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A STEP-BY-STEP BREAKDOWN OF THE HOME PURCHASE TRANSACTION
SELECT A REALTOR TO BE YOUR CONSULTANT
Buying a house is a critical transaction. Knowledgeable and experienced agents should be absolute requirements in the process, considering the value of the transaction and the critical elements involved in the process. It’s not necessary that you find your next best friend in the agent you choose, but you definitely should engage an agent with whom you feel comfortable working closely with for the duration of the endeavor. They should be comfortable with you asking questions about their experience, and in answering, offer a response that may even provide more information than the question sought.
You should also expect the agent to query you about the outcome you seek. The agent should not only want to know what kind of property is desired, but also about your financial wherewithal. The knowledge gained in the conversation will direct their consultations to make the whole engagement drama-free and outcome-positive.
QUALIFY WITH A LENDER
. . .of course, unless it is to be a cash transaction. For those who will require financing, the type of property that is desired, and what can be afforded need to be aligned. The lender is the person who can help make that determination. Further, it is very worthwhile to allow a lender to explain all loan products that may be among those to consider based on your financial position. With the knowledge gained, a target home profile will emerge, and your agent can begin gathering appropriate listings to be viewed.
WITH THE HELP OF YOUR REALTOR, FIND THE HOME YOU’RE LOOKING FOR
Your agent will present you with listings of homes that fit the criteria that has been identified. You can then select from among the ones presented, those that most attract you, and your agent can make the appointments for personal showings. This step of the home-buying process is the one that can happen quickly, or go on for as long as it takes to find a candidate that fulfills your desires. Be prepared to compromise, however. Too often the home in the buyer’s mind is a unicorn.
As you go through candidate homes, your agent should call certain features to your attention. You’ll be most interested to see if any particular house will suit your practical needs, and provide a good solution for furniture placement. Your agent should be drawing your attention to material deficiencies, some of which could be more than merely a bad characteristic of the home. Likewise, your agent should point out less salient design features that indicate the design and/or materials used point to a well-built house.
Too often, after a number of homes have been looked at, one begins to mentally merge with another. So, a good habit is to make notes, as you walk through the house, maybe on the back of the listing sheet or, in the car going to the next listing.
MAKE AN OFFER
Once that near-unicorn is found, you’ll get together with your agent so the offer can be drawn-up. Rely on your agent to suggest an offer price that is most likely to be accepted. Let’s say the house you’ve found is perfect in all respects, except for the price, and you want it badly. Because of your agent’s knowledge of the market at the time, she will know whether there is the opportunity to offer under and successfully negotiate to a mutually acceptable price. In the process of purchasing a house, at the point of offering is one of the most critical. A good agent will have a sense of the amount of nuance allowed in making an offer and negotiating to a price point that both parties accept.
there are other elements in an offer that can have a value to the seller, depending on their needs. Cash, as a form of payment is highly preferable for its assurance that the purchase funds already exist. If the sellers have certain needs that make, say, either an earlier or later closing date attractive – and the buyers can accommodate – that would have some value in the offer. In the course of putting an offer forth, your agent will be having conversations with the seller’s agent. In the course of those conversations, there may be information learned that leads to including in the offer an element that has value to the sellers, adding to the attractiveness of the offer.
If the subject property is part of a homeowner’s association, your agent will provide you with a copy of the Covenants, Conditions, and Restrictions (The Declaration). The Purchase and Sale Agreement document (the Offer) includes a check-box to indicate that you have been provided a copy of the CC&Rs. It is advisable to peruse the CC&Rs for any issues you may find with the condition and/or rules of the Association. You have a short time to object. There is no opportunity to negotiate, the Declaration is absolute (in some cases, arbitration may be a component). If there is no objection after the stated period, it is assumed that the Declaration is accepted, and the Declaration acceptance contingency is waived.
SELLERS ACCEPT OFFER
Pop the champagne! Then start developing the timeline for all that will be involved in the
move. Your agent will send the offer to the title company so a file can be opened and a
Preliminary Title Commitment produced. Also, you will have to schedule a home
inspection (unless you decline) to occur within a specified timeframe.
SELLERS COUNTER OFFER
This is to be expected if the offer was less than the Asking Price. Your agent will consult
with you, evaluating the parties’ positions to determine what response will occur – an
acceptance of the counter, a counter to the counter, or rejection of the counter.
SELLERS REJECT OFFER
If what is put forth as the offer is not satisfactory to the sellers, your offer can be rejected.
Even if the offer was at full price, some other term in the offer could make the difference.
That is why consultation with your agent in developing the offer is critical.
ACCEPT, OR, COUNTER THE COUNTER
If the counter offer is acceptable, the signatures of both parties create a contract. If it is
not, a counter to the counter can be the response. It could be that, in the course of this
process, your agent’s conversations with the seller’s agent, a sticking-point was disclosed.
If the modification to the counter to the counter to ease the sticking-point is acceptable
to you, the counter to the counter is presented to the sellers.
RE-OFFER, UP
If the offer submitted is outright rejected by the seller, and a subsequent re-offer attempt
is not obviated by some fact that cannot be overcome, an improved re-offer is a tact that
can be considered. Your agent can advise the viability of this option.
NEGOTIATIONS SUCCEED
If either of the two prior actions result in acceptance, the sale is under contract and the
process moves on to the next actions. Immediately, you will provide an Earnest Money
deposit to the title company in an amount as was stated in the offer.
SCHEDULE HOME INSPECTION
This is a contract contingency that must be cleared to move forward with the purchase. A home
inspection is not required. But, if you choose to go forward in the purchase without an inspection,
your agent will ask you to sign an affidavit that you were advised that a property inspection is
recommended, and declined.
Once the inspection is completed, a report of the findings will be provided to you. The report will not
only note where repairs or corrections are recommended, but also provide statements on the condition
of various mechanical systems. Your agent will help you determine what items should be requested
to have repaired or corrected, if any, and include them on the Inspection Contingency Notice that is
given to the sellers.
NO ISSUES FOUND IN INSPECTION – CLEAR CONTINGENCY
Great! On to opening a Title file.
ISSUES FOUND – NEGOTIATE ITEMS TO BE CORRECTED
Based on the Inspector’s report, it may be found that due to certain unacceptable
conditions, you may not want to proceed with the purchase. At this point, you can
choose to terminate the contract. That situation notwithstanding, the seller will
respond to the Inspection Contingency Notice stating which requested items will
be addressed - some or all.
It is your choice at this point to accept, or counter. Bear in mind, however, that harsh
negotiations over remediable items, where their value is far less than what is in the
balance, risks ending the contract.
OPEN A TITLE FILE
The title company will begin the process of inspecting and preparing to insure the title, setting-up the purchase transaction in preparation to ultimately managing the documents signings, and the closing of the sale. The first product provided by the title company will be the Preliminary Title Report.
CHECK PRELIMINARY COMMITMENT FOR EXCEPTIONS
The Title Commitment includes a preliminary search of the properties title history, and
shows easements and other possible conditions encumbering the title. Your agent will
look over the exceptions noted and bring to your attention any questionable entries for
consideration.
LENDER ORDERS APPRAISAL
As soon as the Inspection Contingency is cleared, your agent will notify your lender to order the appraisal. The appraisal will usually take place within a week, and the result known less than a week after that.
APPRAISAL IS SUFFICIENT
You will receive a copy of the appraisal. If it matches or exceeds the contract price,
the sale will move on.
APPRAISAL COMES IN SHORT
If the appraisal is lower than the contract price, one or both of two things need to
happen – 1) The seller can lower the asking price to meet the appraised value; or,
2) The buyer can increase the amount of the down payment.
RENEGOTIATE TO LOWER PURCHASE PRICE, OR INCREASE DOWN PAYMENT
Your agent will negotiate through this issue with the seller’s agent. Both parties, by
this time in the process have come to be vested in the process, and should be
amenable to keeping the contract in place.
LENDER PREPARES DOCS
A few days before the stated contract close date, the lender will prepare the loan documents and forward them to the title company. Somewhere around this time, your agent will have made the appointment for your document signing. Your signing can occur as soon as the loan documents have been received by the title company.
BUYERS AND SELLER SIGN
In separate appointments, both parties will execute all the necessary paperwork. Prior to any affixing of signatures, the Title Officer will explain the credit and debit entries in the Settlement Sheet.
TITLE TRANSFERS
Upon recording, the title of the property transfers to the new owner. The keys can then be handed to you, and moving in can begin. Congratulations.