The Buying Process
1) The most important aspect of buying a home is finding out how much you are qualified for! You do not want to look for homes in one price range, only to discover that those student loans are creating a blimp on your credit rating, and lowering your buying ability. SO, the very first thing you should do is to obtain a Pre-approval.
If you are purchasing a home in very sought after community when multiple bidding is the norm, then it might also behoove you to take the pre-approval one step further, and obtain a Priority Pre-approval Letter or ‘Commitment Letter”. This process will take a little longer as the mortgage broker will basically obtain all of the necessary paperwork from you, and submit it to the underwriting department for approval, but well worth the effort! You will be able to bid, knowing you have already been approved for the loan amount. In this scenario, all that would be required to complete the mortgage loan commitment would be Clear Title, an appraisal, and property address!
2) Location, location, location. Where do you want to live? Research the different towns, and even interview the various school districts. For school stats ..
3) Searching for a home may take a day , a week, or even a year! If you have an agent, he/she perhaps has been sending you the monthly market updates during the process, or has signed you up for new listings as they enter the market in your desired price range, etc. , so you feel comfortable knowing that you have had the opportunity to view the homes of interest to you.
4) You have found the home you wish to purchase! Yay!
5) Do you have a real estate attorney? NOW is the time to call one, ask for availability (if the attorney is planning a trip around the world for 3 months, then call another!). Ask the attorney what he/she charges (but remember choosing a good attorney is important, and a few hundred dollars differential should have no bearing here).
6) Your agent has given you comparative sold prices, so you feel comfortable in knowing what the homes have been selling for in that same zip code, elementary school and price range.. Also remember that if a home in New York is priced at One Million or above, then there is a 1% Mansion tax payable at the closing table.
7 What should I bid? When you view the comparative sold prices, and then you factor into the equation those homes you have already viewed, and/or compared the condition of the homes you have viewed with regards to the home you are interested in purchasing, you will have an idea of what to bid on the home. You also place a bid on everything you see visually, and know about the home. Your agent will advise you on the range on what to bid, but it is always your money, your comfort level!
It is customary to place down 10% at contract signing. Speak to your agent and mortgage Broker with regards to your alternatives if required. There are hybrid mortgages, we can structure bids differently. Agents can be creative, speak with your agent , voicing your concerns to see which approach will be best for you.
8) Your agent will negotiate on your behalf with the listing agent for the sellers. Once an accepted price has been obtained, an inspection is scheduled. The listing agent and buyer’s agent will also exchange both sellers’ and buyers’ information, and this information, together with the sales price, terms, and attorney information is sent to all parties. The seller’s attorney will draw up the contract, and send it to the buyer’s attorney. Some attorneys will send out the contract once the inspection is completed, and if the sale is in a much sought after area, then the contract might be sent out the same day as the accepted offer is given.
Some buyers (and sellers) think that they can carry on the negotiations once their attorney in involved. Just remember that the memo of sale reflects what has been agreed to by all parties. You might lose the bid if you try to change it.
9) It is important that you schedule the inspection as soon as possible after the accepted offer. It is the listing agent’s responsibility to keep showing the seller’s home until the contracts are fully executed (signed) by both buyers and sellers. Why? It is not uncommon for a buyer to change his/her mind, and so the listing agent must protect the client and continue to show the home. Accordingly, should a higher bid be submitted to the sellers, then their agent must submit that bid also.
No-one wants their client to spend money on an inspection only to lose out to someone bidding higher, and losing the house they wished to purchase.
Why would the seller do that? The seller wants the most they can get for their home. However, the listing agent usually affords the opportunity to the buyers to increase their bid to correspond to the higher bid. If the buyers don’t increase their bid, then the sellers may/may not go with the new buyers and the higher price.
Sometimes, it isn’t even a higher price. It could be better terms. However, in order to avoid any of this, if the buyer moves forward in a quick concise manner after receiving the accepted offer, then there should be no disappointment. Should a higher bid be submitted by another agent and accepted, then the sellers do not have to reimburse any buyer for their inspection if there has already been one performed.
10) The inspection – You might wish to have a structural engineer if you have questions about the structure of the home and/or a regular inspector. Home inspectors must be licensed. Once again, calling an experienced, good inspector is very important. Now is not the time to quibble over price.
The inspection process may take as long as 3 hours or more, and it is always a good idea to both be present at the inspection, ask questions as you both think of them and/or perhaps writing them down before you meet.
11) So the inspection has been completed, everything is in order, and any renegotiation has been taken care of. Or, perhaps you will to call a few contractors to obtain prices on repairs to help further the negotiation process. Your agent will assist you in this process.
12) You/your agent will let your attorney know that you are ready to proceed for the signing stage, and your attorney will meet with you to discuss and explain the contract once received. It is at this time, that you give forth your down payment to your attorney. He will then send same to the seller’s attorney and the down payment is placed into an escrow account which will remain there until the closing.
13) The buyers are usually given 30-45 days in which to obtain their mortgage commitment. SO, once again, always a great idea to have all of your financial information ready to be sent to the mortgage broker.
While the mortgage process is under way, and your mortgage Broker has received a fully executed copy of the contract, then an appraiser will be requested by the mortgage broker, and sent to the property to assess the value of same.
The buyer’s agent will meet the appraiser, offer forth ‘comps’ for the property. The appraisal process might take a few days or a week. Once completed, the appraiser will send the report back to the bank, and you should also be receiving notification of the appraised amount. It is customary for the bank to estimate the value to the sales price nowadays as opposed to appraising it for a much higher price.
14) While you are in contract, now is a good time to go and measure, bring in prospective contractors if you wish (with the seller’s permission). The contract usually states how many times you can be allowed into the house or there is a reference to same perhaps stating ‘with seller’s permission at mutually agreed upon times’.
15) Interview moving companies in advance also. Moving companies book in advance. End of June closings are popular so this could be a particularly harder time in which to find an available moving company. Your agent will have a list of companies so always ask your agent!
16) Once you have your mortgage commitment, the paperwork/letter is sent to you, your attorney who then sends it to the seller’s attorney. It is very customary to receive the mortgage commitment with ‘conditions attached.’ What are they? It could be that you still must send in a few missing documents/updated financial information. It is common, and don’t let it bother you! A requested essay/letter explaining your job/monetary situation is also quite common!!!!
17) One of the final conditions will be for you to obtain home insurance! You are practically there!
18), Once the bank has given you the ‘clear to close’ then your attorney will reach out to the other attorney, and arrange a closing date.
19) Once you have a closing date, you will arrange with your agent a walk-through at the home, to make sure that it is in the same condition as when you had the inspection. Some buyers choose to ask their inspector back (at a reduced fee) to inspect the home once again.
This is a good idea if repairs were made after the inspection, and you chose not to have a credit for those repairs offered.
Enjoy your new home!
Accredited Buyer’s Representative
Certified Buyer’s Representative
Certified Distressed Properties Expert
Certified Residential Specialist
GRI – Graduate Realtor Institute
Senior Real Estate Specialist
Licensed Real Estate Associate Broker
***Call me if you need inspector’s names, local attorneys, mortgage brokers, etc.