The Buying Process

Steps to Buying a Home

We understand that, for many people, the process of buying a home is both complicated and intimidating. To ease the process, below is an outline that will help to prepare you for steps you should anticipate. If you have further questions, we are more than happy to answer them.

Determine Your Needs

Why are you buying a new home?

Are you a renter wanting to build equity? Have you recently accepted new employment in a different area? Has your marriage or parenting status changed? The reasons for purchasing a new home are very important to know and you should share them with your Realtor®. These reasons will affect the process from the start. Although your needs and desires may alter some during the looking stage, this is an important area to firmly establish before beginning your search.

What basic features are you looking for in a new home?

Establish an idea of the home you are interested in. This will help narrow down your search and eliminate wasted time and effort. Determine the following:

      » Location (state, city)
      » Location (access to facilities, nearby services)
      » Location (city, rural, country)
      » Square footage
      » Number of floors/ bedrooms/ bathrooms
      » Entry way (two story, split level)
      » Driveway & Parking
      » Amenities Included (furnished, washer/dryer, swimming pools, tennis courts)
      » Energy Sources (gas, electrical, fireplace, solar, propane)
      » Special Features (fireplace, deck, fenced yard, extra storage)
      » Pet Considerations (outside areas for dogs)
      » Environment (noise, air, car traffic, children present)

What is your time frame for looking?

Review and determine your schedule of availability. Your Realtor® will need to know the best times to contact you and take you on showings.

What is your time frame for buying?

Buyer’s needs are unique and your time frame for purchasing is a very critical part of the process.

Pre-Qualification and Pre-Approval

Now that you have an idea of the home you wish to purchase, you need to know what price range to look within. There are two ways to prepare for this: (1) pre-qualification or (2) pre-approval. These are both done through a mortgage company, but there are some important differences, outlined below:

Pre-Qualification

This is a simple process. All that is needed is basic information regarding your financial status and it will give you an amount for which you may qualify. This can be accomplished verbally or electronically, via the Internet. The pre-qualified amount is based solely on the information you provide. An important note is that, in most markets, pre-qualified buyers usually hold little clout compared to pre-approved buyers. This is because the pre qualification process is not as thoroughly investigated and may be unreliable. A pre-qualified buyer is only told that they might be approved for a certain amount. This is not guaranteed and approval can still be denied in some cases.

Pre-Approval

This is much more involved. A lender will need all pertinent information regarding your finances and will perform an extensive check on your current financial status to verify the facts given. Once you are pre-approved, you will know the precise amount (maximum) that you will be eligible for, depending on the type of loan you select. Being pre-approved also puts the seller at ease in knowing you have gone through an extensive financial background check and that there is little chance of unexpected obstacles in your buying a home in the pre-approved range. Naturally, being a pre-approved buyer is far more attractive to a seller than a buyer who is only pre-qualified.

Search Listings

Now you are ready to embark on your search. If you don't know much about the city you're moving to, you will most likely want to start your search by finding areas that meet your housing criteria and then narrowing your search to particular properties.

The most efficient way to find properties is to have your Realtor® pull listings that meet your criteria and pass them on to you (in person or via email) for your initial review. Then you can express to your agent the ones that caught your interest. Your agent should be happy to screen these properties for you. For those that are still desirable hits, your agent should then arrange for you to tour the property at your convenience.

You can also access local publications highlighting available real estate in the area. However, these means are generally not as effective because by the time the publication is printed and distributed many of the homes listed are already sold or pending an offer. Nonetheless, your Realtor® can easily tell you if the choices you like are still available. Many of these publications are available at grocery stores and Chambers of Commerce. You should also look on the Internet at various real estate web sites. Even driving through areas that you like is a good tool for learning.

Making an Offer

Earnest Money

In order to make an offer to buy a home, you must first be able to submit Earnest Money, roughly 1% of the list price ($3,000 for a home selling for $300,000). This is generally done with a personal check or money order. For a person check, the money needs to be in a checking account so it will not delay the process of making an offer.

Offering Price

In order to determine the best offering price you will want to take into consideration several factors. How long has the home been on the market? What have similar homes sold for in the last 30-90 days? Are you willing to pay the listing price or do you want to negotiate for a lower amount? An experienced Realtor® should be able to guide you in any other factors for consideration, such as making a contingent offer.

An offer must be in writing with all contingencies and special requests noted on the Offering Statement. This will ensure that it meets all the legal requirements according to local and national guidelines. Both parties will need to execute the transaction, which then makes it legally binding. This process is very important and you should carefully consider and feel certain about the offer you are presenting. The seller will review your offer and has a window of time to respond or the offer becomes void. (This time frame will be noted on your document.) The seller may choose to counter-offer, whereby they usually accept a portion but not all of your offering criteria, and respond with their own criteria for an acceptable offer. This process can go through several rounds before coming to agreement or a decision to drop the offer. Again, carefully consider each counter-offer with the same scrutiny and evaluate each stipulation noted. Once you and the seller have agreed to and signed the offer, it will likely be too late to make any further changes.

The contract, though not limited to this list, should include the following:

      » A legal description of the property
      » The offering price
      » The down payment
      » Financing arrangements
      » A list of fees and who will pay them
      » Amount of the deposit
      » Inspection rights and possible repair allowances
      » The method of conveying the title and who will handle the closing
      » A list of appliances and furnishings that will stay with the home
      » The settlement date
      » Any relevant contingencies

Negotiating an Offer

Almost every offer will undergo some negotiation. People are generally counseled by their agents to offer something below list price, but there are many other considerations that you should be aware of that may enter negotiation. Almost everything is negotiable when you are buying a house, but we believe in being fair. There comes a point when a seller may feel that you are being greedy and simply wanting a good bargain that is significantly below market price, or they may feel badgered by too many requests in your offer/counter-offer. An unfair offer is viewed as selfish and will generally be rejected, and if another better offer comes in before yours is accepted, you can lose the chance to purchase the home.

Some of the things that you may have to negotiate are:

      » Price
      » Financing
      » Closing costs
      » Repairs needed
      » Appliances and fixtures
      » Landscaping
      » Painting
      » Carpeting
      » Date of Occupancy

Your Realtor® should be knowledgeable of the market and tactful in negotiations. He or she should be able to confidently guide you through the process, while aiming to achieve the best price and terms for you. Something important to keep in mind at this point is that you should never agree to an offer that you don’t feel is right for you. If you feel pressured by your agent into agreeing to terms, such representation is not in your best interest, and the agent is merely seeking to make a quick sale. Discuss privately with your agent if you feel unduly pressured and advise them that you are willing to switch representation if they are unwilling to patiently seek your best interest.

Finding Vendors

After your offer has been accepted, your Realtor® will coordinate your obtaining the necessary vendors for completing the process. Many agents have worked with certain favored vendors and will give you their information as a recommendation. However, you are not limited to these choices. Having these procedures done in a timely and professional manner is a must. Investigate each vendor to make sure that they are reputable and have a clean operational history. Your agent or you should also make sure that the vendors have appropriate access to the property in order to perform their procedures when scheduled. Some of the common needs for vendors include:

Appraisal

The lender generally takes care of lining up the appraiser, who will formally survey and document the home and property designated.

Inspection

Inspections are usually paid for by the buyer and may or may not be something you are able to attend. Common inspections done to a home site include: housing/property inspection, pest inspection, or environmental inspection. If issues arise as a result or inconsistencies brought to light during this time, it may delay or even nullify the contract depending on the contingencies set forth.

Homeowner’s Insurance

This item will need to be established before the closing can take place. Insurance experts recommend that you obtain insurance equal to the full replacement value of the home.

Pre-Closing Preparations

As your closing date approaches, your agent will make arrangements with the escrow company or closing attorney and your lender to ensure that all the necessary preparations are being completed and that there is nothing outstanding. Your agent should also confirm delivery of the documents to the correct location so they can be reviewed and ready for the appropriate closing date.

At this point, you and your agent should discuss your form of final payment for any fees. Ensure that any money orders are made payable to the appropriate party. Be prepared that closing costs will generally equal 2 to 3 percent of the total loan value, not including the down payment and the buyer's escrow account. If Sellers are paying a portion or all of the closing costs, it is a good idea to have these agreements in writing prior to closing. Most lenders will allow a credit from the seller to the buyer for the non-recurring closing costs. However, they usually won't allow a credit that reduces the amount of the buyer's down payment or any of the buyer's recurring costs, such as expenses for fire insurance premiums, PMI, or property taxes.

Closing Procedures

At closing, ownership of the property will be legally transferred to the buyer. This is a formal process that is usually separately attended by sellers first and then buyers. Closing procedures are usually held at the title company offices or a lawyer's office. Your agent will be present at your closing to review the documents on your behalf, answer any questions, or help resolve any unanticipated needs.

Post-Closing

After you have taken ownership of the property you will need to arrange for the transfer and initial operation of local services such as electricity, cable, and phone. Your agent can help you coordinate the set-up of these local services as he or she likely already knows the local vendors for such services. At a minimum, your agent should provide you with a list of contacts.

Also, be aware of setting up and transferring other expenses that are typically associated with home ownership, such as Association dues and semi-annual property taxes.

We’re Here to Serve You!

We realize this info page likely hasn't’t covered your individual questions and we are very happy to address them all, until you feel comfortable with the process. Our main goal is to serve you by making this process as smooth of a transition as possible. We look forward to working with you to achieve that end!

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