1. Choosing an Agent
Choosing an agent is often a matter of finding someone you know, or someone that a friend refers you to. This is often the best way to find an agent, but here are some more things to consider.
1. Does the agent you're choosing know the area in which you are looking to buy? Too often, people list their homes with an agent who is a friend, but who lives and does most of their real estate business in a different area. For example, if you are looking to buy a home in Culpeper, an agent who specializes in Stafford County will probably not serve you best.
2. Another thing to consider is whether or not your agent understands you and your vision. The process of finding the right home is a difficult and time-consuming one, and it helps if your agent understands you, where you're coming from, and what you're looking for.
3. Most importantly, do you TRUST your agent? Real estate agents have occasionally given themselves a bad name for playing a self-serving role in their transactions. Make sure that you feel comfortable with your agent, and that you can trust their advice. There are many wonderful, loyal, and trustworthy agents out there, always trust your instincts, and it often pays to check up on an agent's reputation if possible.
When choosing an agent, the best place to start is with asking around your community for suggestions on agents to use or even not to use. When you've collected a few names, call a few agents and essentially interview them, even meet with them so you know you are making the right decision. The right agent can make all the difference in a real estate transaction, and it's a decision that should not be taken lightly!
Although I mention this in my previous article on why to use a realtor, it's important that you know that an agent's commission is almost always paid by the seller. Meaning that the extremely valuable services of a real estate agent generally come to the buyer at no cost, or sometimes very minimal cost. There is no reason for a buyer not to use an agent, as long as they can find an honest and competent one. And if you don't like the agent you've begun working with, you can find a new one. Just make sure that when signing an agreement with an agent, that you have an option to void the agreement with 24 hours notice.
2. Determine What You Are Looking For
Here are some things to sit down and think about, and discuss with anyone else who is a key player in this decision.
1. Of course, number one is How much can you afford? What monthly payments can you afford, and how much are you able to put down in a down payment?
2. What kind of area would you like to live in? Are you looking for lots of land with no nosy neighbors nearby? Do you love to be right in the middle of everything in a more urban setting? Love the suburbs? How important is it that you live near water?
3. Where do you work? If you commute, do you need to live near a commuter station? Do you need to live walking distance to your job because you love to ride a bike to work everyday? How far are you willing to drive to work everyday? etc.
4. What abous school systems? Are you willing to take your children out of their current schools? Do you want to live in a certain school district? (Although keep in mind that school district lines often change when there are multiple schools for each level.)
5. What kind of neighborhood do you see yourself in? Do you want to live amongst social neighbors? What types of dwellings would you like to see around you in your neighborhood?
6. SPECIFICS: How many people will be living in the house? How many rooms do you need? Bathrooms? Bedrooms? Outdoor space? Do you need a basement, an attic? Do you need a garage? Fenced in yard? Seperate living room and dining room? Are there any other requirements you have? Fireplaces? Flooring? Chances are, you won't find everything you want in one house, so you also need to decide how much you are willing to renovate.
Once you have made your list of wants and needs, determine which of your "wants" are dealbreakers, and which ones you could live without. Chances are, your perfect home just the way you want it, at the price you can afford, is not going to be easy to find, and compromises are almost always necessary.
After you have determined what you or you and your family want and need, it is time to sit down with your agent and discuss your list.
3. Mortgage Pre-Approval
Before an agent takes a buyer out to start house-hunting, it is essential that the client has gone through the pre-approval process.
Your agent can help you find a loan officer if you don't already have one, and a loan officer will get all of your financial information, run your credit, and give you a general idea about how much money you may be approved for on a mortgage.
This is so very important because if you are a buyer, and think you can afford a $450,000 house, and your agent shows you a few houses in that range, and then it turns out you only qualify for a mortgage loan of $300,000 -- well, when you then start to look at the lower priced houses, disappointment will most likely ensue.
Even if your agent doens't insist on this step, it is always, always a good idea to get a pre-approval before you start looking!
4. Previewing Houses
Once you have an idea of what you're looking for, your agent will look at their Multiple Listing Service. The Multiple Listing Service in Virginia, D.C., and Maryland is called MRIS. Every agent has their own system of finding matches for you. When you and your agent have decided which houses to view, you will usually need to give 24 hours notice for an appointment. You must have an agent with you in order to preview any listed properties (another reason why having an agent is essential!)
During this process, it's important to make note of what features you do or do not like in each house you preview to give your agent a better idea of what to show you and what not to show you in the future.
Once you've found a house you like, you will move to the next step-- making an offer.
5. Making an Offer to Purchase
When you've chosen the house that you want to put an offer on, you and your agent will sit down and write an "offer."
The price you choose to offer on a home will be based on several things, such as what you can afford to pay, what you feel the property is worth, whether or not there are other people interested in making offers on the property, and how long the house has been on the market. (A few examples)
When putting in an offer, a buyer will also be asked to put down what's known as an "earnest money deposit." This money will go into escrow, and is essentialy a financial commitment to buying the property. The appropriate amount for the earnest money deposit should be discussed with your agent, as each payment depends on the particulars of the situation.
Also, when writing an offer to purchase, a buyer will need to determine whether or not they are offering to pay the closing costs, or if they are going to ask the seller for some or all of closing costs.
CONTINGENCIES: Also, when making an offer to purchase, a buyer will add any contingencies they may need. For example, if the buyer is taking out a mortgage loan, they may need a financial contingency that can void the contract if the buyer is unable to get proper financing. The other common contingency, is a home inspection contingency. This gives the buyer the right to back out of a contract if any major problems are found with the house when it has been inspected, and the seller is unwilling to fix them. There are several other types of contingencies for different situations, but financial and home inspection contingencies are the most commonly used.
6. Negotiation and Contract Acceptance
Often, when a buyer gives the seller an offer to purchase, the seller will produce a counter-offer. Sometimes, the seller is asking for more closing costs or a higher price. The offers and counter-offers can sometimes go back and forth multiple times, and sometimes they are accepted with the first offer.
When the buyer and seller finally agree to the terms of a contract, they both sign off on the contract. They then have a ratified contract.
7. Getting a Mortgage Loan
Some buyers offer to pay cash for properties, and in that case, this step is irrelevant. However, most people need a loan when buying a property, and the mortgage loan becomes one of the most important pieces to the puzzle.
Shopping around for the right loan is important. Many lenders will offer you different types of services, and it pays to shop. This is another place where your agent can be very helpful in finding you some good options to look into.
With the current financial climate, loans are taking much longer than they used to, and loan applicants are expected to provide a great deal of their financial paperwork and information. A conventional loan generally takes 30-45 days for approval, and a VA or FHA loan often takes 45-60 days. This is important to consider when considering a closing date. Also, with the changes in loans these days, loan companies have become more competitive, and it pays to explore all your options -- mortgage lenders, mortgage loan brokers, financial institutions, private lenders, credit unions, and finance companies.
A lender will need to know your financial information like the amount you wish to borrow, your monthly income (pay stubs and W-2 forms), your account statements, a complete list of your assets, as well as a complete list of your debts.
When the lender has received this information they will need to verify these facts and run a credit report. They will then order an appraisal to be done on the property. This is a very important part of the process because the property will need to appraise for the amount it is being sold for in order for the loan to go through. If it doesn't, it doesn't necessarily mean that the deal is off, but it may mean that the buyer must put down a larger down payment.
After the appraisal, the lender will review your application and make a decision. If the loan is approved, the buyer will receive a loan commitment letter which states the mortgage amount, interest rate, and length of loan. The buyer should review it, sign it, and return it to the lender. If there was a financial contingency, it will then be removed. When this step is completed, the selling and listing agents can then set a date for settlement.
8. Home Inspection
Whether or not there is a home inspection contingency, most buyers want the home they are about to purchase inspected. The buyer has the right to choose their own inspector, and an agent can often be helpful in selecting the right inspector. When the inspection has been completed, the buyer will have access to the full report. If the buyer accepts the property as-is, then the deal proceeds unhindered.
If there are repairs that need to be made, that the buyer feels the seller should pay for, they will write up a list of requests. The seller will receive this list, and decide if they are willing to make all of the repairs, some of the repairs, or none of the repairs. If there is a home inspection contingency on the property, the buyer may generally back out of a contract if the seller is unwilling to meet the buyers' demands. If the buyer and seller can agree on what repairs will or will not be made, the home inspection contingency will then be removed (if there was one.) If not, the whole deal may stop here.
Some home inspections are for informational purposes only, and do not have any effect on the continuance of the sale.
Also at this juncture, a termite inspection may also be performed before the contract continues.
8. Preparing for Settlement
Now that all contingencies have been removed, it is time for the buyer to decide on a settlement attorney. An agent can be very helpful in giving options and advice on this decision.
Fire and Hazard Insurance: Most lenders will require a buyer to have fire and hazard insurance. They usually want at least a one-year policy, and they will require a receipt at settlement.
Title Insurance: Most lenders will also require a buyer to have title insurance which provides protections against any unforseen actions that threaten the buyers' claim over the title. When buying title insurance, there are several things to consider and it is best to consult both your settlement attorney and your insurance company.
9. Pre-Settlement Inspection
Known as a "walk-through," the pre-settlement inspection generally takes place on the day of closing. This is when the buyer (and usually their agent) walk through the house to make sure that the house is in the condition in which it is supposed to be. This is to ensure that all fixtures that were to convey are still in the property, all appliances are working correctly, and everything is in order.
When doing a walk-through, here are some suggestions:
1. Turn all light switches off and on.
2. Turn on and off all faucets, showers, flush toilets
3. Test stove burners, oven, test the disposal, run dishwasher, washer, dryer and if possible, make sure the heating and/or central air are working properly.
4. Essentially, try everything. Keys, fireplaces, etc.
Any problems with the house should be noted, and brought to the attention of the settlement attorney. The real estate agent, settlement attorney, the buyer, and seller will need to coordinate about any repairs that need to be made. More often than not, a walk-through does not produce major problems, but it is important to check the house thouroughly.
At settlement, there will be an attorney or title company representative who has been chosen by the buyer. Usually, the listing and selling brokers are present, as well as all of the owners and buyers. All paperwork will be explained by the settlement attorney, papers will be signed, and then hopefully the keys will be placed in the hands of the new owner!
Congratulations! If you have made it through all these steps, you are about to recognize all the joys of being a homeowner. Homeownership brings a person a lot of pride, and gives you a place to grow your roots. You now have the freedom to make the house you've bought into YOUR home.
However, the moving process can be a grueling one, and make sure to consult with your agent about the different options available to help you on Moving Day, and even options available to you like "packers." If you hate packing as much as I do... Sometimes, they are so worth the extra money!
Anne Morgan Pates
Anne Morgan Pates has worked in Real Estate and in Sales & Marketing since 2012. She currently runs her own Marketing business, FXBG Real Estate &.Small Business Marketing.