The Roadmap of a Real Estate Transaction
When buying your first home, it is easy to let your emotions take over. It is very important not to rush into something as substantial and life-changing as buying a home. Are you ready to buy or are you comfortable renting?
1. Hire a Real Estate Professional
An important step in the home-buying process is selecting a professional to help you fine-tune your financial expectations and find the home of your dreams. Working with a Real Estate Professional is worth the consideration because he or she is legally responsible for representing the clients’ best interest in a real estate transaction. An initial meeting with a Real Estate Professional can eliminate confusion and instill a sense of comfort when venturing off into the marketplace. He or she will guide you through the process of a transaction – from financing to closing.
2.Shop for Mortgage Rates, Terms and Brokers
As a first time buyer, you are not expected to know everything about the
home-buying process thus, creating the need for an expert. Just as a Real Estate
Professional is an expert in the home marketplace, a Mortgage Broker is an
expert in the mortgage marketplace. If you happen to know someone that can
discuss financing with you, by all means, talk to them. If you don’t, I have an
agent that I use regularly and trust with my business and would be happy to
refer you to her.
When shopping around for rates, don’t feel like you have to run yourself ragged
trying to find someone. In general, rates are about the same from lender to
lender. Don’t interview 30 lenders; three or four is ample and should give you a
good idea of what to expect.
A difference of even half of a percentage point can mean a considerable savings
over the life of a loan. For example, the difference in monthly payments on a
$100,000 mortgage at 7% and 6.5% is about $35 per month, which equals $12,600
over the life of the loan – 30 years. That is not chump change.
3. Pre-Qualify for a Loan
Once you have shopped around for someone who will offer the best rates and services,
it is time to get pre-qualified. This allows you to see what you can afford and
will provide a range of prices for you and your Real Estate Professional to
search within. Once you find the home you are looking for, being pre-qualified
allows you to move more smoothly through the process. It is also a good
indication to all involved parties that you are serious about buying a home and
can afford to do so.
4. Make a Checklist of Your Needs and Wants
If you decide that you are ready to buy a home, take some time to figure out what
you “need” and what you “want”. Begin with what is a necessity to you (1 or 2
baths, 3 or 4 bedrooms, good schools, certain area of town, etc.). Next,
consider what your “want” (hardwood floors, storage shed, fenced yard,
etc.). Once these two checklists have been created, consider what would be
nice to have, but is not a “need” or a “want”. The goal is to start by searching
for homes that fit your “needs.” Then, we can expound on that by adding the
things that you want in order to narrow down the choices. If the options are
still abundant, you will need to narrow them down by what you feel would be nice
to have. Now you have a list of homes to start to have your Real Estate
Professional show you.
5. Visit the Homes
You are pre-qualified and have a list of “wants” and “needs” together. Now it is
time to have a consultation with your Real Estate Professional again to go
through your checklist and match your criteria with the homes available in the
marketplace. The Real Estate Professional will then schedule showings for the
homes that fit your needs.
Generally speaking, seeing more than 10 houses in a day becomes very overwhelming. By the
time you see the 10th house, odds are that you will not remember the 1st, 2nd,
5th, etc. Take notes on the homes you see. If need be, take a camera and snap a
couple shots, so you can remember the homes when you get back home and start
discussing what you saw.
Once you find a home that you think may fit, pursue it. Human nature tells you to
keep searching, but why? As a first time buyer, you may feel the need to see
every home in your price range in that market. But, if you find a home that you
like a lot, go for it. In so many cases, the buyer finds the home that fits but
wants to keep looking. By the time the buyer and Real Estate Professional looks
around at everything else, the original house that the buyer liked has offers on
it. Believe it or not, there is a lot of competition in the marketplace in
price ranges for first time buyers. Aside from other first time buyers in the
market, you are competing with Investors and other buyers for that price range.
My advice to the first time buyer – when you think you found the home that you
are looking for, act on it. Don’t wait. But, on the flip-side, don’t feel like
you have to rush into something if the houses you have seen don’t work for
you.
6. Rate the Homes You Have Seen
Develop a rating system that you use when you visit each home. For example, pick the
house that you like the best on Day 1. Then compare the homes you see on the
next viewing days to the first home. If you see a home on Day 2 that you like
better than the one you liked on Day 1, throw the Day 1 home out. Then use the
new “favorite” home as your benchmark for following days of viewing.
7. Making the Offer
Now that you have pin-pointed the home that is right for you, it is time to get
serious about the financial and contractual side of the purchase. Your Real
Estate Professional will guide you through the process, as this can become
overwhelming too. Because you and the seller have different goals, rely on the
expert to bring order to the process. The goal is to come to an agreement where
both parties feel like they have “won”. It would behoove you to ask for a copy
of a contract before you get into the offer process. I will give you a copy of
the contract on the first day of consultation for you to become more familiar
with it before having to fill it out.
The offer process can take as little as one day or it can take weeks. Most times,
the Real Estate Professional will put a time limit on when the seller can
respond back. If the seller is an individual, the process may not take as long
as if the seller is a bank (REO or Foreclosure). Your agent will explain this to
you when you make the offer.
Once the offer is accepted by both the seller and buyer, the buyer will be asked to
provide Earnest Money – money given by the buyer, held by the real estate
company, which ensures that the buyer will follow through with the rest of the
contract and binds the seller to the contract. If, for some reason, the contract
does not work out and it is because of the buyer’s default, the money would be
given to the seller. If the seller defaults for any reason, the earnest money
would be returned back to the buyer. Ideally, there would be no defaults and you
would proceed with the next step: the home inspection.
8. Get a Home Inspection
Once the offer is accepted by the seller and buyer, it is up to the buyer to have a
home inspection. Personally, I would not buy anything without an inspection. It
is the best $350-$500 you will ever spend. Your Real Estate Professional can
recommend some inspectors for you to use, or you can find one on your own. It is
the inspectors’ job to find all the faults in the home. Don’t be overwhelmed as
the list may be large. Usually at the end of the inspection report, the
inspector will spell out what he feels is minor and major.
The buyer would then get together with their Real Estate agent and come up with a
list of repairs, to be done by the seller. Negotiation is ongoing right now – it
is not a done deal. Both the seller and buyer have the ability to go
back and forth on what they are going to do and what is acceptable to both
parties. In some cases, a home may be sold “as-is, where is, with no
warranties”- meaning the seller will not do repairs and you are buying the home
as it sits. This does not mean that you shouldn’t get an inspection. Get the
inspection and create a list, as a buyer would do in normal transaction. But
instead of listing what repairs the seller is to do, make a list and put a
monetary value on the repairs. Then deduct the cost of repairs from the purchase
price (unless the home is priced according to the repairs needed).
If terms cannot be met by the seller and buyer, the contingency for the home
inspection is not met and therefore the contract is void. The buyer would be
refunded his earnest money and would be able to begin shopping for other
homes.
If terms are met – contingencies for the home inspection are dropped – the contract
is valid and the seller and buyer are now bound to the contract. It is now time
to ensure the financing is solid and wait for the final inspection.
9. Final Walk Through
Once the seller has completed repairs, the buyer and agent will visit the property
and make sure everything was done correctly and to the buyers’ satisfaction.
This is usually done within a couple days of the closing date, or even on the
day of closing.
10. Closing
The process is so close to being over! Before closing day, make sure all the
necessary deposits and paperwork have been completed. This includes the
mortgage, title work, home owners’ insurance, and any other documents needed to
complete the transaction. (I will provide you with a checklist of what is needed
in order to prevent any unnecessary hold ups for closing). You deserve to enjoy
every moment of the home-buying process. It may become hectic at times, but that
is why you have hired a Real Estate Professional, like myself, to guide you
through the deal and represent you in the transaction.
11. Prepare for Your Life in Your New Home
Before rolling out the welcome mat, consider some moving basics: arrange utilities
(gas, water, sewer, electric, trash pick up, etc.). Before moving your furniture
in, replace/clean carpet, hardwoods, or any other area covered by furniture.
Keep in mind, the best time to renovate, deep clean, or install new things to
your home, is before you move in. Your furniture is out of the way and you have
a clean slate to work with. I can provide you with all the utility
companies you will need to contact.
Congratulations!
You made it through. It is time to invite your Real Estate Professional over for dinner and drinks and celebrate a new beginning!
An important step in the home-buying process is selecting a professional to help you fine-tune your financial expectations and find the home of your dreams. Working with a Real Estate Professional is worth the consideration because he or she is legally responsible for representing the clients’ best interest in a real estate transaction. An initial meeting with a Real Estate Professional can eliminate confusion and instill a sense of comfort when venturing off into the marketplace. He or she will guide you through the process of a transaction – from financing to closing.
2.Shop for Mortgage Rates, Terms and Brokers
As a first time buyer, you are not expected to know everything about the
home-buying process thus, creating the need for an expert. Just as a Real Estate
Professional is an expert in the home marketplace, a Mortgage Broker is an
expert in the mortgage marketplace. If you happen to know someone that can
discuss financing with you, by all means, talk to them. If you don’t, I have an
agent that I use regularly and trust with my business and would be happy to
refer you to her.
When shopping around for rates, don’t feel like you have to run yourself ragged
trying to find someone. In general, rates are about the same from lender to
lender. Don’t interview 30 lenders; three or four is ample and should give you a
good idea of what to expect.
A difference of even half of a percentage point can mean a considerable savings
over the life of a loan. For example, the difference in monthly payments on a
$100,000 mortgage at 7% and 6.5% is about $35 per month, which equals $12,600
over the life of the loan – 30 years. That is not chump change.
3. Pre-Qualify for a Loan
Once you have shopped around for someone who will offer the best rates and services,
it is time to get pre-qualified. This allows you to see what you can afford and
will provide a range of prices for you and your Real Estate Professional to
search within. Once you find the home you are looking for, being pre-qualified
allows you to move more smoothly through the process. It is also a good
indication to all involved parties that you are serious about buying a home and
can afford to do so.
4. Make a Checklist of Your Needs and Wants
If you decide that you are ready to buy a home, take some time to figure out what
you “need” and what you “want”. Begin with what is a necessity to you (1 or 2
baths, 3 or 4 bedrooms, good schools, certain area of town, etc.). Next,
consider what your “want” (hardwood floors, storage shed, fenced yard,
etc.). Once these two checklists have been created, consider what would be
nice to have, but is not a “need” or a “want”. The goal is to start by searching
for homes that fit your “needs.” Then, we can expound on that by adding the
things that you want in order to narrow down the choices. If the options are
still abundant, you will need to narrow them down by what you feel would be nice
to have. Now you have a list of homes to start to have your Real Estate
Professional show you.
5. Visit the Homes
You are pre-qualified and have a list of “wants” and “needs” together. Now it is
time to have a consultation with your Real Estate Professional again to go
through your checklist and match your criteria with the homes available in the
marketplace. The Real Estate Professional will then schedule showings for the
homes that fit your needs.
Generally speaking, seeing more than 10 houses in a day becomes very overwhelming. By the
time you see the 10th house, odds are that you will not remember the 1st, 2nd,
5th, etc. Take notes on the homes you see. If need be, take a camera and snap a
couple shots, so you can remember the homes when you get back home and start
discussing what you saw.
Once you find a home that you think may fit, pursue it. Human nature tells you to
keep searching, but why? As a first time buyer, you may feel the need to see
every home in your price range in that market. But, if you find a home that you
like a lot, go for it. In so many cases, the buyer finds the home that fits but
wants to keep looking. By the time the buyer and Real Estate Professional looks
around at everything else, the original house that the buyer liked has offers on
it. Believe it or not, there is a lot of competition in the marketplace in
price ranges for first time buyers. Aside from other first time buyers in the
market, you are competing with Investors and other buyers for that price range.
My advice to the first time buyer – when you think you found the home that you
are looking for, act on it. Don’t wait. But, on the flip-side, don’t feel like
you have to rush into something if the houses you have seen don’t work for
you.
6. Rate the Homes You Have Seen
Develop a rating system that you use when you visit each home. For example, pick the
house that you like the best on Day 1. Then compare the homes you see on the
next viewing days to the first home. If you see a home on Day 2 that you like
better than the one you liked on Day 1, throw the Day 1 home out. Then use the
new “favorite” home as your benchmark for following days of viewing.
7. Making the Offer
Now that you have pin-pointed the home that is right for you, it is time to get
serious about the financial and contractual side of the purchase. Your Real
Estate Professional will guide you through the process, as this can become
overwhelming too. Because you and the seller have different goals, rely on the
expert to bring order to the process. The goal is to come to an agreement where
both parties feel like they have “won”. It would behoove you to ask for a copy
of a contract before you get into the offer process. I will give you a copy of
the contract on the first day of consultation for you to become more familiar
with it before having to fill it out.
The offer process can take as little as one day or it can take weeks. Most times,
the Real Estate Professional will put a time limit on when the seller can
respond back. If the seller is an individual, the process may not take as long
as if the seller is a bank (REO or Foreclosure). Your agent will explain this to
you when you make the offer.
Once the offer is accepted by both the seller and buyer, the buyer will be asked to
provide Earnest Money – money given by the buyer, held by the real estate
company, which ensures that the buyer will follow through with the rest of the
contract and binds the seller to the contract. If, for some reason, the contract
does not work out and it is because of the buyer’s default, the money would be
given to the seller. If the seller defaults for any reason, the earnest money
would be returned back to the buyer. Ideally, there would be no defaults and you
would proceed with the next step: the home inspection.
8. Get a Home Inspection
Once the offer is accepted by the seller and buyer, it is up to the buyer to have a
home inspection. Personally, I would not buy anything without an inspection. It
is the best $350-$500 you will ever spend. Your Real Estate Professional can
recommend some inspectors for you to use, or you can find one on your own. It is
the inspectors’ job to find all the faults in the home. Don’t be overwhelmed as
the list may be large. Usually at the end of the inspection report, the
inspector will spell out what he feels is minor and major.
The buyer would then get together with their Real Estate agent and come up with a
list of repairs, to be done by the seller. Negotiation is ongoing right now – it
is not a done deal. Both the seller and buyer have the ability to go
back and forth on what they are going to do and what is acceptable to both
parties. In some cases, a home may be sold “as-is, where is, with no
warranties”- meaning the seller will not do repairs and you are buying the home
as it sits. This does not mean that you shouldn’t get an inspection. Get the
inspection and create a list, as a buyer would do in normal transaction. But
instead of listing what repairs the seller is to do, make a list and put a
monetary value on the repairs. Then deduct the cost of repairs from the purchase
price (unless the home is priced according to the repairs needed).
If terms cannot be met by the seller and buyer, the contingency for the home
inspection is not met and therefore the contract is void. The buyer would be
refunded his earnest money and would be able to begin shopping for other
homes.
If terms are met – contingencies for the home inspection are dropped – the contract
is valid and the seller and buyer are now bound to the contract. It is now time
to ensure the financing is solid and wait for the final inspection.
9. Final Walk Through
Once the seller has completed repairs, the buyer and agent will visit the property
and make sure everything was done correctly and to the buyers’ satisfaction.
This is usually done within a couple days of the closing date, or even on the
day of closing.
10. Closing
The process is so close to being over! Before closing day, make sure all the
necessary deposits and paperwork have been completed. This includes the
mortgage, title work, home owners’ insurance, and any other documents needed to
complete the transaction. (I will provide you with a checklist of what is needed
in order to prevent any unnecessary hold ups for closing). You deserve to enjoy
every moment of the home-buying process. It may become hectic at times, but that
is why you have hired a Real Estate Professional, like myself, to guide you
through the deal and represent you in the transaction.
11. Prepare for Your Life in Your New Home
Before rolling out the welcome mat, consider some moving basics: arrange utilities
(gas, water, sewer, electric, trash pick up, etc.). Before moving your furniture
in, replace/clean carpet, hardwoods, or any other area covered by furniture.
Keep in mind, the best time to renovate, deep clean, or install new things to
your home, is before you move in. Your furniture is out of the way and you have
a clean slate to work with. I can provide you with all the utility
companies you will need to contact.
Congratulations!
You made it through. It is time to invite your Real Estate Professional over for dinner and drinks and celebrate a new beginning!
