10 Things a Buyer Should Know about the Real Estate Process
- Know your financial state
It is important to know your financial state before considering purchasing a home; check your credit report and dispute any discrepancies. Your credit score reflects debt, payment history, and is used to determine the amount of money that can be borrowed. Begin by reviewing all outstanding debt such as credit cards, student loans, car loans, etc. and start eliminating debt using the snowball method. Pay all recurring bills on time, save at least 4-6 months of living expenses and a down payment to prepare for home ownership.
- Meet with Hire a licensed broker
It is vital to begin your search for your dream home with proper representation; consider hiring a licensed broker. Begin with interviewing 2-3 brokers prior to selecting the one that will assist in purchasing your home. Commissions for services rendered are always negotiable and are typically paid by the seller as an amount or percentage of the purchase price at closing. A Buyer Agency agreement will list the details of the contract and set the expectation for all parties involved.
- Consult with a lender
Avoid the temptation of searching for homes before discovering the amount you can afford. Consult with a lender to request pre-approval for a home loan. The lender will review your debt and income to determine the amount that can be borrowed. Take the time to review the types of mortgages offered by the lender and determine which option is best.
- Identify must-haves vs. nice-to-haves
The process of looking for a new home can be overwhelming and it is important to create a list of must-haves versus nice-to-haves before your initial search. Must-haves are those items that you do not want to live without like a move-in ready home while nice-to-haves are those things that would be great, but are not considered a deal breaker like a pool in the backyard when it is not offered in your dream home.
- Location, location, location
There are three things that are significant in real estate: location, location, location. Location has a direct impact on value. When looking for a property, it is important to know the area; do your research. Learn about the surrounding areas, school district, criminal activity, shopping, and recreation. Consider the daily commute to work and traffic conditions.
Take time to drive around potential areas of interest before making a decision to purchase a property.
- Begin the search for your dream home
Be prepared to begin searching for your dream home with your broker. After collecting the details from your must-haves list, your broker will identify properties that meet your search criteria. No two homes are alike so there is nothing wrong with viewing multiple homes before making a final decision. Remember that real estate is a competitive market and you may not be the only individual interested in a particular property. When you find the one, ask your broker to prepare an offer to the seller.
- Make an offer
When you have found the perfect home, it’s time to negotiate the deal. Your broker will work with you to complete an Offer to Purchase and Contract to negotiate the details such as price, closing costs, repairs, etc. There may be other offers for the property so it is imperative that it catches the seller’s attention. Paying earnest money and/or due diligence fee is a great incentive for the seller and shows your determination to acquire the property. It is considered a binding contract once both parties have signed agreeing to the terms and conditions.
- Consider a home inspection
There is no such thing as the perfect home without any defects. It is the responsibility of a licensed home inspector to discover any defects that would influence your purchasing decision. There are additional inspections to consider regardless if the home is new construction or an existing property such as a radon and pest inspection. Your decision to pay a minimal fee to inspect your home could save thousands in the future.
- Get approved for financing
Pre-approval and an approval are not the same. The lender will require additional documentation such as pay stubs, tax returns, payment history, savings, etc. to send to underwriting for a final approval of the loan. During this time, the lender will request an appraisal to ensure the property is valued at the sales price. It is vital to avoid making any large purchases or permitting any inquiries for credit; these things can hinder and potentially prohibit financing from your lender.
- It’s time to close
Before acquiring the keys to your dream home, you must hire a real estate attorney. They are responsible for verifying title, receiving loan documents, collecting money, etc. to make sure everything is handled within the scope of law. Your broker will review the closing statement for accuracy. Don’t become overwhelmed from the countless documents that must be signed. Read every page and ask questions for clarification.