HE REAL ESTATE PROCESS DEMYSTIFIED

De-Mystifying the Buying Process
It can be overwhelming to begin the process of finding a home but if approached in this fashion in a step-by-step manner, you can find the home that’s best for you and make the right decisions at the right time.

This is a real ‘nuts and bolts’ scenario so there’s a lot of detail – be prepared!

Get PRE-QUALIFIED

  • Contact a lender either in person or by phone. This interview does not cause you to be committed to using that lender.
  • Discuss all aspects of your financials including child support, student loans, alimony, judgement liens, current debts, ownership in other properties, etc.
  • This pre-qualification is simple and then you will know what price range you realistically can afford.
  • Obtain a letter of pre-qualification from the lender.

Select a REALTOR

  • You may want to get recommendations from people who have used their services.
  • Enter into a Buyer’s Representation Agreement for a short period to see if you are comfortable with and trust this Realtor. You can always extend the Agreement.
  • Unless the Buyer Representation Agreement/CONTRACT spells out specific compensatory arrangements you will be responsible for, this representation should cost you nothing since the seller usually pays the Realtor their fee.
  • Be very specific about the fees that could be charged to you.  ASK questions.
  • You may want your attorney or a trusted source review this agreement/contract before signing.
  • Buyer representation is a ‘good thing’ as the Realtor has a fiduciary responsibility to look out for your best interests!

Select an ATTORNEY

  • Recommendations from friends or the Realtor can recommend three attorneys.
  • It usually doesn’t cost more to involve an attorney from the beginning – ask the attorney if this is the case.

Talk to your ACCOUNTANT about your plans to buy a property.

  • Your accountant knows your financial situation.
  • Discuss where the down payment is coming from and how big a mortgage you plan to carry.
  • There may be consequences you need to know about beforehand.

Go to PUBLIC OPEN HOUSES

  • Broaden your knowledge of the local market.
  • Call your Realtor if a property interests you.

Start LOOKING with your REALTOR.

  • This will aid you in developing a sense of value so that when you see the right property you’ll understand if the value is reasonable.
  • The process of looking is very important.
    — Helps you understand value.
    — Helps you define what features are most important to you.
    — Helps you understand what features you do not want.
    — The internet can be very deceptive – looking online does not replace seeing property in person.
    — Looking builds your confidence in knowing the market so you can move forward when it’s right for you.
  • Do NOT make hasty decisions and do NOT allow yourself to be pressured. However, you may have to act quickly when the right property comes along.

The OFFER

  • Ask your Realtor to do a market analysis of the property you want to buy. Get copies of the recent sales that validate your Realtor’s estimate of value.
  • Then you and your Realtor write up the offer with the terms spelled out – price offered, down payment, inspections contingency, mortgage contingency, closing date, is the offer contingent on your selling other property, is the offer contingent on your receiving a settlement.
  • A mortgage commitment takes about 30 to 45 days.
  • It is customary to write a deposit check to your Realtor as Trustee for 1% of the offered price. This check will be deposited into the Realtor’s Trustee Account within 3 business days of written acceptance of the offer. If your offer is not accepted, your check will be returned to you.
  • Your Realtor will present your written offer to the Seller’s Realtor.
  • Negotiations that follow are usually done verbally until an agreement is reached then your Realtor will draft the new, finalized offer which you will sign and then the sellers will sign. The property is still available for sale until you and the Sellers have signed the agreed-upon written offer.
  • Typically, a second deposit is made by you after you have completed your inspections and the inspection issues have been worked out and added to the contract. This second deposit can be from 0% to a total of 10%.
  • This usually leaves only the mortgage commitment contingency. If you do not get a mortgage commitment within the time frame written in your offer, then all your deposit money will be returned to you. But you will be out the cost of inspections.
  • PAY ATTENTION TO THE DATES OF THE CONTRACT – THE INSPECTION DATE, THE SECOND DEPOSIT DATE, THE MORTGAGE CONTINGENCY DATE.  These dates are critical and once these dates have passed, the inspection, the second deposit and the mortgage contingencies are no longer contingencies.  If you don’t have your mortgage committment in writing, get an extension through your attorney … very important!

AFTER THE OFFER IS AGREED UPON and signed by both parties:

  • You make application for the mortgage with your lender of choice within 48 hours.
  • You arrange for your attorney to handle the transaction. Your Realtor should send all offer documents to your attorney.
  • You meet the contingencies as stated in the offer and perform all inspections within the time     frame, usually within 10 to 14 days of acceptance of offer.
  • Seller’s attorney prepares contract of sale and submits to your attorney.  Often, the original offer IS the contract and will be subject to review by the attorneys within a few days – read the offer.
  • Your attorney reviews the contract of sale and submits to you for review. If all is in order, you sign the contract and give your attorney a check for the additional down payment.
  • Signed contract and check are sent to seller’s attorney for seller’s signature.

The BUILDING INSPECTION

  • You pay for the inspection.
  • Items to be inspected – well, septic, structural, lead, radon air and water, mold, pest, environmental, etc.
  • Fees can range from $500 to $1,500 depending on the property and how big it is.
  • Septic inspections are done by a separate septic contractor and can cost $300 to $400. If the septic has not been pumped out in a while, you may ask the seller to pay for the pumping portion of the inspection.
  • Well water, water quality, radon in air and water, and lead testing can be done by the home inspector who delivers the samples to a lab or you can contact a testing lab directly and have their technician take the samples.
  • Any agreements arising from the inspections are added to the contract.

FOLLOW-UP ON MORTGAGE application

  • If mortgage is denied all deposit monies will be returned to you once the attorneys agree.
  • If mortgage is approved, letter of commitment is sent by bank to you for signature and is returned by you to bank. Bank notifies your attorney of approval.
  • If mortgage commitment is not received in the allotted time, ask your attorney for an extension.

CLOSING

  • You and your Realtor do a final “walk through” prior to time of closing to check condition of home.
  • Title is transferred from seller to you.
  • Your obtain and pre-pay for a certification of insurance on the property
  • You bring a certified or bank check for the difference between the down payment plus the mortgage amount and the sales price. Your attorney will tell all the amounts.
  • Adjustments such as pre-paid taxes, fuel, etc. will be discussed in advance with your attorney and you will pay a pro-rated amount at the closing.

ADDITIONAL NOTES

  • You may want to get Pre-APPROVED by a lender. This means you have submitted all your financial documents, pay stubs, bank accounts and the like and the lender has gone through the process of actually giving you a MORTGAGE COMMITMENT subject to your finding a home. This commitment has a time limit and there will be some fees you have to pay. Being pre-APPROVED makes you a much stronger buyer – in essence you have a mortgage in hand and the property just needs to qualify by being appraised by the lender’s appraiser. This appraisal is paid for by you, $450 to $500.
  • These fee estimates are simply suggestions as to what is typical and they will vary. This is just to give you an idea of the expenses you will encounter.

MY PERSONAL BELIEFS…

  • I am a location and land person.
  • You can always fix the house but you can’t change the land or the location.
  • BUT, I once had clients relocating from Golden, Colorado who said “I want the ‘best house’ in a neighborhood”. Their thinking was they could get a better house for less because the ‘lesser valued’ homes would pull down the price. They would enjoy a better home and then sell it for less for the same reason. They did just exactly that and it all worked out for them, so there goes my theory!
  • Your home is a reflection of you and your values – be honest with yourself as to what you truly love.

MOVE IN — IT’S ALL YOURS! — CONGRATULATIONS!!

CONFUSED? MORE QUESTIONS?  Just call, text or email me and ask.

I’m here to help! Simply text, call or email today!

Cathy Masi
Broker
Flagpole Realty, Inc.

Direct Line: 203.788.3213

[email protected]