Buying a home usually represents your single biggest investment – and debt.
The home buying process is one of the most exciting, and frequently stressful, experiences you’ll ever go through. This holds true whether you’ve bought many homes or you’re looking to buy your first, whether you’re in the market for a new primary residence, an investment property or that perfect vacation getaway.
Today’s real estate market can offer more opportunities, yet can be filled with more risks than ever before. There are a multitude of factors to consider and decisions to make. When buying, it’s crucial to have all the available resources necessary to make a well-informed decision, together with the time required to make use of them. It’s important to enlist the help of a trusted real estate professional who’ll be able to provide expert guidance at each step of the buying process.
Finding and purchasing a home includes the following steps:
1.) Define your goals, research your options, make your plans
Given that buying a home is such a big step, it’s very important to educate and prepare yourself as much as possible. This means clearly determining the reasons you’re buying and what kind of home you’re looking for. Since buying and financing a home are so closely related, it also means examining your current financial situation and projecting how much you can afford. Once you’ve answered these questions, even tentatively, you’ll be in a better position to research housing and mortgage options, and create an action plan and timelines for moving forward. Although it is possible to do this yourself, you may benefit by consulting an experienced real estate professional right from the start.
2.) Contact a real estate professional
Buying real estate is a complex matter with many factors to consider since no two homes or transactions are alike. Moreover, with all the unique opportunities and potential pitfalls of the current market, it’s more important than ever to contact a real estate professional once you’ve decided to buy.
A good agent will guide you through the property search, financing, negotiation and transaction processes. When choosing an agent, you should consider their local market knowledge, experience, and track record. You’ll also want to know if they are full time or part time in the business. Sometimes agents have a regular full time job outside of real estate or they may be raising children full time and doing this on the side to earn extra money. California is a litigious state (meaning there are a lot of lawyers and lawsuits) so you should seek an agent who is in the business full time so they are knowledgeable about the latest legal updates which come out at least twice a year and developing issues and trends in the industry such as how solar panels impact a transaction.
3.) Get pre-approved for a loan from a good lender
In order to put an offer in on a home, you must be pre-approved. Some agents will not even show you houses if you aren’t pre-approved. The pre-approval process involves meeting with a lender and authorizing them to examine your current financial situation and credit history. On the basis of this examination, the lender may provide you with a letter detailing the amount which you are qualified to purchase, your loan type (ie. conventional or FHA), as well as your interest rate. Lenders can make or break a deal. While there are many options from which to choose, understand that relationships can sometimes make the difference between a deal going through and one that doesn’t. A good agent has a stable of reliable lenders that he or she has worked with and trusts to work through issues. Ask your agent for their list. Great lenders help you find the best financing options to meet your needs. There are programs for first time homebuyers with downpayment assistance, help for new doctors, jumbo loans, and much more. Some lenders are better at certain loans than others.
4.) View homes and select THE ONE
Simply put, the key to the home search process is knowing what you’re looking for. Among other things, that means distinguishing between “must-haves” and “nice-to-haves”.
That said, here are a few recent facts about the search process that might put your experience in perspective:
A majority of buyers start their search online. In fact, 92% of buyers use the internet and may spend 12-45 weeks before they are ready to talk to an agent and start the search in person. Sites such as Realtor.com, Zillow, and Trulia provide details about homes, neighborhoods, and previous sale data and are excellent resources to start to get a feel for what’s available in your price range and the neighborhoods you’d consider living in.
Once you become familiar with housing inventory, it’s time to start previewing homes first hand. While the photos may make a house look perfect online, homes can be very different in terms of layout, design, workmanship and other aspects. Photographers try to showcase the best of each home. Ideally, you should view homes with the help of an experienced real estate professional who’ll notice things you might miss, provide expert analysis such as if the house is priced right for the neighborhood, and act as an impartial sounding board.
5.) Make an offer and negotiate with the seller
Once you’ve found the home you’d like to buy, it’s time to make an offer. Your state or local real estate association likely has contracts that are generally used for transactions in your area. These contracts enable you to specify a sale price and also allow the inclusion of clauses specifying various terms of purchase, such as the closing and possession dates, your deposit amount, and other conditions.
You should carefully review these clauses with your real estate professional to be sure that they accurately express your intended offer. In addition to drawing up the contract, your real estate professional will be happy to address all of your questions about the offer process.*
Once you’ve written the offer, your real estate professional will present it to the seller and/or the seller’s representative.
Generally speaking, the seller can accept your offer, reject it, or counter it to initiate the negotiation process.
Successive counter-offers, with deadlines for responding and meeting conditions, may be exchanged between you and the seller until a mutual pending agreement is reached or the negotiations break down.
6.) Secure your financing
Once you have a pending agreement, it’s time to return to your chosen lender to finalize mortgage details in order to close the deal. This means finalizing your down payment, interest rate, regular payment schedule and all other financial conditions associated with the closing.
As the saying goes, ‘let the buyer beware’. Unfortunately, too many buyers suffer negative consequences from not fully understanding their financing decisions. Thus, it’s crucial for you to work with people you trust. In this regard, a good real estate professional can become a true friend for life.
Close the deal – If you’ve efficiently taken care of everything connected with purchasing your new home, taking ownership should be a positive joy with no surprises. Key steps to the closing, also referred to as the “escrow” or “settlement”, include:
Getting a title search – you will need a historical review of all legal documents relating to ownership of the property – to ensure that there are no claims against the title of the property. It’s also necessary to purchase Title Insurance for protection in the event of errors in the records or mistakes in the review process.
The final walkthrough – you will be given the chance to look at the home one last time to make sure it’s in the same condition as when you signed the sale agreement.
The settlement – typically, on the Closing Date you’ll meet with a lawyer, real estate professional, or escrow agent to verify and sign all the paperwork required to complete the transaction. The settlement will include paying your closing costs, legal fees, property adjustments and transfer taxes. At that point, you’ll receive the property title and copies of all documentation pertaining to the purchase.
Oh, and one more thing – you’ll get the keys!