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BUYING A HOME
Buying a home is an exciting process, but it’s also extremely complicated. There are very important steps that you need to make sure you take. We’ll start by giving you a quick, overall list of the steps, and then we’ll go into them in detail.
Talk To A Realtor
Talk To A Lender
Begin Your Online Search
Visit Homes In Person
Make An Offer
Negotiate The Deal
Notify Your Lender
Deliver Option And Earnest Money
Perform Inspections
Negotiate Repairs
Have The Home Appraised
Do A Final Walk-Through
TALK TO A REALTOR
If you’re going to buy a home, you really need a professional to help you through the process. The best part of hiring a Realtor to help you buy a home is that is won’t cost you anything! In the state of Texas, the seller’s agent pays the buyer’s agent, so it won’t cost you a dime to get the help of a licensed professional. I recommend that you hire an agent who is working full-time, not someone who does it “on the side” or in their spare time. This is a very complicated process, and you need someone who is experienced, knows how to deal with any type of situation, and is dedicated to making you his or her first priority.
TALK TO A LENDER
The first question most realtors will ask you is “have you talked with a lender?” That’s because, unless you’re paying cash, you need to know if you can qualify for a home, and how much you can afford to buy. Those are pretty important factors. I have several lenders that I refer my clients to. I’ve also found that it helps to shop around for a lender. Some can get you better rates than others, and some offer loan programs that other lenders don’t have access to. In my experience, it is better to go with a smaller lender than one of the giant banks. The big banks have thousands of customers, and tend to treat you like “a number”. They also don’t have as much incentive to get the loan closed on time, since they have so many loans that they are working on. A smaller lender will most likely hustle a little harder and give you more personal service. They need your business, and don’t make a dime until we close the transaction on your home. Closing on time is extremely important.
BEGIN YOUR ONLINE SEARCH
Once you’ve chosen a Realtor to work with, you should ask them to set you up on an automated search of the Multiple Listing Service (MLS) system. That search will give you the most accurate list of homes that meet your criteria. Sites that are consumer-targeted (Realtor.com, Zillow, Trulia) get their listings fed to them from the MLS systems around the country, and sometimes are a few days behind the MLS system. Your Realtor should be able to send you a link to an online portal, designed specifically for you and your searches. You will be able to map homes, mark favorites, delete homes you don’t like, and send the ones you want to see to your agent.
VISIT HOMES IN PERSON
Once you have looked at homes online, it’s time to hit the street! Compile a list of homes that you’d like to see in person, and send them to your agent. He or she will schedule a tour of the homes on your list. Give them a day’s notice if you plan to see more than two or three. Setting up a tour of many homes takes some time. If you want to see 10 homes, your agent has to coordinate with 10 sellers and try to make your schedule match theirs. It’s not always easy. As you tour the homes, take notes. It sounds like such a simple thing, but it helps tremendously. When you tour a large number of homes, things will start to run together. It will be hard to remember which home had the back yard you liked, which had the best layout, and which one you would be your second choice.
MAKE AN OFFER
Once you have found the home you want, it’s time to make an offer. Your Realtor will look at the “comps” for the home you have selected. (Comps are comparable homes in the same area that have sold in the past six months. The real estate market is constantly changing, so you don’t want to search back too far. Six months is the standard in the real estate industry.) Those comps will tell you what other homes nearby sold for, so you can get an idea of what the home is worth, in terms of recent sales. Your agent will prepare a contract with the terms of your offer. The most important terms in you offer will include your offering price, earnest money amount, option period, and the closing date. Earnest money is money that you put down to show you are a serious buyer. It’s usually 1% of the sales price, and will go towards the purchase of your home. The option period is the time when you will perform inspections on the home. During your option period, you can walk away from the transaction for any reason and receive a full refund of your earnest money. There are many other items in the contract, and your realtor should explain them in detail when you make an offer.
NEGOTIATE THE DEAL
Once you make your offer, the seller will almost always make a counter-offer. If you offer full price or above, they may just take your offer. If they have had their home on the market a long time, they may take your offer as well. Every situation is different. This is the time when you need an experienced Realtor. There are so many items that can be negotiated, so you need someone who has been through this many, many times. A good negotiator can save you money and even get you some extras, like that refrigerator in the kitchen that you liked. A bad negotiator can cost you money, or even lose the deal completely. Hire a good Realtor, and listen to him or her.
NOTIFY YOUR LENDER
Once you have executed the contract (everyone has agreed and everyone has signed), you need to send a copy to your lender immediately. Securing a loan is a time-consuming process. You’ll want to give your lender as much time as possible to help you get you loan completed.
DELIVER OPTION AND EARNEST MONEY CHECKS
You’ll need to give your Realtor the checks for the earnest money and the option fee. BOTH CHECKS WILL BE CASHED. The title company will hold the earnest money in an account, but they will cash the check, they don’t just hold it. The option fee is generally between $100 and $300, depending on what you and your Realtor have negotiated. That fee buys your option period, usually 7-10 days. Again, that will depend on the number of days you have negotiated. During the option period, you can walk away from the deal at any time, for any reason, and your earnest money will be refunded to you. If you do not pay the option fee within 3 days of executing the contract, YOU DO NOT HAVE AN OPTION PERIOD! Your earnest money will not be refundable if walk away. The only way to get that earnest money back will be if you cannot qualify for your loan. The option fee is not refundable, but can be credited to you at closing.
PERFORM INSPECTIONS
During your option period, you should perform inspections on the home. The first inspection should be a general inspection, performed by a licensed inspector. Your Realtor should give you a list of at least four to choose from. That inspector will perform a very general, overall inspection of the home. They will then provide you with a written report (It will be a very long report, even if there is nothing wrong). That inspection report will tell you what items and systems in the home are in need of repair. It will also help you determine if you want to do further inspections. For instance, is the roof ok, or does it need a closer inspection by a roofer? Does the AC system cool properly? If not, you may want to call out an HVAC company. Are there any signs of foundation problems? If so, you will want to call out a structural engineer or foundation repair company.
NEGOTIATE REPAIRS
If you get a clean inspection report, congratulations! You get to move onto the next step. If not, you will need to go over the inspection report with your Realtor and decide which items you will ask to have repaired. Not all sellers will perform all the repairs you ask for. Some will only do part of them. Some sellers won’t do any, especially if they have back-up offers, or they accepted a really low offer from you. You can also ask for a credit in place of repairs. It can be a reduction in price, or they can pay part of your closing costs. I prefer to get my clients a credit so they can have the repairs performed by someone of their choosing. That way there is no question about whether or not the repairs were performed properly.
HAVE THE HOME APPRAISED
Once you have finished your option period, you lender will hire someone do perform an appraisal of the property you are buying. It will determine what the lender think you’re the property is worth. Your agent will not participate in this appraisal, and cannot influence it in any way.
DO A FINAL WALK-THROUGH
A day or two before closing, you have the right to do a final walk-though of your new home. You will want to make sure the home is still in the condition it was in when you first saw it. Make sure that there isn’t any damage that wasn’t there before. IF you negotiated repairs, make sure that they have been completed. You can even have your inspector come back and re-inspect the home to make sure the repairs were completed.
CLOSING
Closing is the best part of the whole process. Be prepared to spend an hour at the title company, where there will be a large pile of paperwork that you’ll need to sign. Be sure to bring some identification, and a cashiers check for the money you need at closing. You can also wire the money ahead of time, if you prefer. Once you have signed and the seller has signed, all the paperwork is sent to your lender. They check everything over, and then they “fund” the loan. Once it has funded, the home is yours!