Several weeks ago I posted a blog with a step-by-step guide on what you can expect when you are selling a home. It made sense to me that I should probably do the same thing for home buyers. So here it is, a guide on what you can expect when purchasing a home.
Step 1: Finding a Realtor
While the internet has made it very easy to find homes for sale yourself, working with a Realtor who represents your best interests in the purchase of a home is a much better way to go. Why? If you simply call agents from online listings or yard signs you are getting the person who has been hired by the seller to market and list their home. Even if that Realtor agrees to help you write the offer, they are not exclusively working for you. When they listed the home, they signed a contract to represent the best interests of the seller. Finding a Realtor to represent you is the best way to make sure you have an expert on your side who is looking out for you and your best interests.
What should you look for in a Realtor? Make sure the person you choose to work with has time for you and is someone with whom you feel comfortable. Start by asking friends or colleagues for referrals. Ask to see their resumes. You want someone who has been through many real estate transactions and understands all of the issues that may come up as you go through the purchase process. This is a team effort, and you need someone who listens and understands your wants and needs.
Some, but not all, agents will have you sign a Buyer Agency Agreement. This is a contract between you and the agent stating that you will use them as your Realtor when you purchase your home. If you choose a Realtor who uses these agreements, please make sure you read the contract thoroughly and that you understand what you are signing. Don’t sign it if you are not sure the relationship will be a good fit. It is, after all, a contract that obligates you to work together.
Step 2: Getting Pre-approved
Before you can start looking for your home you need to know how much home you can afford. If you are a cash buyer, this is easy. If not, you will need to find a mortgage broker who can help you determine how much you can afford to spend on your new home. If you do not have a mortgage lender you would like to use, your Realtor should have some recommendations.
Most sellers will not accept an offer without a pre-approval, so this is a critical step before you get too far along in the process. I wrote about the pre-approval process in a bit more detail here..
Step 3: Setting Up a Portal & Finding Your New Home
Once you know how much you can spend, you will need to sit down with your Realtor to determine what features are important to you. Number of bedrooms & bathrooms, school district and neighborhood are just some of the features you can use to search for a home in addition to price. Discuss your needs with the agent and once you feel like you know what is important to you, your Realtor can set up a portal in the MLS system. The portal will alert you and the agent every time a new home is listed that meets your criteria and price point.
Make sure you look at all the homes in your portal in a timely manner. Well priced homes in good condition do not sit on the market long. Make sure you are looking at your portal daily and that you make time with your agent to see new listings as soon as your schedule allows.
I should mention a few words about Zillow and other online home sites. Your most current and accurate source of new listings is the portal and the MLS system in your area. You may find homes on other websites that do not show up in your MLS portal. Why does that happen? Often it occurs because these other websites are not updated as frequently as the MLS. A listing that looks like it is still available in Zillow may in fact be under contract. While it is fine to check out other websites for homes, be aware that your area’s MLS service is the best and most accurate resource.
Be patient. House hunting may take some time, especially if inventories are low. If your preferences change after your home search begins, your portal can be modified easily with the new criteria that is important to you. Communication between you and your agent is key to make sure you find the right home.
Step 4: Writing the Contract
So now that you have found the right home, what happens next? It’s time to write the purchase contract. Your agent will do a competitive market analysis to help you determine what the “right” price for the home should be. Trust your agent’s expertise in this area and consider whatever advice they can give you. While it may be tempting to write a low offer or even in some cases to pay full price, your Realtor can help you determine what the best course of action should be in terms of price.
You will also need to think about inspections, a home warranty as well as closing and possession dates. Our local purchase contract here in Dayton is eight pages long and that does not include all of the disclosures that will need to be reviewed and signed. Your agent will be able to sit down with you to review all of the documents and explain what they mean so you are prepared to write your offer.
Don’t forget that you will need to provide an earnest money check to go along with the contract. What is earnest money? It is a check written by you to show the seller that you are serious about the offer. Typically the amount of the check should be about 1% of the offer price. The check is usually made out to your agent’s real estate company and is held in a trust account until closing. The amount of the earnest money will be applied toward the purchase price of the home.
Step 5: Negotiations
When your offer is submitted to the seller’s agent, they are given a deadline (usually between 12-24 hours) to respond and let you know if they will accept the contract as written or if they would like to present a counter to your offer. A seller can counter the price or the closing/possession date, as well as other things in the contract that the seller may want to negotiate.
Remember, your agent is there to represent your best interests. Negotiating skills are very important at this juncture. Trust the skill and expertise of the professional you have teamed up with. If you are unable to come to terms then the contract will be rejected and you can resume your search. If however, you are able to agree on terms, you are officially under contract on your new home.
Step 5: Inspections
As you write the contract to purchase your new home, you will decide what type of inspections you want for the property. One option is to hire a whole house inspector, who is sort of a “jack of all trades”. The inspector will evaluate all aspects of the inside and outside of the home including the windows, HVAC system, electrical, plumbing, fireplace and the roof. They will advise you if there are any issues that are in need of repair and may recommend further inspections by specialized experts. Another option is to hire individual inspectors who are licensed and specialize in one specific area ie: a plumbing inspector, an HVAC inspector, an electrical inspector, etc.
How do you decide? Certainly talk over your options with your Realtor who may be able to recommend inspectors based on past experience and feedback from other buyer clients.
You should also set up a termite inspection (which is a requirement on certain types of loans) and consider a radon inspection as well.
Once the inspections are complete, you will work with your agent to determine if there are items that need to be repaired, focusing on items that affect the habitability of the house. You will then submit your requested repairs on a form called a Post Inspection Agreement. The sellers then have a period of days (depending on the contract) to respond back to your request for repairs. When you agree on the repairs to be completed, all parties sign off on the agreement and you are one step closer to the closing table.
Step 6: Appraisal
If you are not paying cash for the home, your mortgage company will request an appraisal of the property you wish to purchase to ensure that the home is worth what you have agreed to pay in the contract. The appraisal company is a third party not affiliated with the bank and will schedule a visit to inspect the home. They will take notes on the size, features and conditions of the property and will then do research on recent comparable home sales to validate whether or not the purchase price is at fair market value.
While this is the last major hurdle you will likely encounter as you go through the process of purchasing your new home, it is a critical one. That is why back in step 4 it is important to listen to your agent’s advice on the price of the home. Some sellers will try and get above market value for their home, but the bank will not loan more than a home is worth. For more information on the appraisal process, check out the article I wrote on the subject, by clicking here.
Step 7: Working with Your Mortgage Company
I listed this as step 7, but you will be working with your mortgage company throughout every step of the home buying process. Your mortgage broker will likely be contacting you on a regular basis to give you updates on the status of the loan and the appraisal process. They will also need all kinds of information from you including past tax returns and pay stubs, to ensure that you are able to afford the loan. Responding to emails and calls from your mortgage broker and getting them the info they need as quickly as possible will ensure that the process goes smoothly and that you are able to close on time.
Step 8: The Closing
You will likely do a walk-through with your agent of your soon-to-be home right before the closing. You will want to check that the property is in good condition and that all the agreed upon repairs have been made by the seller.
Compared to all of the steps that came before, the closing is typically easy. Prior to closing your lender or title company will let you know if you need to bring to bring money to the closing (for amounts over $10,000 title companies will require money to be wired directly from your bank). In addition, you will need to bring your driver’s license with you. Of course you will also need enough energy to sign the stack of paperwork that the closing officer will bring with them. Once you have signed all the paperwork it’s time to breathe a sigh of relief. You have a new home!
A good Realtor should be communicating with you through every step of the process so you understand what is coming next. Remember that buying a home can be one of the most stressful things that you will do in your lifetime, but it should also be fun and exciting. Go easy on yourself and trust your Realtor whose job is to make the process go as smoothly as possible.
Thinking of buying a home? Please contact me & I will put my 40 years of experience to work for you!
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