What to Expecting When Buying a Home
The moving experience often ranks in polls with divorce and the death of a loved one as one of life’s most stressful experiences. Don’t let that scare you. Knowing what to expect can help alleviate much of the stress of buying a home. Here’s how the home buying process typically goes:
Many buyers procrastinate seeing a mortgage specialist, but this step can’t be emphasized enough. There’s nothing worse than seeing someone fall in love with a home, only to be disappointed when they find out they can’t afford it. Furthermore, a pre-approved buyer has a stronger negotiating position than an unapproved buyer, which translates to a better purchase price. By the way, getting pre-approved is quick and easy, and it doesn’t significantly affect your credit score, contrary to myth.
These days, the majority of buyers find their homes online. That’s because direct feeds from the Multiple Listing Service, or MLS, provide the most complete and up-to-date information, as well as multiple photos and mapping features. The MLS is a central database of homes for sale. Only homes listed by REALTORS can be included, because REALTORS pay for the cost of maintaining this expensive database.
Driving neighborhoods can also be a valuable part of the search, turning up homes that were somehow missed online. Touring homes can be a time-intensive process, so consider driving by homes before asking a real estate agent to show them. Often, buyers know whether a home will be worth entering the minute they enter a neighborhood or see the home from the curb.
This is the most exciting part of the process for many people, but it can also become confusing. After seeing several homes in a row, the individual characteristics of different homes may become blurred and overlapping.
Be sure to take notes about each home and write questions for the real estate agent. Keep a running list of top contenders, and regularly purge candidates with no chance. Limiting the number of homes visited in one outing and/or sticking to one part of town per outing will also prevent you from becoming “overloaded.” Always feel free to request a second or even third showing if necessary.
The Offer to Purchase
Once a buyer finds the right home, they must offer to purchase that home from the seller. There will be many points of negotiation, from the purchase price to personal possessions that might stay with the house. Your real estate agent will help you prepare an offer, will present it to the seller’s agent, and will negotiate on your behalf.
When Does an Offer Become a Contract?
An offer to purchase is rarely accepted as written; a negotiating period usually ensues in which buyer and seller negotiate through their agents. This keeps the negotiations civil and makes sure no item is left unaddressed. Once all the terms are finalized, both parties must sign off on the revisions. When the final signature is written and acceptance of the contract is delivered, the offer officially becomes a legally binding contract.
Due Diligence and Walking Away
What if you were under contract to buy a house, but suddenly found out the roof leaks, the foundation is crumbling, and the plumbing is backed up? Fear not – you have a way out.
The period of “due diligence” begins the moment an offer becomes a contract, and lasts for an agreed-upon period of time, often two weeks. During this time, the buyer has the right to perform various inspections, get estimates on repairs, and negotiate for the seller to pay for those repairs (or allow price reductions consummate with those repairs).
During this period, the buyer can also take advantage of “escape hatches” that are written into the contract. If the cost of repairs exceeds a pre-determined amount, for example, the buyer can leave the contract. In another example, if the seller refuses to perform certain repairs, which are described in the contract as “necessary,” the buyer can also choose to walk away.
At the same time the buyer performs their due diligence, the bank will investigate the buyer and the home to be certain they are making a wise investment. After all, they wouldn’t want to lend more money than the house is worth, or lend money to a buyer incapable of paying a mortgage! This is often called the period of escrow, and it can last anywhere from a couple weeks to a couple months.
During this time, the bank will order an appraisal on the house. They may also ask for reports from the inspections performed by the buyer. They will also verify the buyer’s employment, credit, income and assets. When they are finished, they will issue a final approval for the loan.
Closing and Closing Costs
The Closing is the meeting during which the final papers are signed, money is exchanged and house keys are handed over. It’s usually a relatively simple procedure that lasts 20-30 minutes.
At this time, the buyer will pay for a variety of professional services which were performed during escrow and the period of due diligence. These costs can range from mortgage fees to inspection costs, and they typically run between $3,000 and $5,000. The attorney who performs the closing will tell the buyer a few days in advance how much money to bring. Once the closing is over, the deed to the house will be immediately recorded at the County Courthouse.
CONGRATULATIONS! You now own a home.
About the Author - Mark Vanderhoff
Mark Vanderhoff is a real estate broker with Keller Williams Realty. He helps sellers stand out among the competition and helps buyers take advantage of the opportunities. He also devotes himself to consumer education through his writings in various publications and holds free first-time homebuyer seminars.
Mark offers buyer and seller consultations at no cost and no obligation. He is also a certified Environmental Consultant who specializes in green building.
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