Educate Yourself On the Buying Process
Your new home purchase will probably be one of the most important decisions of your life. Before you begin it is important to educate yourself on the real estate market in your area and the buying process. An experienced real estate agent who knows the area can help you with both these issues. Other excellent resources are books on home buying and seminars for the homebuyer.
The ten steps of the buying process discussed in this article are:
- Your Credit Score and “Loan Pre-Approval”
- Select the Best Real Estate Agency
- Search For Properties
- The Offer, Counter Offers and Acceptance
- Disclosure, Disclosure, Disclosure
- The Physical Inspection
- Opening Escrow
- Lender Requirements and the Final Walk Through
- Closing Escrow
- Final Notes
Your Credit Score and “Loan Pre-Approvals”
Your “FICO” score provided by each of the three credit reporting agencies is one of the most important factors that lenders consider when providing a good home loan and determining interest rates. Your bank, or a mortgage broker, can interpret the FICO score for you and advise you on the best course for your situation. It is wise to apply for a “Loan Pre-Approval”. This entails a process of complete verification of your loan application, employment, assets, etc. The loan approval step is critical to knowing the interest rate you can expect based on your credit and exactly how much home you can afford. Furthermore, having a “Loan Pre-Approval” in hand will strengthen your offer on any property.
Select the Best Real Estate Agency
It is an advantage to the buyer to have the best professional representation. In most situations the seller of the property pays the real estate commission and the services of a professional real estate agent are free to the buyer. We dedicate our full attention to service and commitment to our clients.
Search For Properties
Sometimes you find the home of your dreams immediately and your first offer is accepted. Usually the search takes several weeks and it may not necessarily end with the first home you submit an offer on. For some people the home search process will take months. Be determined to find the perfect home at the best possible price, regardless of whether it takes a day or months.
Our agents use all the latest real estate technology. It is important to your search to be kept abreast of new homes. We monitor the real estate market on a daily basis and notify our buyers of newly listed properties the moment they come to market. We will help you find all the best properties for your consideration.
The Offer, Counter Offers, and Acceptance
You have found the right home and you are ready to make an offer. Things included in your offer should be: offer price, terms, conditions and contingencies that must be met in your purchase. It is best to submit offers on the standard form for a residential purchase agreement. A good faith deposit check is normally submitted with the offer. Your real estate agent can carefully explain the purchase agreement to you and fill it out with your complete understanding. You then initial each page and sign the contract.
Once the offer is presented to the seller they may come back with a counter offer. It “stops” your offer when the seller counters with additional terms or conditions. You can accept the sellers offer or make a counter offer of your own. A real estate transaction often will have one or more counter offers before the buyer and seller come to an agreement on price and terms. Your real estate agent will help you with a counter offer and insure that you meet all deadlines and conditions. You have a sales contract once you have reached a successful negotiation with the seller and an offer or counter offer is accepted by one of the parties.
Disclosure, Disclosure, Disclosure…
The buyer should request the seller and their agent disclose every material fact known that may effect your buying decision on the property. Sellers normally provide such a disclosure to their agent. It is best to request a copy of this disclosure when making the purchase offer or immediately thereafter.
The Physical Inspection
There is normally a general physical inspection of the property sometime before opening escrow. The inspection process is designed to ensure that you are making an educated buying decision. A licensed inspector is hired to do a general inspection of the major systems that relate to the property. Your realtor can recommend an inspector with whom they have had good experience with in the past.
The inspection usually costs between $250 and $600 depending on the home. In some states the buyer pays for the inspection and in other states the seller. In New Mexico the seller usually pays for the inspection. If defects are found in the inspection the buyer and seller usually determine reasonable repairs to be done by the seller or an adjustment in purchase price. If an agreement is not made on these issues the contract can be mutually cancelled.
Your purchase agreement including any offers and counter offers constitutes your contract and initial instructions to the escrow agent. The escrow agent acts as a third party and insures that all the conditions of the sales contract are met as well as any lenders requirements. They handle all the paperwork and cash. It is important to have a good escrow agent to insure that your transaction closes on time. Your real estate agent can recommend a good escrow agent they have worked with in the past. Escrow normally takes between 30 and 60 days. Now is also a good time to line up your homeowner’s insurance. Recently obtaining homeowners insurance has become more difficult and takes more time than in the past.
Lender Requirements and Final Walk Through
Prior to closing your lender usually requires a termite report, title insurance policies, and an appraisal. The seller usually pays for the termite report. There are normally two title policies, an owner’s title insurance policy paid by the seller and a lenders title insurance policy paid for by the buyer. The buyer’s lender will also require that the property be appraised prior to funding. Usually there is not a problem with the appraisal unless you overpay for the property. You can protect yourself by stipulating in your offer that the property must at least appraise for the purchase price.
A few days before closing you will conduct a final walk through to insure that the property is in the same condition as when the physical inspection was preformed and that any negotiated repairs etc. are completed.
Prior to closing the deal, you need to ensure that escrow gets a copy of your new home insurance policy and that any balance of the purchase funds be deposited with escrow. Escrow will also provide you with a “Closing Settlement Statement” which discloses all of your charges (debits) and credits in the transaction. It is imperative that you carefully scrutinize this document to ensure its accuracy. When your loan is fully approved, escrow requests loan documents from your lender and schedules a closing date and time to execute the paperwork.
There is a considerable amount of documents that will require your signature. For this reason, the closing session is characteristically known as a “signing spree”. Almost all the documents are standard forms and not subject to change. One of life’s most exhilarating experiences comes after closing when your agent congratulates you on owning your new home.
Once this session is complete, escrow requests your loan funds from the lender. Normally, the day after the loan funds are received, the deed conveying the title to the Buyer is recorded at the county recorders office.
Plan your move appropriately and make sure to give yourself enough time to adequately pack and unpack. Don’t forget to transfer all utilities into your name including the water if applicable. Remember that utilities and cable TV can require several days’ notice. Be sure to order your new phone service and forward all of your mail at least one week in advance. Get references for yard services, housekeepers, etc. Your agent can assist you in locating the correct utility companies for your new home.