Find My Dream Home: The Residential Buying Process
Statistics show that the average American moves every seven years. They research neighborhoods, check out schools, and walk through complete strangers’ homes. Buying a home is a tremendous financial – and emotional – investment, but a qualified agent can walk you through the process to ensure success. Here’s a home buying roadmap:
You’ve Decided To Buy! Now What Should You Do?
Contact a Real Estate Professional:
Whether you’re a first time homebuyer, transferring to a new city, or considering an investment property, hiring a qualified Realtor® is the first and most important step. A qualified realtor:
- Is licensed by the states in which they practice (DC, MD, and VA, in our market)
- Has completed a rigorous course of education
- Upholds strict standards of ethics
- Is an expert negotiator
- Participates in continuing education courses to update and maintain a knowledge base and update best practices and understanding of current regulations.
Start house hunting
It can be lots of fun to search the websites and visit open houses, but finding your ideal home can be daunting. In fact, it can be a full-time job. Your Realtor® is an expert at handling the time-consuming tasks and nitty-gritty details.
- It’s all at our fingertips: Let us know exactly what you are looking for. We can recommend neighborhoods that fit with your preferences, but also warn you about possible drawbacks. We also work with an extensive network of agents, so we know what’s coming on the market, long before you’ll see it on Zillow.
- Searching with search tools: Aggregators sites, such as Zillow and Realtor.com, display homes as soon as they hit the market. But unless there’s an Open House, you’ll need a licensed agent to tour the home. If you find something that peaks your interest, contact us and we’ll set up an appointment.
- Pounding the pavement: A great way to familiarize yourself with a neighborhood or subdivision you are interested in is to get out and see it. Visit the open houses and tour the area. And ask us – we’re a larger team, and our agents live and work in the communities where we serve clients – we’re happy to share our knowledge.
- We’re in It together: When you have narrowed down your search and are ready to explore properties on your list, we’ll go together and see them. It’s a good idea the keep notes – such as floor plans or outstanding features – on any properties you visit. This will make comparison easier in the end.
Formally hiring your agent
Once you’ve decided on a Realtor® to represent you, you will sign a “Buyer-Agency Agreement” detailing what the agent will do for you and legal obligations – your and the agent’s. A buyer’s agent works as YOUR representative, putting your best interests above all others and maintaining confidentiality. A buyer’s agent negotiates your price, ensures the property is inspected, and represents you throughout the process. As a buyer, you usually won’t pay a fee or commission – your agent is usually paid by the seller of the property you purchase.
As a buyer you have specific needs. Hiring an agent protects your interests in purchasing what’s likely to be your single largest asset, and the most important investment of your life.
Get your financial face on
Preparing a financial picture for a prospective lender is another important step in achieving your goal of homeownership, and the sooner the better. Acute awareness of your financial situation, and assembling financial documents to provide to your lender will speed up the process. Here are some tips to being financially prepared for home buying and home ownership:
- Check your credit score – Your credit score is the most important criteria used in getting a loan. Check your credit score, pay your bills on time, and be careful about lines of credit. The discount you receive at a clothing store is enticing, but additional debt and lines of credit may negatively affect your credit score.
- A penny saved is a penny earned – Saving and/or investing as much as you can is optimal. Set up a budget as if you already owned your home, and keep to it. This will make the transition and discipline needed for home ownership less drastic.
- Oh, I didn’t think of those things – There are unmentioned expenses in purchasing a new home – furniture, window treatments, small appliances, kitchen accoutrement, etc. – that can add up fast. Remember to plan for these items in advance so you don’t have sticker shock.
- Show Me The Money – Financial documents including pay stubs, W2’s, bank statements, and recent tax returns will need to be furnished to the lender, who scrutinizes them to determine that you can pay your mortgage.
- Letter of pre-approval – It’s just what sounds like – it states that you are pre-approved for a mortgage. In our competitive homebuying market a letter of pre-approval is a must. Most homes sellers won’t consider an offer without the letter of pre-approval.
Contact a mortgage professional:
Shop the lenders in your area for interest rates and other discounts they offer. If you are a first-time homebuyer, there may be specials programs or incentives you can take advantage of. We work with a network of excellent lenders – we’re happy to recommend one to you.
Ready to Make an Offer? You have found THE house, and are ready to make it yours. Now what? If you decide to make a written offer, it becomes a legally binding contract if the seller accepts it. We will assist you in writing an offer that is compelling while including terms and conditions that protect you.
- Letter of pre-approval – Written by a mortgage lender stating that you are pre-approved for a mortgage loan. Many sellers will not consider an offer without pre-approval.
- Earnest money deposit – This is a good-faith deposit to show you have serious intent to buy a property. It is not part of a down payment. The funds typically need to be guaranteed by your bank.
- Financial disclosure – In addition to your letter of pre-approval, you’ll disclosure additional details pertaining to your finances, how much you’re borrowing, and the amount of your down payment.
- The devil is in the details – Contingencies (such as a home inspection), settlement dates, and other conditions are a normal part of real estate contracts. We will assemble the contract with you, and review all aspects and contingencies before it is signed and presented to the seller’s agent. It’s our job to provide a thorough explanation of the contract, and protect your interests before final ratification.
- Ratification? Ratification is the date of final acceptance, in writing, of all the terms of the contract. Time is usually of the essence as most ratifications must be within a certain time frame.
Welcome home… almost. You are officially Under Contract. Congratulations! Now that your offer has been accepted by the seller, what happens next?
- Inspections and testing – Radon testing, a termite inspection, and a full home inspection scheduled. No home is perfect, and repair issues have the potential to be deal breakers. It is in your best interest, and the interest of your lender, to make sure everything about the house is sound. We will attend the inspection together, and have the opportunity to discuss questions or concerns with the Inspector.
- Inspection checklist – will usually include the home’s structure, exterior, roof and attic, plumbing, systems and components, electrical, appliances, etc. The inspection report notes any defective items and needed repairs.
- Negotiating repairs – This can be tricky and is best handled by agent. Here, again, we represent your interests, and negotiate the best solution for you, the buyer.
- Optional inspections – Depending on the home, some buyers elect to have additional inspections performed on their property. Examples include Radon testing, mold, and lead paint. We can advise you as to which added inspections fit your situation.
- Appraisal – Not to be confused with a Home Inspection! An appraisal is a detailed report that establishes property market value, and probable sales price in the open and competitive market. Appraisers are specifically educated and licensed by state. Lenders require an appraisal for final approval of a loan. The appraisal shows security for the lender that the property will sell for at least the amount being loaned.
- I like to Move It, Move It – If you’re moving from an apartment,. You may be tempted to rent a truck and move yourself. You may be underestimating just how much stuff you actually have, so we recommend you talk to a few movers. We can make some recommendations. Call movers as soon as you know your settlement date(s)
- Utilities – Contact the local utility companies to advise them of the pending sale of the property. Utilities should change hands on the last day the seller occupies the property. At settlement, a portion of the seller’s proceeds will be withheld to satisfy any outstanding water bill – water is the only utility that can create a lien against a property.
Settlement – The settlement company reviews your contract and determines if everything is legally ready for your purchase. They research the title history, possible liens, taxes, land survey, and your loan. Once the contract has been approved by the settlement attorneys, the buyer seller, and their respective agents coordinate a date and time for settlement. Here are some things to be aware of in the settlement process:
- Final Walkthrough – This will take place just prior to settlement- either the day before or the day of the settlement. We will walk through the property to ensure it is in the same condition as when the offer was presented, and that any contingencies, such as repairs, have been addressed.
- What to bring to Settlement – You will need to bring a certified or cashier’s check in the amount quoted to you by your lender. Also, bring state issued picture identification, such as a Driver’s License or passport. And patience, don’t forget your patience!
- Expect the Unexpected – The sale of a home is a complicated transaction, and last minute glitches can happen. Don’t panic. Your Realtor® will represent your interests and “put out the fire.”
- Signing and More Signing – After the walk through has taken place you will sit down with the other parties, most likely at the attorney’s office. This is where it can get tedious – the whole process may take an hour to an hour and a half. A settlement agent will review all documents with you to make sure everything is correct. You will sign them and your loan documents. The seller will sign the property over to you, and give you the keys.
Congratulations, you are now a proud homeowner!