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12 Steps to Buying your Home

Buying a home can be one of the most exciting and rewarding things you ever do, or it can be one of your biggest nightmares. Your home buying experience will depend entirely on your preparation and the expertise of the people assisting you. The following report should answer many of the questions you may have.

1. Selecting a Realtor

This is probably the most important step in the process. You will, for all intents and purposes, be in partnership with your agent/s. You will be confiding in them on a business level and often on a personal level. They will be the people dealing with any problems that crop up along the way. They are the key to you finding what you want, in the area you want, for the price you want. Be selective, look for someone you feel comfortable with and who is experienced and knowledgeable. Don't be afraid to ask for references; most agents are used to this and will not object. Once you select someone you feel good about working with, sign them up as a Buyer's Agent. It is very important that the person you're working with is representing you exclusively.

2. Meeting with Your Agent for a Home buyer's Consultation

Another very important step in the process is where you and your agent prepare each other for exactly what to expect along the way. The following are the points that should be covered and fully understood in this meeting:

Discuss your exact needs (bedrooms, baths, etc.), what locations you're interested in, the price range you are comfortable with and your time line. It generally takes 30 to 45 days from contract to settlement.

Determine your availability for visiting properties and what you expect from your agent in terms of availability & communication (e-mail, phone-daily, weekly).

Have your agent explain financing options and give you references for lenders, usually three. He/she should explain the differences between the various loan programs available and answer any questions you have. Get copies of all the paperwork you will be expected to sign throughout the process and have him/her explain each form. Have your agent explain Buyer Brokerage vs. Seller's Representation and then sign a Buyer Broker Agreement.

3. Selecting a Lender

Most people, when selecting a lender, call various lending institutions to check on rates and generally go with the lender with the lowest rates. We strongly recommend that you go with a lender who has been referred to you either by your agents or by someone who has actually gone through the entire loan process with that lending institution and loan officer. The loan officer is just as important, if not more important, than the lending institution. Most lending institutions offer the same basic loan programs (conventional fixed rate, FHA & VA, etc), but each will usually offer their special "niche" products. For example, some lenders specialize in low down payment loans, some specialize in loans for people with marginal credit, some specialize in loans for self-employed borrowers, etc. Your agents will know how to steer you in the right direction.

4. Meet with Your Lender

Usually this happens in conjunction with Step 2. You will want to meet with the loan officer as soon as possible in the process, to go over and make sure you understand every aspect of the loan process. One of the best strategies we can offer you is to get pre-approved. It is simple to do and can save you thousands in negotiation on a new home. Most lenders can get you approved for a loan even before you have selected a home. Your loan will be approved "pending a property & appraisal". Pre-approval makes you, the buyer, much more comfortable knowing that you won't find your dream home only to have the loan turned down. The seller is also much more likely to deal with you on the sales price if he/she knows that you are a serious, qualified buyer and that nothing will fall through. You should leave the lender appointment with a clear understanding of what your complete monthly payments will be, a pretty good estimate of how much cash you will need (from beginning to end) and what supporting documentation you will need to furnish to the lender.

5. Look at Homes

This is the fun part! It is important to limit the number of homes you're looking at in a day. If you visit too many homes, they begin to run together and you can't remember one from another. It's a good idea to use a checklist form to help you track the properties you have seen. It is also helpful to actually begin to narrow down the properties after each visit. For example, if house #3 was better than house #2, immediately eliminate house #2. Remember that communication with your agent is crucial. It's important to let them know which houses you like and why as well as which houses you don't like. Sometimes it takes going out and looking one time before you and your agent really have a good grip on exactly what you're looking for. Call your agents and have them do the research on any properties that are being advertised that look interesting to you -- that's what they're getting paid for. A lot of new homes sites won't let you return with representation if you visit the site the first time on your own, so wait for your agent before you look at new homes. If you should become interested in a For Sale by Owner, ask your agent to contact the seller, before you do, to see if he/she will cooperate (pay a commission) with a Buyer's Agent.

6. Select a Home

Once you've narrowed your search down to one or two homes that you really like, you're agent will do whatever research necessary to help you make your decision. However, the decision will ultimately be yours and surprisingly enough, pretty easy to make. School reports are generally available and can give you lots of good information. Buyers are welcome to call the local Chambers of Commerce for any statistics of interest. Local zoning & planning offices are a good source for future road plans, etc. Once you've selected one home to focus on, your agents will do a Comparative Market Analysis on that property. This involves determining "fair market value" by looking at what other buyers were willing to pay for properties similar to yours in the same neighborhood or area.

7. Making an Offer and Negotiation

When making an offer on a property, it is important to decide ahead of time how much you are willing to pay at what terms for the house. You already know what the fair market value is, now you have to decide:

  • what price will you offer
  • how much earnest money deposit you will offer
  • what personal property you wish to have convey (everything is negotiable)
  • how much you are asking the seller to pay towards your closing costs
  • when you plan to settle, and
  • what inspections you plan to have done

When negotiating with any seller, it's best to remember not to take anything personally. Also, try to put yourself in the seller's shoes. Figure out what's not negotiable and be willing to give a little on the things that aren't. A good agent should be able to give tons of advice as to how to structure your offer. Once your offer has been presented, the seller will either accept your offer outright, reject your offer outright, or counter your offer. The counter process can go back and forth many times. It's important for all parties to keep their cool and focus on the goal.

8. Get Inspections & Remove Contingencies

If, as part of your offer, you asked for time to be allowed to have inspections done to the property, you have written what is called a contingent offer. Offers can be contingent on loan approval, inspections, the receipt of acceptable homeowners or condo association disclosure packets, the sale of property and many other things. It is important that all deadlines be met and that all contingencies are removed exactly the way the contract specifies. Your agent is responsible for making sure this is done correctly.

9. Select an Attorney

The sales contract will dictate who gets to choose an attorney to represent the transaction. Usually it's the buyers decision. If you don't know an attorney or a title company, your agent can recommend someone. The attorney will take care of ordering a survey, title insurance, title search, and drawing up all the documentation. They will also conduct settlement. Most people don't know that the attorney or title company doesn't actually represent the buyer, they represent the sales contract. Their job is to make sure that all the terms that have been previously agreed to will get met. If any problems that require representation were to arise, each party would need to hire their own attorney.

10. Walk-through

Most sales contracts will give the buyer the right to one pre-settlement inspection. This is your last chance to find any problems and have the seller correct them. Read the contract carefully, but most contracts read that all electrical systems, plumbing, appliances, heating & air conditioning need to be in working order at time of settlement. These are the items you check at walk-through. You are also checking for any other items that the seller previously agreed to fix or replace. if anything is found to be defective or missing, there are several options:

  • The seller can remedy the problem prior to settlement
  • The seller can credit you the amount of money it would take to hire someone to remedy the problem
  • The seller can promise to correct the problem and place into escrow with the attorney, the amount of money you will need to pay someone else if the seller does not perform as promised.

On new home purchases, the process is a little different. The builder will generally do a walk-through with you approximately 1-2 weeks prior to settlement resulting in a "punch-out list". Hopefully, they will get everything on the punch-out list completed prior to settlement. If not, most new homes contract s allow the builder to complete whatever minor items have been noted in a "reasonable" period of time, generally 3 months.

11. Closing on your home

This is the day you "sign your life away", as most clients say! Not really. You will be signing all the loan documentation, which can seem never ending. The person conducting settlement should be able to explain every document to you in a satisfactory manner. Do not ever feel intimidated. If you don't understand ...don't sign. Your agent will explain everything. If you like, you can request blank copies of the documents you will be signing in advance so that you can carefully review them. You will decide at settlement whether your want owner's title coverage or just lender's. You will have to present whatever down payment & closing cost funds you were expected to pay. This check must be certified-- they will generally not accept a personal check.

12. Moving Day!

This is the last and probably the hardest step in the home buying process! A little bit of planning and forethought, though, will make for a much smoother move. You will want to make arrangements with a moving company as soon as you can. Call at least two to get competitive quotes. They will usually ask to come to your home to get an idea of how much they will be moving and how much distance they will need to travel. Be sure to change your address with the post office, banks and any creditors at least 30 days in advance. To avoid late payments, it's a good idea to actually call and verify receipt of the address change whenever possible. Call to order your utility hook-ups approximately 10 days prior to your move. Be aware, some utility companies will keep you on the phone for a long time.

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