investors. However, some people buy real estate to build a home in and they may never sell their homes for as long as they live. They prefer to use their real estate asset as collateral with which they can procure loans for other profitable business ventures. They are also called real estate investors.
There is no right or wrong way to invest in real estate. The parameters for investing are not as straightforward as neatly summarized above. When it comes to real estate investment, there are a host of options available to you full of intricate details.
Here, we cover real estate and the home buying process in Delaware from start to finish. We’ve also linked out to resources for further reading should you wish to know more.
Where to start looking
Delaware has great real estate spots to pick from. The bustling vibes and ocean air attract tourists from all over. Most people fall in love with it and decide to vacation there every year. Some just pitch their tents and decide to stay. If you’re wondering how the real estate market in Delaware is looking, we’ve made some calculations.
A lot of factors are taken into consideration when determining whether or not to buy a property. they include:
1. Quality of maintenance of the home
2. The location of the home
3. The size of the home
4. The value of neighboring properties
5. The overall economy of the city
Using these five (5) parameters, we’ve narrowed down the best places in Delaware that have low entry barriers, rising home value appreciation rates, and a low cost of living. If you want to live in Delaware and get good returns on your investment, we’ve rounded up a list of investor-friendly locations:
A tightly-knit village bordering a major economic hub, Ellendale is home to thousands of tourists during the summer months. The average price of homes here is $171,840. When compared to the state’s median home value price of $303,000, it seems like a pretty good deal.
It is located in a quaint little village fondly referred to as the gateway to Delaware’s resort beaches so you never have to worry about your home depreciating.
With elite towns like cape Henlopen and Lewes all around it, it presents a desirable location. According to Zillow, the average price of homes in Rehoboth beach is $604,383 and climbing. That may seem pretty steep right now but studies suggest that this figure could potentially double in the coming years.
Home appreciation rates in Rehoboth beach are 20% higher than the state’s average and 80% higher than the national average.
The median value of homes here is $194,000. This is significantly lower than the national average. Home values are climbing steadily because of its proximity to Dover, the state’s capital.
The average home value here is $183,700. This is considerably lower than the national average and presents a great entry opportunity for investors. Although the real estate market here is growing steadily, it is still a great place to start if you want a good bargain.
Finding a real estate agent
When you’ve settled on a location you like, it’s a great idea to do some digging of your own. You’ll want to make sure the area meets all of your requirements. For instance, if you’re on the hunt for a place to lay down roots and call home, the location you pick should have some basic features such as a nearby school, market, hospital, bank, leisure center, etc.
When you’re sure about your choice, the next thing you want to do is to find a good agent who knows the area pretty well. The agent you pick should be experienced; someone who knows his onions. Here are few important qualities your real estate agent should have:
1. Excellent communication skills:
During the homebuying process, you will need to interface with your agent regularly. To understand your unique needs, deal-breakers, and hard no’s, your agent must be able to listen and respond effectively.
2. Technological skills:
Technology can be found in every sector and industry today. Real estate is not left out. To excel, professional real estate agents must keep abreast of the latest trends in technology, understand how they work, and use them effectively to serve their clients.
Technology as simple as email and calendar scheduling can speed up simple tasks and make communication seamless. You want the real estate agent you pick to be tech-savvy.
3. Superb negotiation skills:
Negotiations are an unavoidable part of every business transaction. The real estate industry is not exempt. The highly driven nature of the business makes it a dog-eat-dog land; the best negotiator takes all. Your real estate agent needs to be able to represent your best interests at every seating. They need to present contingencies that mirror your interests and uphold your values.
It is worth mentioning that all realtors are real estate agents but not all real estate agents are realtors. The dividing line between the two is that all Realtors have been through a certification process with the National Association of Realtors (NAR).
Here are 4 key tips for finding the best real estate agent in your area:
1. Do some research for agents with the highest listings:
Finding a real estate agent with tons of clients and a high number of confirmed closings indicates that he or she has a substantial level of skill at the job. This is exactly what you’ll need from them.
2. Use word-of-mouth referrals:
If your friends like someone, it’s likely that you will too. Getting word-of-mouth referrals from family members or buddies is a great way to find a real estate agent to work with.
3. Check your agent’s practicing license:
You don’t want to work with someone who’s got an outdated license or someone who’s faced significant disciplinary actions in the industry. As you make a final draft of your top picks, you might want to pay a visit to your state’s real estate department website and look up the agent’s name.
4. Play hardball:
This means that you’re allowed to approach several agents at once and conduct interviews for each one. During each interview, look out for signs such as composure, competence, pricing, and amount of effort put into the proposal. You also want to know what the individual’s best communication platform and preferred hours are.
If you like proper phone conversations and are only free to go house hunting on weekends, you’ll want to work with a realtor who easily accommodates that.
Buying a real estate property
Before you can buy a house in Delaware, you want to be sure that you’re ready for it. It’s easy to look through communities to find the perfect fit and finding a real estate agent, while not exactly a walk in the park, is a breeze compared to this next step.
Nobody likes to talk about money but to buy a house in Delaware, we must have this conversation. One question sums up the conversation about money nicely; do you have any?
To buy a house in Delaware, you must get your financials in order. Here are a few things you’ll want to get straightened out before you begin making offers:
1. A good credit rating:
You’ll need a good credit score to earn favor points at the bank that’s going to loan you money. A good credit rating convinces the lender to hand you a loan to purchase your property because you’re likely to pay it back.
2. Cash in the bank:
You’ll need this at the beginning and toward the end of the home buying process. When you make an offer on a house, at some point, you’ll be expected to pay a small fee called earnest money; it sends a message to the seller that you’re intent on purchasing their house. Toward the end, you’ll need cash to cover all closing charges incurred.
3. A letter from a bank stating that you have been preapproved for a loan aka a preapproval letter.
Steps in the home buying process
When you get your financials in order, you want to work hand-in-hand with your agent to get the best possible deal. The home buying process can sometimes drag on with weeks of back-and-forth between your agent and the seller’s agent. Even the best of us despair.
We find that it’s easier to keep going when you focus on the various steps involved in the homebuying process rather than solely on the details of each step. This way, you can follow along and track your progress toward your goal of owning a new home.
We know every home buying journey is different. Luckily, we were able to isolate common factors that occur in all. These steps are a general run-through of what you can expect as you embark on this journey. Here are the 6 steps to buying a house in Delaware:
Step 1: Settle on a house you want to purchase
Step 2: Have your agent approach the seller with an offer
Step 3: Order up an inspection on the house
Step 4: Read through your contract with your agent thoroughly
Step 5: Get your mortgage officially approved by the bank
Step 6: tie up loose ends and cover your closing costs
Viola! The keys to your new home are in your hands. We know the home buying process is a tad more complex than just 6 steps. Your real estate agent can fill you in on the details of your unique journey.
Tips for first-time homeowners
If this is your first rodeo and you’ve never bought a home before, yikes! We can’t promise it’ll be easy but we can promise to prepare you for what’s ahead. Buying a home is a big deal, it can be a really exciting time but don’t think it’s all bells and whistles!
Owning a home is a huge commitment, it’ll require you to take on a ton of responsibilities like monthly mortgage payments, random household repairs, membership in a homeowners’ association (if you’ve got one), and lots more.
We want you to go into this new phase of your life for the right reasons, prepared for what’s ahead. So here are some questions to answer to know if you’re truly ready:
1. Can you settle in that city for at least 5 years?
The typical loan duration is anywhere between 15 – 30 years. You may not have to live in the house for that long but, chances are, you will be spending a significant chunk of time there. Not only that, but you’ll also be committing yourself to a loan payoff every month. Ask yourself if this is something you believe you’re ready for.
2. Do you have a good credit score?
When preparing for a huge financial undertaking, it is wise to avoid any reckless spending or taking up a new line of credit. You should nurture your credit score for a good while to keep it within the upper limit. This is so lenders can confidently approve your loan.
3. Do you have a cash stash?
Many people believe that most of the payments made during the home buying process are not made in cash. There is a grain of truth in this because there are state programs, loans, and tax incentives designed to assist first-time homeowners in purchasing a home.
However, these do not cover all the costs involved. You will still need to have a good amount of money set aside to cover fees like the down payment and closing costs.
Check the United States Department of Housing and Urban Developments to find out if you qualify for a loan assistance program.
4. Do you have a great agent?
Agents and realtors are trained to understand the real estate industry and the local market. As a first-time homebuyer, you don’t want to waltz into the home buying process on your own. You’ll need a great representative by your side and if you haven’t got one yet, here’s a gentle reminder to do so.
Real estate agents will help you throughout the home buying process and answer any questions you may have. To get you started, here are 7 common questions realtors often get asked.
Why you need a home inspection
A home inspection evaluates the condition of a property. It points out faults in the structure, appearance, and interior of a home. You’ll want to order up a home inspection before you close on a property.
Home inspections can uncover underlying defects that may be deal-breakers for you, causing you to back out of the deal. Alternatively, you may stipulate in your contract that the seller fix the issues found before you pay for the home. This act will be classified as a contingency.
Don’t mix up a home inspection with a home appraisal as they are not the same thing. Sure, they are similar in some ways, however, several factors make them differ. Here are a few key differences between home inspections and home appraisals:
1. Home inspections are usually performed at the request of the buyer, not the seller.
2. A home inspection will not impede your loan approval but a home appraisal might.
3. Home inspectors assess the flaws of the property whereas home appraisers determine the worth of a property
Home insurance is a key step in the home buying process. It acts as a safe bubble for your investment. Your lender will require to show proof of home insurance coverage around 3 days before closing. If your home gets damaged or destroyed, insurance makes sure your lender does not lose their money.
If you can afford to own your home outright, it is still a good idea to get good homeowners’ insurance for your property.
Depending on your initial down payment and the location of your property, your lender may require you to get additional insurance such as private mortgage insurance (if your down payment is less than 20%), earthquake insurance, flood insurance, etc.
Speak with your lender to get a good idea of what type of insurance you will need.
Reducing your debt
When you take out a loan to purchase a house, don’t constrain your expenditures because of what you owe. Instead, make a little payment to your lender each month that will go toward reducing that debt. These payments can span as long as 15 years or more.
We know 15 years is a pretty long time to pay off a debt. Don’t worry, there is something you can do to speed up the payment process; it’s called building your equity.
In simple terms, equity on a property is calculated by subtracting the amount you owe the bank from your home’s current market value. What’s left is your equity. There are two ways to reduce your debt on a property:
1. Increasing the market value of your home through renovations and regular maintenance
2. Increasing your loan repayment rate
When you carry out renovations or routine maintenance on your property, you either maintain its market value or increase. So, even if an $8000 renovation bill takes money out of your pocket right now, it’ll increase your home’s market value, thus, putting money back into your pocket in the long run.
Another way to reduce your debt on a property is to increase the amount or frequency of your repayment. This one is easy math. The more amount of money you put down against your loan, the quicker you get out of property debt.
Well, there you have it! The complete rundown of real estate and the home buying process in Delaware. We know it can be a lot to digest especially if you’re a newbie. We’ve found that having a great agent always helps. Also, don’t put off asking questions as they come to you because you may forget.
Really make sure you understand the details of every document before you sign. Keep track of all your expenses too. If you have a poor experience in the end, don’t write off real estate investment altogether. Instead, make a mental note of all the things that went wrong and think of ways it could have gone better so you’ll be better prepared next time around or when you’re advising a friend.
Finally, if you do have a great experience, remember to refer your friends and loved ones to the agent who made that happen and to this article too!