What is real estate?
Any piece of land can be considered real estate. Land, along with everything attachedto it – whether natural or man-made – is real estate. Theseattachmentscould include rocks, minerals, streams, fences, buildings, trees, etc. The higher the value ofthese attachments, the higher the price of the real estate. This is the origin ofthe term “prime real estate”.
Because of how valuable real estate is and its enduring nature and ability to appreciateover time, ownership of real estate is consideredan investment. Not only would you recover themoney 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 thesefive (5) parameters, we’venarrowed downthe best placesin Delaware that have low entry barriers, risinghome value appreciation rates, andalowcost of living. If you want tolivein Delaware andget good returnson your investment, we’ve rounded upalistof investor-friendlylocations:
Ellendale
A tightly-knit village bordering a major economic hub, Ellendale is home to thousands of tourists during the summer months. The averageprice of homes here is $171,840. When compared to the state’s medianhome value price of $303,000, it seems like a prettygood deal.
Itis located in a quaint little village fondly referred to as the gateway to Delaware’s resort beaches so younever have to worry aboutyour home depreciating.
Rehoboth beach
WithelitetownslikecapeHenlopenand Lewesall aroundit,itpresentsa desirable location. According toZillow,theaveragepriceofhomesinRehobothbeach is$604,383andclimbing.Thatmay seemprettysteep right nowbutstudies suggestthatthisfigure could potentiallydouble inthecomingyears.
Home appreciation rates inRehobothbeachare 20% higherthanthestate’saverageand 80% higherthanthenational average.
Camden
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’scapital.
New Castle
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, leisurecenter, etc.
Whenyou’resure about your choice, the next thing you want to do is to find a good agentwho knows the area pretty well. The agent you pick should be experienced; someonewho knows his onions. Here are fewimportant qualities your real estate agent should have:
1. Excellent communication skills:
Duringthe homebuying process, you will need to interface with your agentregularly. Tounderstand your unique needs,deal-breakers, and hard no’s,your agentmust be able to listen and respondeffectively.
2. Technological skills:
Technology can be found in every sector and industry today. Real estate is not left out. To excel, professionalreal estate agents must keep abreastof the latest trends in technology, understand how they work, and use themeffectively 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 theNational Association of Realtors (NAR).
Here are 4 key tips forfinding the best real estate agent in your area:
1. Do some research for agents with the highest listings:
Findinga real estate agent withtons ofclientsand a high number of confirmedclosingsindicates thathe or shehas asubstantiallevel ofskillat thejob.This is exactlywhat you’ll needfrom 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 amountof 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 onlyfree to go househunting onweekends, 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 earnfavorpoints 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 calledearnest 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 allclosing 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 buyingprocess 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 solelyon the details of eachstep. Thisway, you can follow along and track your progress toward your goal of owning a new home.
We know everyhome buying journey isdifferent. Luckily, we were ableto isolate common factorsthat occurin all. These steps are a general run-through of whatyou can expect as you embark on this journey. Here are the6 steps to buying a housein 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 buyingprocess is a tad more complex than just 6 steps.Yourreal estate agent can fill you in on the details of your uniquejourney.
Tips for first-timehomeowners
Ifthis 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 toprepare 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 trulyready:
1. Can you settle in that city for at least 5 years?
The typicalloan durationisanywherebetween15 – 30years.Youmay not have tolive inthehouse forthat long but, chances are,you will bespendingasignificant chunkof time there. Notonly that, but you’llalsobecommittingyourself toaloan payoff every month.Ask yourselfif this is somethingyou believeyou’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 scorefor 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 mostofthepayments made during thehome buyingprocess are notmade in cash. There is a grainoftruthin this because there are state programs, loans,and taxincentives designed toassistfirst-timehomeownersin purchasing a home.
However,these do not coverall thecosts involved. You will still needto havea good amount of money set asideto cover fees like thedown paymentand closingcosts.
Check theUnited States Department of Housing and Urban Developmentsto 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 are7 common questions realtors often get asked.
Whyyouneedahomeinspection
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 orderup a home inspection before you close on a property.
Home inspections can uncover underlying defects that may be deal-breakers for you, causing you toback 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 acontingency.
Don’t mix up a home inspectionwith a home appraisal as theyare not the same thing. Sure, they are similar in some ways,however, several factorsmake them differ. Here are afew key differences betweenhome inspectionsand 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
Getting insured
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,insurancemakes sureyour lender does not lose their money.
If you can afford to own your home outright, it is still a good idea toget good homeowners’ insurancefor 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(ifyour 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 paymentto your lender each month that will gotoward reducing that debt. These payments can span as long as 15 years ormore.
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 calledbuilding yourequity.
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 $8000renovation 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.
Final thoughts
Well, there you have it! The complete rundownof real estate and the home buying process inDelaware. We know it can be alot to digest especially if you’re anewbie. We’ve found that havinga great agent always helps. Also, don’t putoff asking questions as they come to you becauseyou 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 experienceinthe 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 itcould 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!
