How to Buy a Home

FIRST STEPS

Most buyers begin their property search by looking for their dream homes on websites like Trulia and Zillow. While it’s a lot of fun, it may not be the best way to start your search.

The first real step you can take towards buying a new home is setting a realistic budget and getting a pre-approval letter. A pre-approval is an official letter from a financial institution that estimates how much money you could likely be loaned to purchase a home. This will give you a realistic sense of how much money you can really spend and help focus your search.

DECIDING WHERE YOU WANT TO LIVE

Next you need to think about where you want to live. Obvious considerations are commute times, access to public transportation, a strong school district and community, and access to activities you love, whether it’s going to the theatre or going for a hike. 

I really do think that finding the right community should be your first priority, then find the right house!

FIND A GOOD BUYER’S AGENT

One of the most important steps in buying a home is finding an agent to help you with your search. It’s important to take your time to find an agent who understands what you are looking for and how much you want to spend. Call around to a few local agents and see who you connect with and who can talk to you about local market conditions, inventory in your price range and the pros and cons of local markets.

WHO PAYS THE AGENT’S COMMISSION?

A very common question is how do real estate agents get paid? Most of the time agents for the buyers and sellers get paid commission out of the proceeds of the sale - which means that the seller pays both sets of fees.

GET OUT THERE AND SEE SOME HOUSES!

Next… line up some showings! Try to cast a wide net to start with and don’t hesitate to see houses that may not appeal to you aesthetically. Your agent’s job is to help you find a home and educate you about the local market, the best way to do this is to see a broad range of homes in your preferred price range.

MAKE AN OFFER

Once you have found your home, have a discussion with your agent about how much to offer for a property. Factors that can come into consideration are; how long the property has been on the market, is there a lot of inventory for buyers to choose from or is it a seller’s market, has the property been priced appropriately and is it in good condition? 

CONTINGENCIES

Once you have your offer number in mind, you should think about contingencies. Contingencies give you an exit route and allow you to back out of the deal with with no financial or legal obligations. There are three contingencies I always write into an offer letter:

1. Home Inspection - the home must have a clean inspection by a licensed home inspector. You may want to include a water and radon test, and a separate septic inspection if recommended.
2. Title - your attorney can order a title search, which means they confirm that the owners can legally sell the property and make sure there are no liens attached to the house
3. Financing - at this point you have your pre-approval, but if something happens and you can’t get the financing you need to purchase the home, you are off the hook.

OFFER LETTER 

Once you are satisfied that you have a good number to offer and all of the contingencies in place, your agent will submit an Offer Letter along with your pre-approval letter to the seller's agent. After some negotiation, hopefully you have an accepted offer! 

An important point to keep in mind is that until contracts have been signed, a seller will fully expect their agent to keep showing and marketing their property in case the accepted offer falls apart. Try not to worry too much, this is a very normal but stressful phase of the process.

HOME INSPECTION

After you have an accepted offer you should schedule an inspection with a state-certified home inspector. Even though sellers are obliged to disclose any problems with their home, they may not know about issues that could result in costly repair bills. 

The inspector will go through the entire house with you to try and identify any issues or problems. Based on the age and general condition of the property and available maintenance records, the inspector may recommend a separate inspection of the septic system. They may also recommend tests for radon and water if the property has well water.

If the home inspector discovers any issues, you can ask your agent to negotiate with the seller to fix those problems prior to purchase, or provide you with a credit at closing so that you can fix them yourself.

LAWYER UP

After a satisfactory home inspection, it's time to get to contract and you will need a real estate attorney to help you with the contract of sale which is a legally binding document. 

Your agent should be able to refer you to some local attorneys with experience in the field. Since we are not legal professionals, we cannot give legal advice so it's important to find an experienced attorney. 

At contract signing, you will be expected to deliver the agreed upon deposit which will be held in escrow by the seller's attorney.

WRAP IT UP

Once contracts have been signed, your lending institution will step in to appraise the house and start underwriting. The home appraisal is important to the banks as they won’t lend you money to buy a home that is over-priced.

This phase of the process can take a few weeks, so be patient! Once the underwriting is complete and the home appraisal is submitted you should be cleared to close - which means actually buy the home.

CLOSING

On the morning of closing you will do a “walkthrough” of the property with your agent. Turn on every light, make sure the dishwasher works, if the seller needed to do any repairs after the home inspection you should make sure that they have been completed. The walkthrough is your last opportunity to inspect the home before you buy it and if you find any issues later it will be your problem!

The closing involves a lot of signing and check writing. Check with your attorney and lending institution ahead of time to make sure you know how much closing costs will be - they can run in the thousands!

CONGRATULATIONS!

Congratulations! you have purchased a home.