Many people fear what they do not know. The same is true when it comes to buying your home. Many have not had the repeated experience of home buying to know what goes into the buying process, steps that need to be taken, or how to handle the emotional ties that come along with it. Below, we will outline the ten steps to buying a home, so you are prepared when you decide to move forward.
1) Realtor Locate and Buyer Consult
First, locate a trusted real estate expert. This can be done by reviewing realtors online through Google, Zillow, Facebook, Yelp and word of mouth from your friends and family. What is particularly important, is finding a Realtor. Despite often being used interchangeably, Realtors and real estate agents are not always one in the same. “Realtor" is a designation earned by some highly qualified real estate agents, requiring them to uphold high ethics and report to a strict set of standards.
Once you've found the Realtor you want to work with, they will walk you through a buyers consultation. This consultation will outline the entire home buying process that we are covering today. Here, your agent will lay out the expectations of both you as the buyer, and what they will provide as your Realtor. This will help take the mystery out of the home buying experience, answer all of your questions, and give you actionable steps to work toward. At this meeting, you will also determine what exactly you are looking for and start the search for a home that meets your needs. During this process, we will find out if you are pre-qualified for a home loan and what mortgage provider you are using. If you have not done this yet, we can help you locate one.
Before you can tour homes, you need to be prequalified for a home mortgage loan. Your agent will have recommendations for lenders in your area, if you don't already have one picked out. Having a great working relationship with your lender and Realtor is imperative to a smooth home buying experience. This step is important because it takes some time to complete. If you were to start your search for a home before you were qualified, and you found a home you loved, you would have to wait to get pre-qualified before writing an offer. Pre-qualification can take some time, depending on how quick you get your documentation to your lender. In the meantime, while you are trying to get prequalified, someone else has the opportunity to write an offer on your prospective home and you will miss out.
3) Home Tour
Once you have completed the buyer consultation and are prequalified, the home tour begins. Your Realtor will locate all of the homes that fit your needs in regards to size, location and finishes. Once located, they will schedule a day and time to tour around looking at homes. It is highly recommended that you take notes while you look at the properties so you can highlight pros and cons. By doing so, you can remember all the things you liked and disliked, and recap it at the end of a long day of tours. Sometimes it takes one day to find a home, other times it could take months. It is different for everyone and also depends on how fast you need to move in.
4) Identify & Offer
Once you've completed the home tour and identified the home you love, it's time to write an offer. You will sit down with your Realtor and run a comparable market analysis on the home to make sure the home is worth the list price. After this is done, you will talk about what the terms are that you want to write in the offer. Here you will also, you will decide on an offer price, whether or not you want to ask the seller to pay part of your closing costs, when you want to close and record on the property, and what you want to come with the property in regards to appliances and other personal property. Once this is completed, you will submit this offer to the sellers and their agent. They will have three options: Accept the offer, deny the offer or counter the offer. Don't worry if they counter the offer, that means they want to negotiate. I've seen offers counter once and I've seen them counter up to seven times. If its a property you really want, stay in the negotiations.
5) Finish Loan Application
After the offer is accepted, the next step is to finish the loan application with your lender. When you met with your lender previously, they only gave you a prequalification. This is a letter stating that, based on your current financial situation, they will lend you a certain amount of money. The lender will also provide quotes on your interest rate and length of the loan. Once you have an accepted offer, you will need to actually finish applying for the loan.
6) In Contract and Second Negotiation
After the offer is accepted, you have a legal contract to buy the property. Once this is done, there are several things that need to happen before you can close on the property. The first thing you will do is order an inspection of the home. You will want to be present at the inspection with your Realtor, so that you can interact with the inspector as they walk you through everything going on with the home. As soon as you receive the inspection report, typically next day, it is time for the second negotiation with the sellers. This is a negotiation over what repairs they will do to the home before you close. There can be several back-and-forths on this as well, so don't worry. There are typically three categories to the repair list: Health and Life Safety, Significant Repairs and Recommended Repairs. One thing to keep in mind is that you want major things fixed and not to worry about small trivial items. If you keep this in mind you will more then likely be able to come to agreeable terms on repairs to be done. This is the second time the buyer spends money during this process. The buyer pays for the inspection and it depends on the age of the home and square footage, on average expect to spend around $400 - $600.
Once the repairs for the home are agreed to, the lender will order the appraisal. In Alaska, it is typical for the seller to pay for the appraisal while the buyer pays for the inspection. The bank will select an appraiser, they look at similar homes that have recently sold in the area and compare them with the home you are looking to buy. The appraiser will also assess any improvements and updates to the home and land that you are purchasing.
It can take up to twelve days to get the appraisal returned. If the appraisal report indicates that the home value is equal to or greater than the purchase price of the property, then you free to close and record. If the appraisal price is lower than the purchase price, then the price needs to be negotiated to meet the appraisal price or the buyer will need to bring extra money to the table. The lender will never allow the buyer to have a loan that exceeds the value of the home.
8) Final Inspection
The last step after the appraisal, and before closing, is the final inspection and walkthrough. The buyer, Realtor and inspector (should they choose) will walk through the home and confirm all the agreed-upon repairs were completed. It is also a chance to confirm that the home is in the same condition as when the offer was first written. It is highly recommended that you have the same inspector who performed the first inspection look at all the agreed-upon repairs to confirm that they are completed properly and to code.
9) Close and Record
After everything is done it is time to close and record on the property. This is the day you go to the title company, sign all documents, close the transaction and transfer ownership. Depending on the title company you work with, you may record the sale the same day or the next day. The recording is referring to the actual filing approval from the local city, borough or municipality. It is also when the loan officially funds and you take possession of your new home.
This is both a happy yet stressful day. You have been waiting for this day for a few months and it is finally here! It is time to move in, set up your home and start the next chapter of your life.
This is the general outline of the buying process. There is more detail that goes into this process and your realtor will explain everything in your buyer consult. For more information give me a call at 907-302-1011 or email at email@example.com.