Buying a home usually represents your single biggest investment – and debt.
The home buying process is one of the most exciting, and frequently stressful, experiences you’ll ever go through. This holds true whether you’ve bought many homes or you’re looking to buy your first, and whether you’re in the market for a new primary residence, an investment property, or that perfect vacation getaway. Today’s real estate market can offer more opportunities, yet can be filled with more risks than ever before. There are a multitude of factors to consider and decisions to make. Therefore, it’s crucial to have all the available resources necessary to make a well-informed decision, together with the time required to make use of them. It’s important to enlist the help of a trusted real estate professional (agent) who’ll be able to provide expert guidance at each step of the buying process. Finding and purchasing a home includes the following steps, which are examined in more detail throughout the Buyer’s Guide:
1. Define your goals, research your options, make your plans.
Given that buying a home is such a big step, it’s very important to educate and prepare yourself as much as possible. This means clearly determining the reasons you’re buying and what kind of home you’re looking for. As buying typically means you are also borrowing (to pay for the home), it also means examining your current financial situation and projecting how much you can afford. Once you’ve answered these questions, even tentatively, you’ll be in a better position to research housing and mortgage options, and create an action plan and timelines for moving forward. Although it is possible to do this yourself, you may benefit by consulting an experienced real estate professional/agent right from the start. Buyers agents are paid for their services by sharing in the seller’s agent’s commission (typically 6% of the transaction price, of which the buyer’s agent receives half), so there is no cost to buyers in having an agent on their side representing their interests.
2. Contact a real estate professional.
Buying real estate is a complex matter with many factors to consider. And, just like no two homes are alike no two real estate transactions are alike. There are multiple deadlines and obligations to meet in even the most basic contract for sale and meeting them can be challenging even in the most trouble-free transactions. Accordingly, having a real estate professional on your side will help to ensure that the transaction makes it to closing with little difficulty. Agents are trained in the real estate transaction process, giving their clients the benefit of the agent’s experience and knowledge while at the same time taking most of the home-buying chores off the buyer’s hands. For example, agents are able to value property to determine whether a seller is asking too much or too little and can therefore help a buyer determine what s/he should offer. Agents can negotiate repairs and are experienced in handling inspection and appraisal issues. Moreover, with all the unique opportunities and potential pitfalls of the current market, it’s more important than ever to have the expert guidance of a real estate professional/agent.
3. Get pre-approved for a loan.
You should definitely get pre-approved for a loan before you start viewing homes with the serious intention of buying. The pre-approval process involves meeting with a lender and authorizing them to examine your current financial situation and credit history. On the basis of this examination, the lender may provide you with a document detailing the amount you can borrow to buy a home (usually called a “pre-approval letter”). Having a pre-approval letter shows sellers that you are serious and capable of taking the deal to closing/getting financing. Accordingly, the acquisition of such a letter is imperative – many sellers will not even accept a buyer’s offer without an accompanying pre-approval letter. And since the amount you can borrow affects the price of the home you can afford, the pre-approval process is something that you should do early on in the home search process. Consider looking online to see what different lenders offer, or contacting your local bank or credit union. Or, your real estate professional/agent can usually provide you with a few trusted local lenders for you to choose from.
The benefits of pre-approval include:
*You’ll know that you are eligible to receive a loan and will be able to plan accordingly.
*As a qualified, motivated buyer you’ll be taken more seriously when you make an offer.
*Lenders can tell you if you qualify for special programs that will help you afford a better home (particularly if you’re a first-time buyer).
Real estate financing is available from many sources, and an experienced real estate professional will be able to suggest lenders with a history of offering excellent mortgage products and services.
For more information about the benefits of pre-approval and the loan process in general, see - The Loan Process – Financing Your Home Purchase, on page 14 of the Buyer’s Guide.
4. View homes and select THE ONE.
Simply put, the key to the home search process is knowing what you’re looking for. Among other things, that means distinguishing between “must-haves” and “like-to-haves.” To help you to target your search and define your home preference priorities, the Buyer’s Guide includes a Home Search Worksheet on page 23. That said, here are a few recent facts about the search process that might put your experience in perspective:
*92% of buyers use the internet or mobile apps to search for homes.
* The typical buyer searches for 12 weeks and views 12 homes.
* 97% of buyers view real estate agents as important in the home search process.
There are many benefits to starting the search process through the web. You can view many homes and their details, take video tours and access neighborhood info. However, you should be aware that many websites devoted to real estate searches contain out-of-date information, so partnering with a buyer’s agent can help you find up-to-date listings of properties available for purchase, along with their current pricing. Also, you’re going to need to view homes in person. While the property details may seem similar online, homes can be very different in terms of layout, design, workmanship, and other aspects. Usually, homes listed for sale are not available for viewing by people unrepresented by a real estate agent. A buyer’s agent can set up an in-person viewing of the listing and is perfectly positioned to notice things you might miss, provide expert analysis, and act as an impartial sounding board.
5. Make an offer and negotiate with the seller.
Once you’ve found the home you’d like to buy, it’s time to make an offer. Your state or local real estate association likely has contracts that are generally used for transactions in your area. These contracts enable you to specify a sale price and also allow the inclusion of clauses specifying various terms of purchase, such as the closing and possession dates, your deposit amount, and other conditions. You should carefully review these clauses with your real estate professional to be sure that they accurately express your intended offer. In addition to drawing up the contract, your real estate professional will be happy to address all of your questions about the offer process. Once you’ve written the offer, your real estate professional will present it to the seller and/or the seller’s representative. At that point, the process will vary somewhat depending on the market you’re in. Generally speaking, the seller can accept your offer, reject it, or counter it to initiate the negotiation process. Successive counter-offers, with deadlines for responding and meeting conditions, may be exchanged between you and the seller until a mutual pending agreement is reached or the negotiations break down. You real estate agent will assist and advise you in the negotiating process, which is another tremendous benefit to having an agent on your side.
Negotiations involve many factors specifically relating to different market conditions, homes and sellers, some of which are examined in – Successfully Negotiating The Deal – on page 18 of the Buyer’s Guide.
6. Secure your financing.
Once you have a pending agreement, it’s time to return to your chosen lender to finalize mortgage details in order to close the deal. This means finalizing your down payment, interest rate, regular payment schedule and all other financial conditions associated with the closing. As the saying goes, ‘let the buyer beware.’ Unfortunately, too many buyers suffer negative consequences from not fully understanding their financing decisions. Thus, it’s crucial for you to work with people you trust. In this regard, a good real estate professional/agent can become a true friend for life.
For more information on the loan process, see – The Loan Process – Financing Your Home Purchase, on page 14 of the Buyer’s Guide.
7. Close the deal.
If you’ve efficiently taken care of everything connected with purchasing your new home, taking ownership should be a positive joy with no surprises. Key steps to the closing, also referred to as the “escrow” or “settlement,” include:
Getting a Title Commitment and Acquiring Title Insurance
Typically, prior to closing the seller in a transaction will contact a title company to obtain a commitment for title insurance and will pay for the eventual title policy, naming the buyer as the insured party. Prior to issuing the commitment and policy, the title company will review all of the public documents (deeds, deeds of trust, liens, easements, etc.) that relate to the property and that are on file with the County Clerk’s Records Office to ensure that there are no claims against the title of the property and that the sellers have good, marketable title. Based upon its review, the title company will issue a title policy for the buyer’s protection against errors in the public records relating to title or mistakes in the title review process.
The Final Walkthrough
You will be given the chance to look at the home one last time to make sure it’s in the same condition as when you signed the contract for sale/sale agreement.
Typically, on the Closing Date you’ll meet with a lawyer, real estate professional, or escrow agent to verify and sign all the paperwork required to complete the transaction. The settlement will include paying your closing costs, property adjustments, and transfer taxes (a description of various closing costs, and who typically pays them, can be found here) and transaction funding. At that point, you’ll receive legal title to the property and copies of all documentation pertaining to the purchase.
Oh, and one more thing – you’ll get the keys! In most cases, the Possession Date (the day on which you will take actual possession of the property) will either be on the day of closing or within a few days of closing. If you and he seller executed a temporary lease to let the seller remain in the property past the closing date, the Possession Date will be determined by that lease. Regardless, once you have physical possession you will be able to move into your new home.