Here is a basic guide for prospective home buyers, geared to be particularly helpful for first-time buyers. While it’s certainly not exhaustive as to the list of different scenarios it’s possible to encounter on any individual transaction, use this as a starting-off point for what to expect.
First, a quick overview:
1. Get a loan pre-approved
2. Shop for a new home
3. Make an offer to buy the home
4. Conduct inspections on the home
5. Buy the home
The first step in the buying process should always be getting a loan prequalification. This process can be as simple as spending 10 minutes answering a few basic questions about your income, assets, and credit history, but without talking to an expert it’s hard to know exactly how much you qualify to borrow, which in turn is going to affect what you’ll be able to spend on a new home. When you’ve established how much house you qualify to buy (and more importantly, how much you feel comfortable buying), you can tailor your search to include properties in the price range that’s realistic for your budget.
Next, determine whether you’ll be working with an agent or “going it alone” when it’s time to go home shopping. Obviously, we feel pretty strongly that hiring an agent of your own is a good idea – after all, it’s a big part of what we do! There are, however, some tempting reasons not to work with a buyer’s agent:
· Some discount companies rely on you to do all of the legwork to find properties yourself and request showings (even if you work with a full-service agent, you might decide that this is the fun part, and something you want to do). They’ll then offer to kick back a portion of the buyer’s agent commission to you – this could mean thousands of dollars in your pocket at the close of escrow! The drawback: inexperienced, underpaid agents are often assigned to conduct property showings – they frequently won’t have the expertise to observe conditions about the property or neighborhood that affect its desirability. Once you do decide to make an offer, you’re handed off to a single buyer’s agent that has a whole team of showing agents providing them leads – because they’re doing so much business they’ll be able to take a big pay cut per deal, but the agent likely won’t have time to give you personalized representation or service you’d receive from a dedicated professional committed to serving only a few clients at a time.
· If you work with the seller’s agent who has the property you’re interested in listed for sale, the agent may promise to get you a better deal, or to get your offer accepted if there are multiple offers on a single property. The drawback: this agent was hired by the seller to net them the highest possible offer, regardless of whether or not that’s in your best interest as a buyer. Where would your loyalty lie, with the person who hired you, or with someone who came along later?
It’s not just that there are perils in working with a cut-rate brokerage or with a seller’s agent more committed to her client than to you, we believe there are tangible benefits to working with a buyer’s agent of your own. Not only will you be working with the same person or small team of people from when you start shopping until you move in, you’ll get personalized attention from local market experts who will be with you during home tours, providing detailed information on recent neighborhood sales to help you make the best possible offer, help decipher disclosures and arrange inspections, and negotiate the whole way through with nothing other than your best interests in mind.
So after these (admittedly biased) pros and cons, we hope you’re still interested in working with us. Now that you know how much home you can afford, let’s go shopping! We’ll work with you to set up a customized webpage and search engine that will comb the county for new listings that meet criteria that you set – location, price, number of bedrooms, yard size, whether or not there’s a working dishwasher – we can cast as wide or as narrow a net as you choose. You’ll then get an e-mail notification instantly (or once a day if instant data is too fast) when a new property that you might like hits the market, falls out of escrow, or has its asking price cut.
Hopefully the search we’ve set up pulled up plenty of matches, and you’re even interested in a few of them – in that case, give us a call, let’s go take a look! When it comes to showings, it’s always nice to have a day or so advance notice on the properties you want to see – some are vacant or have accommodating owners who will let us in at a moment’s notice, others are occupied by tenants who want all viewing appointments scheduled in advance with them. If you’re unfamiliar with the neighborhood that your dream house just popped up in, it might be a good idea to drive by the property and around the block before requesting a showing. What’s too good to be true on the internet could be too scary to set foot upon in real life.
With all of the preliminary looking done, it’s time to actually see these places that have gotten your hopes up so. It’s a good idea to take a notepad to jot down some thoughts on each of the properties you’ll be seeing, maybe adding a distinctive feature to jog your memory later (that one with the awesome kitchen, aside from the hideous puke-green paintjob). If you’re also taking pictures, make the first one you take at any property the address marker on the house or the curb – it’ll help going through them later. Your agent, that jack-of-all-trades that knows a little about contract law, a little more about finance, and even a touch about construction, should be able to point out some positives or negatives that are easy to miss while you’re busy taking in the big picture.
Some folks find their equivalent of Malibu Barbie’s Dream Castle (there should probably be a trademark symbol here) on the first day of looking. Others aren’t so lucky. Regardless, hang in there and we’ll find somewhere that makes you happy…eventually. Then it’s time to write an offer.
Before the offer is written up, your agent will look at all of the other homes for sale near your new palace, including those that are already in escrow or might have sold recently. From there, he’ll compare all of them to the property you want to buy – this one has a pool, which makes it more desirable than yours, that one doesn’t have the kitchen remodel yours does, which would make it worth less. We’ll share our findings with you and, based upon what we’ve learned, will advise as to what we think the right price is for the house. Of course, we work for you, not the other way around – you hire professionals for professional advice, but ultimately we’ll craft and present the offer that makes you happy.
The offer itself is a bit of a Mt. Everest for the uninitiated – at least 10 (often more) pages of tiny text, checked boxes, decisions galore. We know it, we can write it, and, the part you should care about, we can give you a Cliff’s Notes explanation or break it down into common English line-by-line. You initial, initial, sign, initial, sign, initial, and give it back to us (this step has been greatly condensed for brevity’s sake), and we go to bat for you, pushing the seller’s agent to accept or, at least, send us a counter offer.
Provided that we can reach an agreement with the seller on the best price at which her property should sell (even though she’ll always prefer that you pay more and you’ll always wish there was a way to pay less), we go to escrow. At this point it’s time to put your money where your mouth is – kind of. An Earnest Money Deposit (EMD), usually about 1% of the total purchase price, goes to escrow, a “disinterested third party” that takes instructions from the buyer, seller, lender, and others involved in the transaction – basically acting as a referee to make sure that no money changes hands until everyone does what they’ve agreed to do in the contract.
Getting tired yet? The real work is just getting started – you now enter your inspection and contingency period, normally 17 days long, starting the day after everyone signs the contract and acceptance of your offer is confirmed. During this time, the seller has to tell you everything bad they know about the property (usually surprisingly little), you can review the rules of the Homeowners’ Association (if there is one), and conduct any inspections you’d like (at least, any inspections that don’t result in the property’s destruction).
As agents, we’re required by law to recommend that you get a general home inspection. Not only that, but we really, really like home inspections. We enjoy them quite a bit, actually. Remember, we’re jacks-of-all-trades, and while we know a bit about construction, this isn’t our area of expertise. A good home inspector will spend a few hours poking around and testing everything from the plumbing and electrical systems to the roof, kitchen appliances, foundation, and other components of a home too numerous to even attempt to list here. If there is any evidence of termite damage or other problems, they can recommend specialists to review and recommend repairs.
Even though the contract you signed earlier said you agree to buy the house in its “as-is” condition (we’d have covered that if this were a real transaction rather than a generalized write-up), we have the right, during our inspection period, to ask for anything we want – a price reduction, repairs to be made by the seller, etc. Of course, the seller also has the right to tell us (in terms decidedly certain or somewhat ambiguous) to go fly a kite. As long as our contingency window hasn’t expired, we can back out and you’ll get your deposit money back (minus any fees you’ve incurred during the escrow) if we’re not able to negotiate a solution with the seller.
Because this imaginary transaction is going to be as happy as a tree in a Bob Ross painting, let’s say we make it through the inspection period and everything is peaches – the house is in as good of a condition as we thought at first glance (or we got the seller to agree to credit us some money to fix the blemishes we found after taking off the rosy glasses), and our loan is approved. Your next step is going to be signing loan documents – a lot of them (take a look-see at our loan page) for more.
The finish line is in sight – all we need to do now is make sure nothing catastrophic has happened to your new home while you weren’t looking. Within 5 days of close, we conduct what’s called the “final walk-through,” where we have a chance to confirm that everything in the house is in the same condition as it was when we agreed to buy it (or in better condition, if we asked for repairs to be made).
Provided there are no major hiccups and that the seller didn’t rip the oven out of the wall that was clearly permanently installed and meant to remain for your enjoyment for years to come, it’s time to pony up with the cash (for real this time). You instruct your bank to wire the rest of your down payment (the difference between what you were going to put down and the Earnest Money Deposit that you placed a few weeks ago), and as soon as that’s in and your lender funds your loan, a deed is recorded to transfer title of the property from the seller’s name into yours. Congratulations, you’re a homeowner!
Of course, you know that this is just the simple version detailing one of the many outcomes of a choose-your-own-adventure saga (perhaps another copyright ought to be acknowledged here), but it’s our goal to make it to the end with you and land in a place with smiles on everyone’s faces. Thanks for reading, now it’s time to get in touch with us, or you can start to browse available properties for sale through a widget we’ll have installed on this page in the coming weeks. So you actually can’t do that yet. But you will be able to soon, we promise…