Steps to Buying Your Home
This is a key step in the Home Buying process. A seasoned agent that knows the local market, has a strong support team and can negotiate a contract in a tough market can be the difference in getting that dream house or settling for something less. They will have a network of vendors, including home inspectors and local lenders who know the local real estate laws and can provide your best option at getting appropriate financing. We recommend agents with at least 5 years of buyer experience that do 25-50 transactions per year.
This is what initiates your actual search. Most agents will either not show you homes or will limit their activity until you get pre-approved by a local lender. This is nothing personal. Fact is you cannot even make an offer unless you are pre-approved for the appropriate amount and you very well may waste time looking at homes in the wrong price range only to find your pre-approval is for much less. The great agent you want is busy – which is a good thing. They are in demand so getting a pre-approval makes the process more efficient and lets you know up front that you are looking for houses you can actually purchase. One Note- local lenders know the state laws, what developments are FHA approved, local issues and how the local closing process works – among other things. They are with you from start to finish and vested in your success. Out of state lenders and online lenders are not as well versed on local conditions.
Now you are ready to review your requirements with your great Buyer Agent. Its critical to get this defined and start your search. Most seasoned agents have a property search capability superior to those you can find on Zillow and other real estate search sites. The difference being they are linked directly to the local MLS service so you will know immediately when a new home comes on the market, a current listing takes a price reduction and moves into your price range, or a listing suddenly goes under contract. This is important particularly in a low inventory market since it often takes a few days for new listing to make it to Zillow and by the time you see it, it could be gone. Your agent is a step ahead. They may also know of homes that are going to be listed but not yet ready. You can have access to viewing such a property. That’s why a team and large real estate organization is a plus.
This is simply the process of making appointments (your agent will do this) and then viewing as many homes that fit your requirements as possible. In a strong selling market, your options may be limited. Again, your well-connected agent will be your strongest asset. You will see homes in a wide range of conditions. A larger home with a lot of “cosmetic” issues could be similarly priced to a smaller home that is perfect. So, if you are OK doing some work, the big house may be a good deal. Your agent has vendors that can help with any work/upgrades that need to be done – new AC, roof work, paint, siding etc. Use this asset!
This is the moment of truth. You will discuss the pricing strategy with your agent. If it is a home with multiple offers in process, it will be a different approach than if it is a home that has been on the market for 60+ days and you are the only buyer making an offer. It can include also a request for closing cost credits or possibly a deduction for an obvious issue (water damage, roof issue etc.). Once submitted the seller will, a) accept, b) counter offer, or c) ignore the offer if it is deemed insulting.
When the price is agreed to a contract is drawn up outlining the deal, escrow deposits, closing date and milestone dates: Home Inspection, Appraisal, final confirmation of financing and any other contingency items. It is signed by both parties and the property is considered “under contract”. You are obligated to purchase and the sellers to sell as long as all the conditions are met.
This has become a critical step in the current market. Any issues surfaced here can be the cause for either party to walk. The home inspector will evaluate the home and all key systems from a condition and operational perspective. This makes sure everything is working as intended and the home is in acceptable shape. Any deficiencies are noted in the inspection report. Deficiencies can become a bargaining point for the buyer but the seller needs to agree to a remedy by either fixing the issue or providing a discount to cover the planned activity. In some cases, the seller may elect not to fix the issue in which case the buyer can assume the potential cost once closed…. or walk. This is an area where a seasoned agent can make a huge difference in the outcome.
The appraisal is required by the lender to verify the value of the property and substantiate the loan. They do not look at the condition of specific items like a home inspector. They evaluate other homes sold in the area (comps) and the make the necessary adjustments to arrive at a fair market value. For example, the comp might not have a finished basement, so an additional value would be included for that. The home might only have a one car garage and the comp a two-car garage, in this case he/she would subtract value from the appraisal. They follow this process until a final value is established in concert with 3-6 comps if possible. If the house falls short of the necessary value required to support the loan type the buyer is selecting, several things may happen. The purchase price can be modified and thus the loan amount will be adjusted, which requires the seller to approve. The buyer could also make up the difference in cash if the seller refuses to accept less. If neither party can come to an accommodation, the deal ends. Your agent will work hard to make the deal happen for you.
Once the appraisal is done, home inspection issues have been resolved and the deal granted a “clear to close,” the parties meet to sign all the paperwork, transferring all funds and the home title as well as loan documents. When complete, keys are passed and you own your new home!!!
