The Process | Steps in Finding the Perfect House

4 04 2011

Even if you’ve bought a home before, chances are you don’t make a habit of remembering every detail to the transaction….that’s what your Realtor is for….to prep you for what is coming next & to help set expectations & give advice based on experience.

1.  The first step when thinking of buying a home, whether it is your very first one, or you’re upgrading to something different, is to talk to a lender and find out what you qualify for in a mortgage.  I know it seems really scary, but most all lenders are friendly, helpful & prompt.  If you know what you make, how long you’ve worked there, what your monthly obligations are (car, student loans, minimum credit card payments, etc.), it should only take about 5-10 minutes to know what the bank is willing to let you spend 🙂  Specifically ask for a pre-approval letter & make sure to share this with your Realtor so he/she is prepared for when you are ready to write an offer.

1.2  Next, if you own a home currently, call a Realtor you trust (it never hurts to interview a few, unless you loved your last agent) to get a CMA, or Comparative Market Analysis, to help determine the value of your current home so you know how much you’ll have for a down payment on the next place.  This will be helpful in communicating with the lender, also.

2.  Contact a Realtor to help you get set up on the perfect search criteria for you.  This is also pretty quick and painless.  Just be thinking already of what part of town you’d like, your minimum bedroom/bathroom/garage stall numbers & the maximum you want to spend.  If you have your email address ready, the whole setup shouldn’t take more than about 5-10 minutes.  🙂  Feel free, of course, to ask as many questions as you can think of along the way.  For instance, what is the sale to list price ratios.  This will help you determine the max value you should be searching for.  If you live in a market that it’s common/acceptable to chop 10% off the price and it’s likely to get accepted, you may think about searching for a higher value than you really want to spend.  If it’s like Billings, and the average is more like 3%, probably best to stick right at the max you’re comfortable with for pricing boundaries.  There’s nothing more depressing than falling in love with a home you can’t have.  Once I have the info I need to set a client up on a search, they get all the homes that are available for them to review immediately & in the future if any drop into their price range, or newly hit the market, an email is sent with the appropriate link & info!  Pretty darn slick…you don’t have to spend hours on anymore!  WAHOO!

3.  Let your Realtor know which homes are your possibilites/favorites, and pick a time to go view them.  The more time you spend with your agent, the more they will understand what you love (and don’t love) about the homes you go see.  This is helpful so they can start suggesting homes that hit the market in your price range that meet your criteria that you may haven’t seen in your list yet (or maybe it hasn’t even hit the market yet, but they know it is getting ready to).  Don’t be shy with your agent.  It’s a common misconception that all agents work for the seller.  This is not true.  Only the Seller’s agent works for the seller.  If you pick an agent to represent you as a buyer, that’s exactly what they do.  Even if you go see one of your buyer’s agent’s listing (which would make it Dual Agency), if you have a good agent, they will still do everything to make sure the home you buy is the best thing for you right now (and your future plans that you share with the agent), even if that means it’s not their own listing.  No Realtor wants a call from a client who’s mad about their purchase.  The most successful agents have repeat clients who love referring their Reatlor’s name to their friends & family.

4.  Once you find “The One”, sit down with your agent to determine what the best negotiating strategy should be.  Each market/price range/situation is different, so do your best to have an open mind during this phase.  Your agent will be able to help you determine what the average sold prices are for homes that are similar.  Not everything is about the price.  Keep in mind dates, what goes & what stays, etc. all play an important role to both the buyer & the seller.  Maybe a seller is firm on their price, but very willing to help repair and home inspection items, or replace a roof.  This is the time where your agent will fill out all the necessary paperwork for you & you’ll actually write the offer.  It should take about an hour & require an earnest money check (not cashed until there is an accepted offer between you and seller), a pre-approval letter (which you should already have from the lender), and quite a bit of initialing & a few signatures.

5.  This is the due diligence part of the process.  It’s time for you to make a few phone calls.  You’ll want to schedule a home inspector & coordinate that with your Realtor to make sure the seller knows about the appointment & is prepared.  You’ll also want to call and check with an insurance agent to get a quote on homeowners insurance.  It never hurts to call more than one place to make sure your quote is competitive.  I’ve seen HUGE rate differences for the same product.  Be choosy.  Saving hundreds of dollars is worth making a few more phone calls.  Keep in mind – your agent is NOT an home inspector & neither is the listing agent.  Your agent should point things out to you they notice, but if they don’t, it is still your responsibility to discover anything you don’t like prior to purchasing.  A home inspection isn’t required, but it’s VERY much recommended.

6.  You’ll most likely be able to walk through with the inspector after they complete the investigation of the property.  You’ll pay for the report & receive a copy either via email/disk/both.  You’ll have a chance to walk through that with your agent & notify the sellers of any “deal breakers” you may find.  This is a negotiation step.  If you find something you really don’t like, even if it’s fixed (and you’ve made the offer contingent upon the inspection & are within the dates specified in the contract), you’ll be able  to terminate the agreement and get your earnest money back/start searching for a different property.  If you still want the property, but only if a few items are taken care of, you’ll have the option to negotiate with the seller.   There are dates set out in the contract so these negotiations are done in a timely matter and don’t stretch out for months.

7.  Assuming your successfully negotiated the home inspection items (or there weren’t any deal killers), the next step is to notify the lender to order the appraisal.  This will probably take 1-2 weeks to complete.  The appraiser assigned will be random & you won’t be able to have contact with them.  They’ll give their unbiased report to the lender of what they feel the value of the property is & if there are any repairs necessary prior to closing/lending of the money.  If the appraiser  feels the property is worth more than what you and the seller have agreed to, good for you (the seller can’t change the price)!  You’ll have a bit of instant equity.  If it appraises for the purchase price (most often this happens), all is well.  If it appraises for less than the purchase price, there is another time period for negotiations.  The bank will only lend a certain % of the appraisal value.  Either the buyer will need to come up with cash to make up the difference, the seller will have to reduce their price to reflect the appraisal, or some combination of those two options.  If no agreement can be made, the earnest money will be returned (provided the offer was contingent upon appraisal and you’re within the negotiation dates).

8.  Your Realtor will review what is called a preliminary title commitment to make sure there is nothing that should stop the sale….ie, the buyers don’t have outstanding tax liens/judgements/back child support & the seller’s don’t have unpaid liens against the property, etc.  Most of the time, if any issues come up, they are easily resolvable.

9.  After all of that, you’re ready to pick a time at the title company to sign all your documents.  In that very first phase when you wrote the offer you, the seller, and the agents would have chosen a target date for closing.  This is a firm & negotiated date that everyone works toward.  Assuming all went smoothly & the process didn’t need to be lengthened for any reason, that will be the day you sign/take possession.  It will take about an hour at the title company to sign all the loan documents.  You’ll need your photo ID & your downpayment in a cashiers check.   After you’re done signing all the papers, you’ll get your keys & the home is yours!  The title company will record the title either that same day, or the next business day.  Success!

Whew….I think I just wrote a novel.  I could have made this a lot simpler/more concise, but I wanted you to get a good feel for what it’s really like.  Keep in mind, if you buy with cash, things get significantly easier/shorter.  Since that is not the standard, I did not highlight that process, but I’d be happy to go over it with you if you’d like.




2 responses

4 04 2011
House Blueprints - House Blueprint 25007

[…] you can check out: Also you can check out this related blog post: […]

24 06 2011
Negotiate Your Best House Buy « johnallenchambers

[…] The Process | Steps in Finding the Perfect House ( […]

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