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STEPS TO BUYING A HOME
Step 1 Hire a Realtor
Real Estate is not just a local business, it is truly a micro local business. As no two communities are the same, no two neighborhoods are the same. An experienced Realtor® with many completed transactions in their portfolio is essential for success. Their knowledge and expertise can save you money and valuable time. Establishing a relationship based on trust and clear communication is so important.
As a buyer, you are entitled to the same exclusive representation as sellers have traditionally received.
Interview realtors until you find the one you believe is best suited to your needs. Then work exclusively with that realtor.
Once hired for the job, your Realtor® will provide you with information detailing current market conditions, financing options and negotiating issues that might apply to a given situation. Remember: Because market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information should not be set in stone. During your time in the marketplace your Realtor® will keep you updated and alert you to each step in the transaction process.
Step 2 Get Pre-Approved for Financing
Whether you are a first-time home buyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing time frame? Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals.
Your Realtor® can recommend a lender. Although you may have purchased 1 or more properties over the years, your Realtor has been involved in hundreds of transactions and can be your best most reliable resource.
In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.
Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage payments, so most home buyers choose to buy with some cash up front.
As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses. Speak with your Realtor® for details.
Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.
Step 3 Pre-approval
"Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
Step 4 Looking at Properties
Some buyers like to look at listings on the basis of location or price; others prefer to have their Realtor® suggest properties; and many buyers prefer both approaches.
Regardless of your choice, it's important to target your search. By using basic measures such as general location and affordability, you can refine your search and focus on homes that offer the most desirable features.
As a guide, you should maintain a file with information on each of the homes you like. You can print out listing pages from your Realtor® and then make notes for each one -- what you like, questions about the property, etc.
Step 5 Identifying "The" house
As a buyer, here's what actually happens. A home has been placed on the market for which the seller has established an asking price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller's offer and create a contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller may accept, reject or make a counter-offer.
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced Realtor® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Step 6 Make an Offer
The process of making offers varies around the country. In a typical situation, you will complete an offer that your REALTOR® will present to the owner and the owner's representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in an offer can be considered a "counter-offer"), it's important for buyers to remain in close contact with their Realtor® during the negotiation process so that any proposed changes can be quickly reviewed.
A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections.
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property's mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through.
Again, your Realtor® has much knowledge and experience with inspectors over the years, who else to ask for a recommendation?
Step 7 Secure Home Insurance
The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
There are various forms of insurance associated with home ownership, including these major types:
Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.
Homeowner's insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Your Realtor® can explain which locations require such coverage.
Home warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with your Realtor®, insurance brokers and home builders.
Step 8 Closing
What to expect
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
What you need to do
One of the best parts of settlement is that buyers and sellers need to do very little. Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
Step 9 Moving in
It is generally understood that sellers will leave homes "broom clean" when moving out. This expression does not mean "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.
Your home, your money
For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.
Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.
You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what's most important is that home ownership should be a wonderful experience. Enjoy!
Step 10 Stay in Touch
Even after closing, your Realtor® is a valuable source for referrals to services you may need in the future, such as contractors, plumbers, electricians, chimney sweeps.
We at Tache have a network of providers that we have worked with for years. Take advantage of that knowledge. |
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