While buying real estate can seem like a complicated task, it can actually be pretty straight forward with some simple advice and the help of a real estate agent or broker. Here are a few simple steps that can help get you into the home of your dreams.
Hire An Agent/Broker:
You want someone that will fight for you. A buyer’s agent is that fighter. They have a fiduciary duty to look out for your best interests and they can help ensure that the property is right for you. The hiring process may seem complicated but do not be afraid to reach out to friends and co-workers for recommendations. It is also wise to find a specialist who is knowledgeable about the area you’re looking at to ensure your questions are fully answered.
A buyer’s agent may require you to sign a broker agreement meaning that they will receive a commission from any sale. However, it is important to remember that it is the seller, not you, who shoulders that cost.
One of the biggest glue traps for your home purchase is the financing. Many people are not in the position that they can pay outright for a home meaning that they will have to obtain a purchase money mortgage of some form. Be sure that your credit history is sound and repair any errors.
When it comes to finding a mortgage broker, one of the best suggestions is to begin by asking your agent/broker or your bank for advice. Additionally, be sure to compare rates among different loans and brokers. Many sellers ask to see a loan preapproval letter as part of the buying process so be sure to obtain one to verify your income and credit. You should also determine the best loan type for you.
Find Your Home:
This could be one of the most complicated parts of the home buying process. You are trying to find the perfect home but when it comes along, you cannot let your love of the home influence your decision. Remember that buying a home is an investment. If you show your love of the home, the seller may be less willing to negotiate on the price if they feel you’ll pay anything for it.
You can start by giving your agent some criteria like the price, number of bedrooms, bathrooms, garage bays, etc. Also, be sure that you research the area to see if it is right for you.
Make an Offer and Negotiate:
When you make an offer on the home, be sure to ask your agent what they think. Your agent can help you determine the best offer and create multiple offers in case the sellers do not like the first one. Also, be prepared for rejection and ask your agent why the offer was rejected so you can adjust the offer if you want to.
It is almost a guarantee that if the buyer does not flat-out reject an offer, they will likely counter it. This is something you need to be prepared for because you will either have to reject, accept or counter that offer. However, if the seller counters your offer with the full price, you should continue to negotiate.
Make an Earnest Money Deposit and Open Escrow/Order Title:
Once your offer is accepted, you will most likely be required to deposit an earnest money check to show your commitment to the property. Be sure that you deposit it with the correct party and, under no circumstances, make the check payable to the seller. You should also ensure that your contract returns your earnest money deposit if the contract is cancelled.
Additionally, your agent or another third party will open escrow and title. They should provide you with the escrow officer’s name, phone, and file number so you can give it to your lender and insurance company.
Perform an Appraisal:
In any real estate transaction involving a mortgage, the broker will make you perform an appraisal on the property to make sure it is worth what they’re loaning to you. In the event that you receive a low appraisal, be sure to discuss your options with your agent and always request a copy of the appraisal.
Comply With Your Lender:
Chances are your lender will require additional information from you to ensure the loan. Be sure to work with them to get them what they need. Be sure that you do not adjust your financial situation while you’re in escrow on the home, this can lead to the denial of the mortgage as well as other issues with the sale. Once the file is complete, it will be submitted to a mortgage underwriter for final approval.
You should also remove any contingencies if applicable. However, you first need to make sure your loan is firm and the appraisal is acceptable before removing a loan contingency. Remember that if you don’t remove any contingencies, the seller could issue a request to perform and cancel the contract on top of keeping your deposit.
Approve Any Seller Disclosures:
As part of the real estate transaction, the seller will be required to complete a disclosure about the property. Be sure that you read and understand every section of the disclosure and your rights in the event that the issues disclosed may force you to back out of the contract. Always be sure to ask any questions that might come up and that you know what is going on.
To close on the home, your mortgage broker will require you to have insurance on the property. Be sure that you comply with this and get it as early as possible to avoid any issues. There are times when previous claims by a home owner can make it difficult to get insurance. This is why we recommend getting it as soon as possible.
Additionally, you should obtain a Title Insurance Policy that protects you against title claims and issues with the property. While there is a small chance that you will ever use the policy, it protects you against big damage for a small price. Would you risk losing your entire property to a title claim or rest peacefully knowing that you’re protected from that situation?
Conduct a Home Inspection
Be sure to hire a reputable home inspection to go through the home and look for any potential issues. You might want to provide your own check list if there is something in particular that you want checked and you should attend the home inspection if possible.
In the event that the inspector finds an issue with the home, be sure to bring it up with the seller to discuss fixing the problems. Some sellers will be less willing to work with you however it is recommended that you make the sale contingent on fixing any issues from the inspection.
Before closing on the home, you should be sure to do a final walk-through inspection to make sure that everything is as you anticipated it. By this time, the seller should have moved their property out of the home allowing you to get a full look at the home before you close. Be sure to make a note of any damage found along the way.
You will also typically be required to sign the loan and typically a loan officer will be present at the closing. Be sure to bring any required documents.
The closing agent will typically require you to deposit the finds through a certified check from a local bank branch. You should also always bring some additional escrow to the closing just in case. If you have to pay anything additional, you will receive a refund after the closing if applicable. Additionally, it is recommended that you ask the bank to wire the funds to escrow reducing the amount of time that you’re waiting.
Once you receive your property deed, seller’s conveyance and deed of trust, it is heavily recommended that you record the documents in the public records to reduce the likelihood of anyone laying claim on your property. This is typically done automatically but be sure to check. Title will typically notify you when it records.
Finally, chance any locks and alarm codes to prevent an unexpected visitors. While the other party may seem innocent, you can never be too careful.
If you’re also selling your home, be sure to check out our page on Selling Real Estate.