Ready to Buy, What are the steps?
Are you ready to start the home buying process but don’t know where to begin?
Your very first step in the home buying process is to talk to a lender. Getting prequalified with a lender will give you a clear depiction of what you can afford, what type of loan you are going for and what it costs to buy. There are different types of loans with varying percents down, and guidelines to follow when looking for a home. For example government such as FHA loans will not allow a buyer to purchase a home with peeling paint or broken windows. A USDA loan requires homes to be in a certain geographical area. It is best to know right up front what you should be looking for, and at what price range so you are absolutely ready to buy when that home you've been dreaming of comes on. I have had buyers to this day who still talk about that house they loved and missed out on because their ducks were not in a row.
From there select a Real Estate agent who is well qualified to help you along through the process as your BUYERS agent. (You can select an agent before talking to a lender, they can give lender recommendations but they won't show you houses until you are prequalified). Sellers have their own agents, listing agents. Together the buyers agent and the listing agent represent their clients to come to agreements on price, inspection items and more.. Sometimes the buyers and listing agents can be the same person, dual agent. Your buyers agents commission is generally paid by the SELLER and does not cost you to have your own representation (Raveis does only charge a $195 admin fee to keep paperwork on file. Some loans this isn't required) You do not HAVE to use the listing agent as your agent. You can have your own agent to represent, guide, listen and be exclusively your agent. You do not have to choose the first Realtor you meet either, be up front and interview those you might want to represent you. However don't waste time once you've promptly decided you will have to sign a exclusive right to represent paperwork. This paperwork tells you what the agents duty's are to you, that they are your agent and what is required of you as well as a buyer. These are standard procedure. Your agent should have knowledge of the area, will know exactly when things are coming on and what you are looking for.. They should keep you well informed, educated, obtain documents and be able to explain contracts to you.
Once you have your approval and Realtor it is time to start looking!
Your agent will help set you up on a search from the multiple listing service (the most up to date list of homes out there) with your specific criteria, schedule and request appointments. They'll send you attachments and answer any questions. Some buyers take only 3 houses in one day before picking the one they want to put an offer in on, some can be almost 40 over the course of years. We are all on our own journey and your agent is there for the long haul. They will discuss, and draw up your offer with you, if there are multiple offers they will help guide you on the next steps. Generally from offer acceptance to closing it takes 45 days depending on the lender and the complexity of the sale and loan, some as little as 30 depending on the lender.
It is important to remember besides down payment there are also closings costs associated with buying a home. These costs are attorneys fees, appraisal fees, recording fees and more. Generally buyers closings costs are 2-5% in Connecticut. So if you are purchasing a $300,000 home be ready to have $12,000 in closing costs outside of your down payment/deposit. Some loans will allow a buyer to wrap these costs into their mortgage as a seller credit.
How low is too low? So you submitted your offer now what? How long does it take for the seller to respond?
General idea is you want to get your foot in the door. If you "low ball" with expectations that the gap will surely be closed, you may be wrong. Sellers get insulted, refuse to counter back or if they do it is minimally, you do the same.. and you will end up at a stand still. Things that play into effect, how long has the house been listed? How many price reductions? They may or may not be motivated, your best bet is to put a decent foot forward with a reasonable offer and move in smaller increments in negotiation. Other items that play into the offer are the deposit amounts, the closing date and other terms such as requiring inspections. Sometimes buyers like to add in tractors or other items of interest into your offer, we sell houses not lawnmowers, snow blowers, generators and furniture.. try to avoid those. Purchase them outside after (DO NOT MAKE BIG PURCHASES DURING THE HOME BUYING PROCESS) and outside of the closing. I have had deals fall apart because a seller and buyer couldn't agree on tractor attachments. While sometimes it can help narrow the gap between sellers and buyers it is best to keep personal items out of the contract. If down the road the sellers want to off load some things while they pack, you want to buy some things then is best to figure out what we can all work out. Contractually sellers usually process, think it over and respond within a day or two however if you are concerned with waiting you can write in a date you'd like to hear by in your offer.
The seller can ACCEPT, REJECT, OR NEGOTIATE. I have seen all THREE. If you came in with a good offer they may not want to play games and just accept. YAY! If they feel insulted they can completely reject. More times then not they will counter offer and negotiate. The ball will go back and forth a few times before everyone can agree on price and terms. This is why having an agent is so important, to keep focus on the task and not let the emotions get the best of everyone. Sellers have a lot of pride in their home and can only let it go at the price their willing or can let it go for due to finances. And buyers can only afford what they can afford at what they are willing to pay.
Once everyone can agree, contract is signed and sent on to lender, you pick a closing attorney, first deposit delivered and inspections are scheduled.. Inspections are generally paid out of pocket and not wrapped in closing costs. Prices vary depending if you are getting just home inspection, or radon, well, water, insect and more. If there is a septic system in place that is a separate inspector. You may want to reach out to whoever has serviced the septic in the past. Sellers generally pay for pumping, buyers for inspection of septic. Inspections are done within the first two weeks, if there are major defective items to be addressed you will submit a form to the seller stating you what items to be fixed or credited (unless it is "as is"). As long as you are within your dates you can walk away at this time with your deposit if you do not wish to move forward or can't agree to terms. Again in negotiations seller can accept or reject some or all items. Generally they want a sale as bad as you do and we work hard to come to agreements on the defective items. It is important to keep an open mind that even new houses can have issues. No house is perfect. Ask for reasonable, hazardous, major, and health concerning issues. Avoid cosmetic, items under $100, trivial or things you want to update. Once everyone agrees in writing the items to be fixed the seller has till closing to get them done. You should get receipts of work done and check work at your walk through. If any is not complete you will then talk with your attorney.
During this time after inspection items are handled and if you are still moving forward second deposit is due. You will continue on with your lender, sending information and working towards your mortgage approval. You will pay for and schedule your appraisal. A bank will not lend on a property unless it appraises out. When asking for closing cost credit the house must appraise at that price. So a home selling at $300,000 net to seller but under contract for $312,000 to wrap in closing costs must appraise at the $312,000. Once apprisal happens, and you work with your bank you may get a mortgage conditional approval.. items to be addressed before a approval. Once you have approval and clear to close your attorney with the sellers attorney will schedule exact closing date and time. This sometimes varys from the actual date on the contract. Once scheduled you'll schedule walk trough day of or day before closing with your agent. Make sure the house is as you thought it is inclusions/exclusions and inspection items addressed. Then onto CLOSING! Congratulations!
Each deal is absolutely different, no two are the same. I've had interesting sales where the buyer did the inspections before they ever put in an offer, cross country face time showings, offers from open houses when my first time seeing the house as their agent was at inspections, early closings, delayed closings, have a house to sell, 3 different appraisals, Bank owned, short sale, 100% financing VA loans, Cash deal... They are ALL different and have different challenges. Most are not clean cut straight forward, but we as agents hope to journey with you, manage the stres and guide you through this process to be successful. These are the general steps that your agent will guide you through. They can help give you recommendations for lenders, inspectors and attorneys. They are there to be your right hand man. As a team we hope to climb this mountain of tasks together and get you from a buyer to a homeowner!
4/15/2020 09:54:05 pm
Great article! Future homeowners or investors can take notes from here. The points are well explained.
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Kelly S Ryan
William Raveis Real Estate