An overview of the home buying process
Buying a home is a complex process than can take several months. It’s, therefore, important to find the right professionals to help you through the process, including a real estate agent, mortgage lender, attorney and home inspector.
Here is an overview of the process involved from selecting a real estate agent to closing on your new home.
Signing with an agent
One of the first steps will be contracting with a real estate agent. It’s highly recommended to use a licensed professional to help you through the process.
An experienced agent has been inside many of the homes in the area, so he or she can be a valuable source of information on the local market. The agent will also assist you during the negotiating process as well as through the legal and inspection requirements.
Depending on the size of your local market, there may be dozens, hundreds, even thousands of agents from which to choose. If you know somebody who had a good experience with their agent, ask for a referral. Otherwise, look for agents who sell the type of homes you’ll be looking for; don’t work with an agent who specializes in executive homes if you’re in the market for a starter home.
You and the real estate agent will sign an agreement that states you will work exclusively with the agent during the home-buying process, and he or she will work in your best interests.
The agent will ask what you want in a house, such as price range, size, location, and the number of bedrooms and bathrooms. The agent will generate a list of homes that meet your criteria, and maybe a few that are close.
The agent will accompany you to view the homes on your list. Usually, this will occur when the homeowners are away.
While looking through homes, take pictures so that you don’t have to remember every detail of all the properties you toured. Also, study the neighborhood to see what traffic is like, how well other property owners maintain their homes, and if there are irritants like noisy dogs that could affect your enjoyment of the house.
Once you’ve looked at several homes, you may narrow down the list to a few homes or the one that stood out the most. It’s usually a good idea to walk through the home of your choice a second time before making an offer, just to make sure you still have the same feeling about it.
Review the disclosure statement
During these visits, pick up any documentation left by the buyers or their agent for your records. One of the most important pieces to review is the statement of disclosure. This is a legal document detailing every problem or issue known by the buyers. It will state whether the owners have knowledge of water damage, pest infestation, mechanical problems and other issues with the home. The owners will also record when they replaced certain items in the home, such as roofing and appliances, or how long it’s been since those items were replaced.
Making the offer
Once you’ve decided on the home you want, you can make an offer. You don’t have to offer the list price; that’s just an approximate value the seller has placed on the property. At the same time, you don’t want to provide such a low offer that the seller no longer wants to work with you.
Your real estate agent should assist in coming up with a number that both parties can agree to. The agent will help you fill out an offer sheet. There’s more to an offer than just a price. It will also include a date you wish to close on. It may also include contingencies, such as the results of an inspection, selling your current home, or obtaining financing. The fewer the contingencies in a contract, the more likely it is to be accepted. You can also ask for appliances, window treatments, and other items that are not automatically included with the property on the offer sheet.
Your offer may be accepted as is, rejected, or the buyer may make a counter offer consisting of a different price and/or the removal of contingencies or additions. Negotiations could go back and forth several times before the two parties reach an agreement.
An important part of your offer will be earnest money. This is a deposit that informs all parties involved you’re committing to buy the property. There is no set amount, though it usually equals about 1 percent to 2 percent of the purchase price. Earnest money becomes part of the purchase agreement and will be deducted from the agreed purchase price. If the deal falls through, in most cases, the buyer will get the earnest money back.
Once the sellers have accepted your offer, they cannot accept another one, even if it’s better. The home will remain on the market in case the deal falls through, but it will be labeled as ‘sale pending,’ or something similar, until closing.
The detail work
Following acceptance of the offer, the process of inspection begins. This process includes:
Appraisal. Your lender will order an appraisal of the home to ensure that you are not borrowing more than the home is worth.
Home inspections. The home will need to be inspected by a certified home inspector, as well as a pest specialist who will look specifically for the presence of termites. Depending on the age and/or location of the home, there may be other tests and inspections, such as for radon, lead, or soil integrity.
Home inspectors will check to ensure the home is up to building codes. They will check the plumbing and electrical, note any potential safety hazards, examine the condition of the roof and siding, and test all appliances, the HVAC system, garage openers and other mechanicals to ensure they are in proper working order.
It’s a good idea to be at the home during the inspection. That way you can see for yourself any problems the inspector finds and ask questions. Inspectors provide a detailed written report that the buyers can use to either cancel the deal, ask for a contingency, or to know what repairs they will need to make after buying the property.
If anything on the inspection indicates a problem that was not on the sellers disclosure form, then you may be able to amend the offer. Depending on how large the issue is, you may ask the seller to fix the problem prior to closing (this may move back the closing date), ask for a reduction in the purchase price, or even cancel the sale altogether.
If the issue was recorded on the disclosure statement, then you have no recourse because you essentially accepted that risk by making the offer with the knowledge of the issue. That’s why it’s important to carefully review the disclosure statement.
Title opinion. A title opinion will also be conducted by an attorney, who reviews the home’s title for any burdens or claims against title that could impact the transfer of the home from the seller to the buyer.
Finally, closing day. On closing day, you will sign the mortgage papers. Once that’s done, you’ll be given the keys to your new home and be able to move in.
Another reason to work with an agent is that, if there is a problem on move-in day that didn’t exist before, the agent can work on getting it solved. For example, the previous owner may have broken a window while moving out or vandals may have damaged the property while it was vacant. If that occurs, call your real estate agent right away.