So you are thinking of buying a house. Whether you are a first time home buyer or you have been through this before it is good to know all the steps in the process. The following are steps a good agent will take their clients through:
Selecting an Agent
The first thing you will want to do is find a Buyer's Agent. This is a Realtor (a Realtor is a real estate agent that is a member of the National Association of Realtorís) that will represent you, the buyer not the seller. There are many ways to find an agent such as going to Open Houses, referrals from friends and associates and searching the Web. It is important that you feel comfortable with the Realtor you select because you will be working with them a lot during the home buying process.
When you interview an agent they are also interviewing you. While a Realtor is there to serve you they also need to make a living so they don't want clients that can not qualify for a loan or look at a lot of homes without buying anything. Also just like you want an agent you can get along with they want a client they can get along with.
The first meeting with the Realtor will most likely be at their office. You should do the following to prepare for the meeting.
Contact several banks or mortgage companies and get Pre-approved, not just pre-qualified. If you are not sure what to do your soon to be Realtor can help you.
Make a list of all the features you want in you new home and rank them by importance.
Make a list of question you would like your Realtor to address.
Make sure you bring a drivers license or some other photo ID. Many agents make a copy of it for identity and security reasons.
Bring your check book. Many agents require a deposit to make sure you are serious about buying. Note: the check is deposited and the funds placed in escrow and typically apply toward your purchase.
The Realtor will typically have a presentation of the home buying process and market condition, and then they will ask you for a list of features you want in a home. Many times they will have had you contact a bank or mortgage company ahead of time to get pre-approved. Then there is some paper work to do. Many states require an Agency Disclosure form which informs you of your agentís role in the home buying process. Also your Realtor will want you to sign a Buyers Agency agreement which says you are working with them and if you buy a house during the term of the agreement they will get paid.
Along with finding a Realtor to work with it is very important to find a lender. You need to determine what you can afford. It is important to be careful. In recent years mortgage banks have been loose with their qualifying criteria and have at times brokered loans that were not really in their or the borrows best interest. If you are not absolutely clear as to how much you can afford and what the short term and long term payments are going to be on the loan then you should seek the advice of a Certified Public Accounted (CPA) or a Certified Finance Planner (CFP). This may cost you a few hundred dollars but it could save you a lot of headaches in the future. NOTE: a Realtor is typically not a CPA or CFP and should advice you to seek guidance from a CPA or CFP if needed.
A good Realtor will insist you get pre-approved as soon as possible and may not want to show you any properties until you do. The reason for this is simple there is no sense looking at a houses you can not afford. Furthermore the seller's agent will usually advise their client not to accept an offer that is not accompanied by a mortgage pre-approval letter.
Now it is time to start looking at homes. As you look at homes you should take notes on each one. Typically your agent will take you to three to five homes per outing so it is important to write down your impressions so you can review them later. Even taking a few pictures with a digital camera is not a bad idea. If you have narrowed your choice to a couple of homes you should feel free to ask to go back and look at them again if necessary.
Your agent should provide you with the information sheet for each home. They may also keep a copy for their own records. Before going out your agent will typically call the point of contact for each home to make sure it is ok to view it at that time. While there is usually a lockbox with the key at the house you don't want to be barraging in on people unannounced.
Make an Offer
Once you have found a home you like it is time to make an offer. An offer is typically in the form of a contract and addendums, your pre-approval letter from the bank and your financial information sheet as well as a cover letter. You then sign all the documents and the package is sent to the sellerís agent. It is important that you understand what is in the contract you signing so ask you Realtor if you have any question. Keep in mind however that Realtorís are typically not attorneys so depending on your question they may advise you to have your attorney review it before you sign.
Your Realtor usually has an automated contract writing system that will generate all needed forms with the information filled in. They will then have you review and sign it. Before writing the contract your agent will want to discuss with you pricing, contingencies, any special requirements you may have and the negotiation strategy.
During negotiation your Realtor will be calling you with updates and asking you how you want to proceed. This can be fast paced which is why you and your agent have discussed and agreed to a strategy before hand, but unexpected issues can come up. It is important that you understand the issues and if you need a few minutes to think something over let your Realtor know, it is better to take some time then agree to something you don't like.
Your Realtor will be negotiating on your behalf with the sellerís Realtor and possible with the seller. At Exit Realty we like to have the buyer's agent in the same room with the seller's agent and the seller if at all possible. However the negotiation may not take place all at once. Your Realtor will need to call you so you should be available to discuss issues during this time. As mentioned earlier your agent will have worked out a strategy with you in advance to guide the negotiation.
Contract of Sale
Once the seller has signed the contract and you have received the signed contract (you signed it before it was sent) then you have a ratified Contract of Sale on the property. Note that the seller may make modification to the contract in which case you would sign the modifications and send it back to them. Once they have received it the contract would then be in effect. If you are not sure where you are in the process talk to your Realtor.
Your Realtor will act as a conduit for transmitting the contract back and forth. This is to insure that everything is in order. In the simplest example you sign the contract, your agent sends it to the sellers agent who gives it to the seller, the seller signs it and gives it back to their agent to send to your agent, your agent reviews it to make sure it is ratified correctly then gives it to you. Until you have physically received it back it is not binding in most states.
Now the fun begins. Most contracts have a number of contingences that allow you to get out of the contract. These include but are not limited to getting financing that is satisfactory and inspection with satisfactory results. These contingences let you get control of the property so you and your lender can examine it in more detail.
Your agent will advice you and coordinates the do diligence activates with the vendors and sellers. Note: If you want any special inspections such as mold if you have allergies you should discuss this with you agent before writing a contract so they can be sure it is covered in the contract.
Your lender will want an appraisal done to validate its value. You do not need to do anything about this your agent and lender will schedule this with the sellers.
As soon as you have a ratified contract your Realtor will contact you mortgage company to schedule an appraisal.
One of the most important parts of the Do Diligence phase is the Home inspections. Besides the general inspection there are several optional inspections you may want or you Realtor may advise. Here is a list of inspection you may have done:
General Home inspection
Lead inspection for home built before 1978
Mold inspections if you see any mold or have allergies
Radon if there is a damp basement
Well and Septic if there is a well and septic system
Your home inspector may advise you to have a contractor come and inspect some specific part of the property and give you a repair estimate. Depending on the results and your contract with the seller you may wish to either exercise a contingency to cancel the contract, have the seller repair it before you close or renegotiate for a lower price.
Your agent will schedule the home inspection and can work with the inspector(s) on your behalf. It is advisable however to be there yourself during the inspection.
Many sellers offer a Home Warranty by buying a Home Warranty Service plan that cover the homes major appliances, HVAC, water heater, etc during the list period and for the first year after you purchase. You should ask you agent if this is available on the home you are buying. If it is not you may either want to ask that the seller buy one. This would need to be done in the purchase contract or during the negotiation.
Your Realtor can advise you on home warranties
One of the key issues of getting to closing is the financing. You will be communicating a lot with your lender and Realtor to get everything the lender needs to make the loan. Once all the contingencies have cleared and your leaner has everything they need you Realtor will call you to confirm the closing date and time.
After the contract is ratified your agent will be working with your mortgage lender, the settlement company and anyone that is need to be able to close. As the day of the closing approaches your agent will call you frequently to make sure everything on your end is ok and helps you resolve any issues you may have.
Beside the items that need to be taken care of to close there are a lot of items such as moving and turning on utilities that need to be taken care of. You should make a list and check them off as they are completed.
If you are moving into a new area you may not know who the utility companies are. Your Realtor can help get you the information you need.
Get Closing Cost
Here are some of the key activities you will be doing between putting in a contract and closing.
Write a contract
Work with Realtor in negotiation
Give lender detailed financial information
Plan the move
Have insuring in place the day of closing
Prepare for closing
Here are some of the key activities your Realtor will be doing between writing the contract and closing.
Write a contract
Work with you in negotiating with the seller
Coordinating contract ratification.
Give lender detailed information on the property
Give settlement attorney information on the property and a copy of the contract.
Renegotiated if needed based on inspection
Coordinated activities of buyer, seller, lender and settlement company
Help buyer with planning move
Prepare for closing
Pre-closing Walk Through
You and Your Agent
Within a day or two of closing your agent will schedule a final walk through of the property to make sure everything is in order. Ideally this is done the morning of closing and the previous owners have moved out. However much of the time this is not the case but even if the previous owners are still moving out during your walk through it is still a good idea.
Bring to Closing
Your Realtor and lender will let you know what you should bring to closing. Typically these are:
A certified check of the amount the lender will specifies
A check book in case the lender's prelimnary numbers are a bit low. If they are high you will get a check from the settlement company
Your driver's license
Your Realtor will typically bring their working file on you and your property in case anything comes up.
At the Closing
Closing also know as settlement involves signing a lot of papers mostly related to the loan but also the deed to the property. If you paid all cash there are only a few papers. The main thing you want to look at is the numbers which are summarized on the HUD-1 form but also might show up on other documents. If these number are not what you thought you agreed to then you should stop and ask. You may want to bring someone with you to help you check the numbers. Your accountant or financial planner would be ideal. Also if there is some aspect of the mortgage agreement that doesn't look correct such as the papers say ARM and the you thought it was fixed you need to stop and find out what is up. Once you have signed the papers it generally requires legal action to resolve issues so make sure things are as you thought they were going to be. Once all the documents are sign you will be given the keys and you now own the home. Congratulations!!
Generally your Realtor is there to give moral support and answer any question that come up. Keep in mind though that generally Realtors are not accounts, financial advisors, or attorneys. They may spot check your HUD1 and other documents but it is YOUR RESPOSIBILITY for signing or not signing.
You are now moving in!! You should go through you check list and make sure everything is check off. Utilities should have been transferred to your name. The home insurance should have been activated. You will want to change the locks. You should have had your mail forward and updated your address information with everyone that needs it.
Things to remember
Here are somethingís to remember after you have moved in:
Keep track off all your financial papers during the move
Make sure your bank and other financial institutions have your new address.
There is tax benefits to owning a home so talk to your accountant about what papers he will need when filing you taxes
Generally your mortgage company will have you make payments that include additional amount that will be escrowed and used periodically for property taxes, insurance, PMI, etc
Just because your mortgage company escrows taxes and insurance do not blindly assume they will pay those the first year. Check the statement from them to make sure they have paid and if not call them up and get the issue resolved otherwise you might get a notice from the county saying your house in going to a tax sale.