Many times a new buyer will contact me with no idea of how or where to get started when looking for a home to purchase or lease. There are many different staring points to approach this process, so i will go over them from starting to the actual closing.
1.
One of the first things you need to figure out is how much house you can afford. You can do this several ways. You can contact a mortgage professional, (which you will need do at some point), do an internet search for a mortgage calculator, or contact a real estate professional. Either way, one of those choices should be able to tell you what price range you should be looking at. Please start with this step so you are not looking at million dollar homes when you can only afford a fraction of that. Most real estate professionals will not even work with you unless you have gotten this step done with a mortgage professional and received a pre-approval or pre-qualification letter (note: pre-qual’s and pre-app’s are basicly the same thing).
2.
Now that you know your price range, you need to start looking at some houses. Most people (about 80%) start there home search online. This is an easy way to preview properties through the many pictures and/or virtual tours that are listed online. If you are looking at some of the “for sale by owner” websites and you see a house you would like to see, then there should be some kind of contact info for the owner so you can schedule a showing. Most of the other homes you will come across will be listed with a real estate professional. There are 2 ways that you can schedule appointments to see homes listed by a real estate agent. One, you can contact every real estate agent of each property and schedule an apointment with each of them, but in certain area’s this can be a problem because you might have to sign a buyer’s contract with only one agent. Two, you can find one good agent to work with who can show you any of the properties for sale by any MLS participating agent. This is what I would recommend because they can also send properties to your email daily and will sometimes have a network of other professionals that they have worked with in the past that they can recommend to you so you don’t have to spend time searching for other qualifed professionals. So, now that you have found a house you would like to see, just contact your agent to make an appointment to see it.
3.
Now you have just seen the house that you want to make an offer on. People always ask, “how much should I offer?” Well, there are many factors in determining what to offer. Making an offer will depend on things like: the perceived market value, the condition of the property, the number of offers already made on the property, the sellers motivation (if you know), and a few other factors. But, in this market a good rule of thumb that I tell people, is to make a starting offer of 10% below asking price. Sometimes there are reasons to offer higher or lower, but that will depend on each individual property. (When Leasing, sometimes the price you see is the price you get. This is because your credit is sub-par, you have no down payment, and/or no job history. So you really don’t have a bargaining chip). Once the offer is made, you will get one of three responses. Accepted, Rejected, or a Counter Offer. In most cases, you will get a counter offer from the seller. It is now your turn to give one of the same responses. After a few back and forths, an agreement is usually made and you will have an accepted offer. Congratulations!
4.
Now that you have an accepted offer, the next logical step would be to enter into a formal contract. But before you do that you’ll want to get a home inspection done first. Your real estate professional should be able to recommend a few. If you are buying a home that is being sold “as is”, it is still a good idea to have one done so you know what might need to be addressed/fixed once you take ownership. Banks do not require a home inspection in order for them to loan you money to buy your home. Most of them will require a termite inspection, so it is a good idea to have one done before contracts are signed. After you have received your termite and home inspection report, you will have one last chance to bargain with the owner. If the inspector finds problems with the home that were not easily visible when you made your offer, you can ask the seller to repair these items or you can ask to have money taken off the agreed price and the repairs will be the buyer’s responsibility after taking ownership. Deciding how much to take off depends on what kind of repairs are needed. The same goes for asking repairs to be done. Don’t get over zealous by asking for unrealistic price drops or repairs to be made. I have seen deals fall apart because the buyer and seller could not agree on the most insignificant things.
5.
If you have not done so already, you need to contact a mortgage professional or go to your bank or credit union. I will briefly explain the difference between going to a mortgage broker as opposed to going to a commercial bank. A bank can have good rates and mortgage products, but they are most of the time limited to offering you loans from that bank. A mortgage broker on the other hand, can sometimes have access to hundreds of banks and can shop around for you to get you the best terms and rates. Both have pro’s and con’s. I will not talk about the different kinds of loan products in this article. That is a whole other topic. So for now, just shop around in your area to get the best loan for your purchase.
6.
In some areas the real estate agent can handle the closing, but where I practice real estate, a buyer needs a lawyer to close a real estate transaction. Getting a lawyer is a pretty simple process. Sometimes if you have a good real estate professional, they can recommend a few. If not ask your friends or colleagues. I am sure one of them knows a lawyer. Make sure the lawyer you are going to use is a “real estate attorney”. If you have your friend’s cousin’s brother who is a criminal lawyer and hasn’t done a real estate closing except for in law school, then you should probably get another attorney. The deal might close but there can be a lot of headaches also. Although headaches can happen with experienced real estate lawyers also, they will probably be more likely to quickly solve a problem that might arise. Lawyer fee’s can vary. Some will take a partial payment when you sign contracts and the rest at closing, and other lawyers will accept the total fee at closing.
7.
Once your lawyer has reviewed the contracts and made any changes to them, it will be time to meet with him/her to sign them. As a buyer, you will sign contracts first and then they will be sent to the seller’s attorney for the seller to sign. When you meet with your lawyer to sign the contracts, you will need to give your down payment check to your lawyer so he can send it with the contract to the seller’s lawyer. This check can be a personal check because it will have time to clear in the attorney’s escrow account to be used towards the purchase price. Once the buyer and seller sign the contract, you will be in what’s called “full contract”. Congrat’s again! At this point your lawyer and mortgage professional can start to do what they do to get you to closing.
8.
Once you get the closing date for your purchase, you will need to do a walk thru either the day before or the day of closing. You want to do the walk thru as close to the closing date as possible because if the seller still has not moved out, and you do a walk thru say, 3 days before, and everything looks good, and then after you get the keys at closing and go see your new home, there is damage to the walls, staircase, floor, etc… from when the seller moved out. Now there is a way to get money for damage in a case like this. It’s called escrow. Your lawyer would hold back some of the sellers money at closing until he gets an “ok” from you after you go check out the house after closing. Holding money in escrow can be used for a number of issues like, C of O problems, trash, damage, repairs in the contract that were not done, etc…
So, there you have it. A quick over-view of how the home buying process works. If you have any other questions about the home buying process, please feel free to contact us. Thanks.