Buying a Home

The process of buying a home is a big undertaking. However is can be a very enjoyable experience if you are well prepared and follow the right steps.

Understanding the process will help you be prepared and know what to expect.

The Short Version

1)      Select a Buyer’s Agent 
2)      Get Pre-Approved
3)      Find a House
4)      Make the Offer
5)      Negotiations and Counter Offers
6)      Get the Due Diligence Done
7)      Get your Insurance in Place
8)      Prepare for Closing
9)      Closing the Transaction

The Detailed Version. 

      1)      Select a Buyer’s Agent to represent, and guide you through the process.
Working with a credible buyer’s agent will make the process much smoother and more efficient. Most times it will save you money having someone with experience, and knowledge of the marketplace on your side to help you negotiate based on real time market data. The buyer’s agent will also help you plan the process to help ensure a smoother transaction

Hiring a buyer’s agent will NOT cost you any money. When a seller lists a home, they typically offer a 6% commission to get the property sold; the commission is offered in a 50/50 split between the seller’s agent and a buyer’s agent. So you can have the benefits of having your own agent to represent you and it will not cost you any out-of-pocket money.

Advantages of working with a buyer’s agent
·        Access to real time market data
·        Experience in the process of buying and negotiating real estate
·        The buyer’s agent takes care of the majority of the work and planning
·        You gain very valuable insight into different areas and neighborhoods
·        You have someone working on your side under a Fiduciary Relationship (working in your best interest) 

      2)      Get Pre-Approved
This is a vital step in the buying process. When you get ready to buy it is important to see your banker or mortgage lender. After evaluating your credit, income to debt ratios, and your financial strength, they will provide you insight into what price range home you can buy. In addition you may have credit issues that will have to repair before you can buy. Once approved, you will be given a “Pre Approval Letter” that you will need when making an offer on the property you wish to purchase. It is also a good idea to think about what type of financing you wish to use (FVA, VA, USDA, Conventional) and also what terms you want (how much to put down in cash, interest rates, and the length of the mortgage).

      3)      Find a House
This is where the fun starts! Begin by considering in what areas you would like to live and make a list of points important to you such as; schools in the area, shopping, distance from medical district, neighborhood demographics, resale values etc. Next, decide what type of property you would like to purchase and make a list of features most important to you in a home such as size, # of bedrooms, # of bathrooms, bonus rooms, year built, size of yard, # of garage stalls, landscaping, etc.

Now that you have your price range, area list, and home list put your agent to work! Your agent can set up a custom MLS search that will give you a list of homes matching your price, area, and home requirements. This allows you to begin your home search in full swing. Once you have identified 3-5 properties you want to view, ask your agent to set up a private home tour to view the properties. As you look at the properties keep a detailed list of what you like and don’t like in homes. You will discover features as you view homes that become important to you that you may have never considered before. Also keep a list of your top 2 favorite homes and continually update the favorites list as your search progresses. When you find “The Home” (and trust me you will know when you see it) then it’s time to make an offer.

      4)      Make the Offer
ALWAYS make an offer in writing! There are too many things that can go wrong in verbal negotiating. Your agent can prepare your offer based on how you wish to make the offer. It is a good idea to base your offer from the results of a current CMA (comparative market analysis), it will give you the latest information about the area market conditions and will indicate what current market values are. Make a list of things on which you are flexible and things that not negotiable. It is important to remain firm on this list. Your offer will also depend on whether you are buying in a seller’s market or a buyer’s market. Once the offer is complete, your agent will present it to the seller or seller’s agent.

     5)      Negotiations and Counter Offers
Very rarely are initial offers accepted. There are typically 3+ issues on a contract that initiate counter offers. This is the time where you need to trust the experience of your agent. Negotiations will sometimes wrap-up quickly for a completed contract or they can stretch for longer periods. Make sure that you remain steadfast as to the points that you will negotiate on and those you will not. You will either reach a successful negotiation or you will simply not be able to complete the contract. Don’t be discouraged if the deal did not come together. I have seen many times where one offer fell through only to have a much better one come together for the buyer. Once your contract is in place  the real work starts!
      6)      Get the Due Diligence Done!
There are several things that need to happen once you are under contract:
A)     Order your Home Inspection – your agent can recommend a good inspector
B)     Have the Title Company Order the Title Commitment
C)      Stay in constant contact with your lender so they know how the transaction is progressing
D)     Based on the home inspector’s findings, you may need to order additional specific inspections such as, Termite Inspection, Roof Inspection, Static Water Inspection, Hyro-Static Water Inspection, Foundation Inspection etc. Your general home inspector will advise you on what steps you need to take next. Based upon the information you receive concerning the home’s condition, you may need to renegotiate the contract for repairs from the seller or reductions in price in order to pay for the repairs yourself.

E)      Once all inspections are completed and the contract is still in place your lender will order an appraisal of the property to ensure that you are not paying more than market value for the property. If the appraisal passes you are ready for the next step. If not, you have to renegotiate the asking price.

F)      Review the Title to make sure the Title is ready to convey. The title company will provide you a title commitment to review showing any and all liens and issues with the title. Once the title is clear and ready to covey you are ready to prepare for closing

      7)      Get your Insurance in Place
It is important to get your new investment insured. Contact your insurance agent and get the process of insuring the home started. (One of the major issues with home insurance in the Amarillo area is the condition of the roof due to the hail storms we receive.)   

      8)      Prepare for Closing
Now that all your due diligence is done, the lender appraisal is complete, and the title has been reviewed you are prepared to close. You will need to set a closing time at the title company and have your cash deposit ready. No later than 24 hrs prior to the closing you will be issued a “HUD 1” statement. This will be your full closing statement and will need to be reviewed. If everything is correct on the HUD 1 then you are ready to close the transaction.

      9)      Closing the Transaction
Typically, you will close the transaction at the title company. There will 2 separate closings (1 for the buyer and another for the seller). Once both sides are closed and all documents have been signed; then the transaction will be pending funding. Funding can sometimes take place within 30 minutes after the closing and other times it can take several hrs. Working with local lenders usually means quicker funding. Once the transaction is funded it is complete and keys are exchanged. You are now a homeowner!!!

Each step in this process has additional information that accompanies it. Your agent can explain each step in detail and let you know how to work though them. A buyer’s agent will typically handle the majority of the steps and keep the communication flowing between you, your lender, the tile company and the seller or seller’s agent.

Good luck with your purchase and please let me know if you have additional questions or would like for me to be your agent! 

Original Content by Dirk van Reenen © 2012

1 comment:

  1. Great Post! It's very nice to read this info from someone that actually knows what they are talking about.