What is the timeline of purchasing a property?
Obviously there is not “one correct order” of approaching your real estate purchasing and financing.
However, there are certain steps that can save you some time, energy and disappointment if you do them in the right order.
Usually when people develop the thought of purchasing a property, they think of a monthly installment that seems payable and look up online how much credit they can take with that monthly payment. Right afterwards they start looking for properties in that credit range online. That’s totally Ok. But keep in mind that a monthly installment is not always going to result in the same possible mortgage amount. There are other factors to it
1.) Making sure you look at the right properties by knowing your budget (and what to look for)
There are no risks or costs in talking to a mortgage broker* but a lot of useful information to get.
A mortgage broker can check what obstacles, limiting factors or special options you will face in your individual situation. These can be anything, from your language (not all banks give mortgages to clients who don’t speak German), your residency status, your age, maritial status, citizenship etc. etc.
After analyzing your financial situation the mortgage consultant will be able to tell you exactly up to how much property price you can afford.
If you are lucky enough to meet a service oriented advisor, you will also have a partner at your side with whom you can discuss multiple properties that you are interested in.
2.) Starting the search
The search of the property should be considered as a (temporary) hobby. Don’t expect to find the right one within a few weeks. Don’t even try that.
The big difference of real estate and other investments like stocks is that it is highly subjective. We can always invest in the same apple stock. But we can’t invest in the very same real estate. Even two flats on the same level of the same house with the same size will not be 100% the same. There can always be a different kitchen, a renovation done, a bathroom with a window, living room window to west instead of east etc. etc.
There will always be something making one property (slightly) different from another. Those things can be experienced and valued differently by each person. Some things matter only to some people. Hence, for some things it will be very difficult to determine a “fair market value”. Living in your own property also comes with certain emotions. Those can’t be easily told in Euros. Could you say how much more the exact same flat should cost if it has a balcony? Even if you could, other people might say different numbers.
Therefore you must look at many, dozens, of properties. In my opinion you should look at least at 20-30. If you go on two viewings per week for three months, you will have seen 24 properties. You should even go to viewings of properties you know you will not buy, just for the experience. Not only do you at some point get a feeling for what a fair price is, but more importantly you understand what features are relevant for you. Don’t hurry, big financial decisions should not be taken under time pressure.
However, don’t confuse this with a feeling of 100% certainty. It’s very unrealistic to ever have that. Of course there can always be “a better option”. For orientation it will be helpful if you write down some “musts” and “shoulds” to have a guideline in the search. These could be from sizes, to “Hausgeld” per m², to energy label, to window direction, balconies, elevators etc.
During the first viewings you should not discuss prices to much. Instead try to gather information about the real estate and the situation of the seller. Do they need to sell fast or are they patiently waiting for someone whoe is willing to pay too much? Always ask why they are selling. If you are looking for rented flats as an investment, also ask who the tenant is.
3.) Deciding for a property and placing an offer
The searching period should be used to have multiple talks with your financing consultalt. You can discuss different properties together, compare their ups and downs. This will help you narrowing down your search. But you should also use the time to discuss all different mortgage options and features.
When you find the right place often you must be ready to act fast as there will be other people interested. The better the possbible deal, the more well prepared competition you will have. Hence, you want to be sure about how you want to structure the financing to make an offer confidently.
You show the property to your financer, you check the value, discuss the important things, calculate that weeks interest conditions and think of an amount to offer. Based on that price offer you get your mortgage offer calculation**.
4.) Placing an offer
People think that real estate agents are always trying to maximize the selling price. Usually a good agent will be busy and a busy agent will prioritize time efficiency. For example, an agent will earn more if he sells eight properties in a year instead of seven but each for 10.000€ more. Of course they have to try to satisfy the sellers profit expactations.
If you can show the agent that you are well prepared and know exactly what you are doing he/she will sense that you mean it serious and that you will not waste their time. This can make the agent wanting to proceed with you more than with other semi-serious prospects.
You should place the offer in written form. Since you will offer less than the initially asked price is, you should give some reasons. These should neither offend the agent/sellers expectation nor talk the property bad. Instead give an emotionless fact based reason. Your mortgage consultant will help you to find these arguments. Adding a time limit (of for example two weeks) to the offer can be considered. Lastly you should add a financing assessment. This is a letter from your financer addressed to you stating that your personal documents have been reviewed and that from a financing perspective your creditworthiness is good enough to purchase that property.
The agent earns their commission when the purchase contract is signed. So you can also bring up the question for when that could be scheduled.
5.) Purchase price agreement and mortgage application
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