Outline of the Real Estate Process
- Get Pre-Qualified/Approved
- Getting pre-qualified, and ultimately pre-approved is an important aspect because this will give you a good idea of what you can afford based on your debt to income ratio and desired payment amount. Submitting a pre-approval letter with your offer also strengthens your offer making it more likely it will be accepted the first time, or over others in a multiple offer situation.
- Searching for a Home
- The most obvious place to look for a home is through the MLS while working with a buyer’s agent. Agents have access to some listings in the MLS that may not show up through our websites because listing agents have not given us permission to show them on our website so it is important to make sure that you are seeing all listings and should get the links directly from me in many cases. As a buyer, if you happen to see a for sale by owner sign that you like, you should send this to me and I will make contact with the owner to find out about price and showing, and still maintain your interests in the transaction (See Agency Write-Up). My commission is still generally paid by the seller in these scenarios as well.
- Review of property disclosures
- The property disclosure generally tells known issues with the property and information on easements and encroachments as well as utility and building conformance. The property disclosure should not be relied upon in the place of a home inspection.
- Review market conditions and establish negotiating technique
- Pulling up comparable sales and establishing an initial offering price is important. Some homes are competitively priced for the market where others may not be. It is important to know if you are dealing with a good price before making an offer. This will help you get the best price on the home. Offering listing price on a home overpriced may lead to you paying more than the home is worth while “low-balling” a well-priced home may make the seller unwilling to work with you.
- Write offer to purchase
- Anyone can write a contract with a price in it. The important part of your offer should address specific concerns you have, your lending needs, and any special provisions or contingencies to protect your interests and your earnest money. Our market typically requires $1000 earnest money minimum and generally up to 1% of the purchase price.
- Counter offer to acceptance
- Your offer may not be suitable enough to the seller in the original form for many reasons, their bottom line generally being the main reason. A well-written counter offer and a good buyer’s agent may be all it takes to secure the property for you. As soon as a counter offer is made, it nullifies the original offer and you are free to counter back or keep looking.
- Ensure all requirements are met with lender
- The lending process is generally the longest portion and in today’s lending environment requires a lot of information from the buyer. A good lender will give you a list of everything you need and maintain solid contact with your agent to assure a smooth transaction.
- Perform home inspection
- The home inspection is an often “left out” portion of the real estate transaction and it could easily be the most important. All homes have issues and the home inspector’s job is to find them so you know what they are before consummating the transaction. A typical home inspection is around $400 +/- and can very easily save you that much just by knowing the problems. By the way – don’t think that new construction homes are exempt from this need. Human error alone is enough to think strongly about getting one. Do not expect sellers to fix everything on a home inspection. All homes have problems. The home inspection is a tool for you to identify these issues and know if it is something you want to get into . It is typical to request repairs, or an allowance, to cover any major items but if you request those repairs, be prepared for the owner to say no – and make your decision to continue to purchase or not.
- Renegotiate or accept results of home inspection
- In some instances, if there is significant cause, you may be able to renegotiate the price and/or terms of the contract after reviewing the property inspection report. Typically, small items are overlooked and factored in as part of buying a home, but larger items like an incorrectly installed roof or HVAC may be cause to renegotiate or start looking for another home.
- Perform appraisal
- An appraisal is the bank’s reassurance that the house is worth what you are borrowing for. Appraisals can very easily be shifted several thousand dollars either way depending on the comps used (providing there is enough comparable sales in the area) so making sure your market price is correct in your offer is important. Appraisers are being a little less liberal with their appraisals due to new lending guidelines so do not be shocked if the appraisal comes back less than anticipated.
- Establish Insurance
- Lenders will require Hazard, Fire, Wind & Hail, and sometimes Flood insurance. Because of the nature of our insurance market, it is often a good idea to have an insurance contingency in the contract to purchase or check prices on insurance before writing the offer.
- Lender underwriting & loan commitment
- While we were doing everything else, a good lender would have been doing their job in the background and getting information from us and from you to get a commitment. The originator who takes your information will get it to a processor who will put it together in an organized manner and then send to an underwriter. The underwriter will then review it, ask for any additional items needed, and upon completion will give a commitment. The commitment will typically be conditional upon a few minor items which are to be taken care of before closing and may include wood destroying insect report (WDIR, aka Termite report), review of closing statement, and borrower’s funds to close.
- Set closing date
- The closing date is often set at the beginning of the file but may be adjusted based on underwriting and other factors. Upon commitment from lender, it is generally okay to set a more concrete closing date.
- Abstract of Title (Clear title)
- The closing agent will order a title abstract which is a review of the title to the property to make sure there are no “issues” which may complicate the ownership interest.
- Wood Destroying Insect Report (WDIR)
- The wood destroying insect report is provided by a company licensed to do so and generally consists of a visual inspection. The WDIR will consist of any observed live activity as well as previous damage and areas which are conducive but may not necessarily have termites yet (such as wood to ground contact or mulch/bark close to the home). Some call this a “termite inspection” but this report covers far more than that and may also include information on wood boring beetles, carpenter bees, and moisture content on raised homes as well as anything that could be conducive to any of the above.
- Establish utilities connect date
- Once you are sure of the closing date, you may want to set your utilities to be turned on that day or the next, depending on whether they are currently on and whether the seller has a problem leaving them on for one to two days after closing. There is nothing worse than going to move in on a Saturday and realizing the utilities were turned off on Friday.
- Closing package sent to attorney
- The lender sends a closing packet to the closing agent that includes all the paperwork that needs to be signed – and there is generally quite a bit of it…
- Attorney review of package
- The closing agent generally will try to review the package before closing to make sure there is nothing missing as well as to familiarize himself/herself with it. All lenders have slightly differing packages so it is important for the closing agent to do a quick check through it prior to closing if time permits.
- Closing
- The moment everyone has been waiting for. This is the time you get the keys to your new home, the time the seller gets the money for selling it to you, and the time that I get paid for all of my hard work. Congratulations on your new home. I hope to share in this and your future real estate needs!