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What you can expect when buying a new home
If you are considering buying a new home, it can seem like a daunting task. So much that to some, it may even feel like an unobtainable goal. In reality, the process is much simpler than you might think (even if you don’t think you can). Most of the work is performed by your REALTOR®. In fact, most of my clients enjoy the comfort of their own email and electronic signatures throughout the majority of their transaction.
It is the intention of this article to provide you with some insight into that process; thus, helping you to understand it and have an idea of what to expect. Please note that not every real estate agent, nor every purchaser, goes through the exact same process; however, it should be very similar in nature. Where appropriate, it will clarify particular aspects concerning using myself as your agent.
A Real Estate Agent for Free
I can be your buyer’s agent, for Free. No tricks and no gimmick. Contact me now to find out how.
As your buyer’s agent, I will show you how I get the seller to pay for the services I provide for you. If you decide not to purchase a home, you still don’t owe anything.
When you connect with me, as your REALTOR®, it does not necessarily commit you to pay for or buy anything. In fact, I’ve never had a home buyer pay me anything; ever. Known well in advance before committing, there are circumstances where a buyer would pay for my services; however, they are quite rare and I’ve always been able to avoid them.
Concerned about qualifying/affording to buy a new home?
For those who think they can not purchase a new home, you may be pleasantly surprised. There are many reasons people feel they are unable to buy a new home. Among these, the most common include credit problems, bankruptcy, difficulties with a down payment, and not enough income for the monthly payments. Each of these are manageable concerns that don’t necessarily prevent you from buying a home. Professional agents and lenders have developed many ways that can assist in overcoming these difficulties; including, not enough income. In fact, you may even learn how you to actually save money buy purchasing instead of renting.
If you are interested in buying a new home and have concerns that you may not qualify or be financially able to buy a new home, please contact me. A free and strictly confidential conversation may show you otherwise. At a minimum, you may acquire the necessary information to position yourself so that you can qualify.
Preparation
There will be various pieces of information you need to provide throughout the process. Some of this is necessary for the agent to assist you, while some is for the lender. These are the basic things you need to prepare and more may be necessary, depending on your circumstances.
To assist you in locating the home you are looking for, I need the following information.
- Requirements (or must haves) that you may have for the home you are looking for. This includes anything that you define that says the home must have before you will consider it.
- Preferences (or like to haves) that you may have for the home you are looking for. This includes anything that you define that says it would be nice if the home does have.
- Exclusions (or must not haves) that you may have for the home you are looking for. This includes anything that you define that says the home must not have.
To assist you in financing the purchase; try to acquire the following documents for the lender, as soon as reasonably possible.
- Copies of your tax filings for the last 2 years.
- Copies of your bank statements for the last 3 months.
- Copies of your last 2 pay stubs.
- Proof of any other liquidable financial assets you may own (i.e. stocks, bonds, other properties, etc.) – Not always required, but helpful if you have them.
The Process
The following describes the process you’ll most likely experience. It certainly doesn’t describe everyone’s experience nor does it guarantee your experience with me; however, it is the general flow for my home buying clients.
Not including viewing potential homes (step 5) and the final closing (step 11), the entire process may be completed while requiring less than a total of three hours of your time.
Step 1. Real Estate Agency Disclosure (RECAD)
This document is not a contract and, therefore, is not binding in any form or fashion. Signing the RECAD merely acknowledges that the agent, as required, has explained the various methods of representation they can offer you. It doesn’t result in a commitment of any kind.
Step 2. Exclusive Buyer’s Agency Agreement
When not understood, this is the agreement that brings about fear from most buyers. The concern is normally, “If I sign this, I have to pay someone.” That simply is not true. Ultimately, it protects the buyer and the agent; however, it does not, by itself, commit a buyer to pay anyone.
This agreement is binding between the agent and the potential purchaser. In summary, it commits the agent, to the buyer, with certain responsibilities and obligations. These include confidentiality, proper representation, and legal responsibility. It also commits the buyer to the agent; thus, preventing the buyer from circumventing the agent from getting compensated when a home is purchased.
Consider the following scenario: An agent locates and procures a particular home that the buyer wants to purchase; however, the buyer believes they can buy it at a lower cost by dealing directly with the seller. This agreement prevents a buyer from side-stepping an agent in this manner.
Step 3. Limited Consensual Dual Agency Agreement
This is another binding agreement; however, it doesn’t involve committing the buyer to purchasing or payments of any kind. Instead, it involves the occasional circumstance where the agent my be a representative of both the buyer and the seller.
When this rare circumstance does occur, there is the potential for a conflict of interest. This is because the agent owes certain obligations to both sides. To prevent such a conflict, the agent is required to limit their impact and influence on the transaction.
If this agreement is not signed, the agent is not allowed to present the buyer with properties that are represented by the agent, or their organization.
Consider the following scenario: An agent representing a seller of a $200K home knows that the seller is willing to lower the price to $150K. The same agent, representing a buyer, knows the buyer is willing to go as high as $225K. There is obviously a potential for a conflict of interest here. The agent is not allowed to inform the seller of buyer’s higher limit; nor, can they inform the buyer of the seller’s lower limit. The agent must remain neutral in this circumstance.
Step 4. Prequalification
This is a necessary part of purchasing any home and it, usually, occurs prior to searching or selecting a home. But keep in mind. This process is not about obtaining a loan. It is merely about learning how much of a loan you can obtain.
In short, the agent can connect you with a lender, or you can use any lender you choose. When this step is complete, you will know the limits of your purchasing power. You will also acquire a letter of prequalification that is used during your making an offer on purchasing a home. Without this letter, it is likely that any offer made to purchase a home will be rejected.
Step 5. Searching for your New Home
While listed as step 5 of the process, searching for a home does not have a specific point in which it has to wait to occur. In other words, it can begin anywhere in the process; usually, after Step 3.
The agent will begin searching for properties that meet your criteria provided from the preparation stage, identified previously. It is important to understand that the prequalification stage can, and usually does, provide some directional control of this search effort. It doesn’t make sense to include home price ranges of $300K with a prequalification of $200K.
If you have an interest in certain properties that the agent hasn’t presented you with, you should let the agent know so they can schedule a viewing of that home; thus getting you access to see the home more closely.
** Note: You still are not committed to owing any money
Step 6. Making an Offer
Once you find the home you are interested in purchasing, it is time to make an offer. At this time, or possibly sooner depending on your agent, you should be prepared to write a check for earnest money. This money is held by a real estate broker, in a non interest bearing account. It is not used for paying your agent, the broker, or any other fees. Instead, it gets applied to your purchasing balance and expenses at closing (discussed later).
Overall, the earnest money identifies your level of seriousness in purchasing the home and provides an incentive for the seller to remove the home from the open market and stop receiving offers.
While the amount does vary depending on the purchase price and other variables, it is most commonly $500 to $1,000.00. If you decide to cancel an accepted offer to purchase, you are subject to lose some or all of this money. Your agent, nor their broker, is permitted to return the money to you without a written release from both side of the transaction. In the event of this occurring, please understand this: neither your agent, nor their broker, can return it without this release.
** Note: At this point, you may be committed to buying your new home.
Step 7. Negotiating
This is, undoubtedly, one of the more defining components of the entire transaction. This is where your agent strives to ensure that your purchase price is in line with a fair market value and in your best interest. It can also occur prior to, while assembling an offer, or during addressing counter offers.
Contrary to popular belief, the objective of negotiating doesn’t always mean getting you the lowest purchase price possible. Surprisingly, that could actually be doing you a disservice. This is largely due to the fact of how homes are appraised. Appraisals are performed using the sold prices of similar properties. Once you purchase your home, your purchase price may be used to appraise neighboring home and vice versa when you sell. Effectively, your purchase price could potentially drive down the value of your neighboring homes; which could eventually impact the value of your new home.
It is important to remember to purchase at a fair market value price. Don’t over pay; but, don’t under pay, either.
Consider the following scenario. You have an interest in buying $200K home. Your agent negotiates a purchase price of $150K. Initially, you feel as though you agent just saved you $50K on the purchase of a $200K home. False. You didn’t buy a $200K home for $150K. You bought a home for $150K. Period. The home is now worth $150K. Exactly what you paid for it. In other words, it just dropped in value by $50K.
Step 8. Inspection
Now you have an accepted offer on a home you want to buy. Excellent; however, the work isn’t over yet. Now it is time to order an inspection . Let me say that again. GET AN INSPECTION. It will cost you money; but, think about it like insurance. The inspection may reveal aspects about the home that could change your mind. The cost of the inspection, usually $300 to $500, is much better than $200K plus repairs and a home you may not want when you learn about the potential problems.
Your agent can offer you one or more inspection companies to use. But remember. You can select any inspection company you choose.
Additionally, the inspection can lead to further negotiating; thus, a better purchasing arrangement. Almost always, they lead to the next step in the process. Requesting repairs.
Step 9. Requesting Repairs
After the inspection report is received, it is likely that there will be certain aspects of the home that you desire to have repaired. Maybe there are things that are ‘not to code’, loose wood on the porch, a cracked foundation, or bad plumbing. Whatever they are you can request repairs to be made, renegotiate the purchase price, or possibly cancel the entire offer and walk away from a bad deal. The inspection report is your opportunity to find out about these things and now you have a chance to address them.
It is also worth noting that the seller is not obligated to make the repairs. Just as you can request them or cancel, they can refuse the request and cancel.
Unreasonable requests or refusals may not prevent cancelling a purchase agreement. It is important to measure the request against not purchasing the home.
Step 10. Appraisal
The lender is generally the one who will request an appraisal on a home. While there are exceptions; if the purchase price is higher that appraisal value, the lender is not likely to fund the purchase. This is good to know, actually. It is reassurance that your price is in range with the appraisal and you are not over paying.
Step 11. Closing
The final step to purchasing your new home. It is a final meeting, usually conducted with an attorney, to go over all of the paperwork and perform the actual purchase. Additionally, the seller’s agent and the buyer’s agent are usually present to assist their clients as necessary.
This closing attorney is not a representative for the buyer or the seller; although, they are generally selected by the buyer. Instead, they aid in understanding any of the paperwork presented, that ll of the proper papers are filed, and make sure everything is done as it should be.
When the purchase is complete, the closing attorney will present checks to various parties involved in the transaction: the seller, the seller’s agent, the buyer’s agent, and the buyer, if they are due cash back after the purchase.
Additionally, this is when you get the keys to your new home.
Step 12. Moving In
You are now the proud owner of a new home. You have succeeded and it is yours. Move in and congratulations.
