Why do you want to move? Are you getting married, ready to start a family, plant your own garden? Do you feel you've finally "arrived" at your company? Maybe a raise, or a bonus, or a baby on the way has made you think about living in a home of your own?
Whatever your reasons may be for homeownership, there are 12 steps you will inevitably take. If you do them in the right order, you will save yourself time, frustration, and money.
For example, if you start shopping for homes on the Internet without knowing how much you can spend, you will not only waste time looking at the wrong homes, but you may be ultimately disappointed at what you can actually afford.
1. MEET WITH A REALTOR (PARTICULARLY A BUYER'S AGENT)
Using an agent can help you in numerous ways. A good Realtor is a master hand-holder, problem-solver & solution-provider. In addition, they will educate you on the process and they will know what aspects of a home are critical for you to consider when choosing.
Good news to buyers, as you don't pay the Realtor's compensation. Both the seller's agent and the buyer's agent are paid out of the seller's transaction proceeds. Contrary to popular belief only 4 percent of homes are actually sold through newspaper ads. The other 96 percent are sold through networking among agents and all their various resources.
Make sure your Realtor has your best interests at heart. The vast majority of Realtors do as their accreditations, awards & referrals can testify.
2. SIGN A BUYER'S AGREEMENT
Again, if you find an agent you like and trust, go all the way and sign a buyer's representation agreement. This agreement means that you will have one agent representing you as a buyer. The agreement empowers the agent to not only search out the latest Multiple Listing Service list, but to seek alternative means of finding you a home, including searching foreclosures and homes for sale by owner.
With a signed agreement, the agent becomes a fiduciary and must act, by law, in your best interests.
3. DETAIL YOUR FINANCES
The next thing you need to do is figure out what kind of home you want to buy and how much you can afford to pay in monthly installments.
Creating an Excel spreadsheet of your expenses vs. income will help determine the equation. Also, list your various assets (ie: 401K, IRAs, checking/savings, stocks/bonds, etc...)
Keep in mind that the results of your calculations will only be an estimate as a Realtor and Lender will explain the tax savings and other various costs to the home purchase process.
We are fortunate in today's flexible lender market, that with decent credit and stable income, a person no longer needs 20 percent down payment to buy a home for themselves.
4. GET PRE-APPROVED FOR A LOAN
Either go to a mortgage broker or a direct lender and find out, for certain, the size of mortgage for which you can qualify.
The pre-approval letter from a reputable lender will help you be taken more seriously by agents and sellers because they will recognize you as someone who is prepared to buy. In today's limited-inventory market, no seller is going to commit to selling their home to you without some confirmation you can indeed afford it.
5. KNOW YOUR LIKES & DISLIKES
As you shop for homes, keep in mind what you like and don't like and pass along your feelings to your agent. You should feel comfortable looking at numerous homes, but neither you nor your agent is interested in wasting time on homes that aren't appropriate. Like any relationship, your home will not be perfect. If you are finding that most of your criteria is met, it shouldn't be long before you find the right home.
Think in terms of possibilities as well as what you see is what you get. Perhaps a home isn't move-in perfect, but with a little work it could be the home for you. Don't let cosmetic or minor remodeling problems discourage you. Many remodeling jobs add tremendous value to a home. If you remodel a kitchen, for example, you may receive as much as a 128 percent return on your investment.
Talk with your agent, friends, relatives, and contractors and find out what it will cost to remodel the home the way you want it.
6. WRITE A CONTRACT
When you find the home you want, you and your agent will write a contract. Your offer should spell out all the details (i.e., what you are willing to pay for and what you are not, when you want to close, and when you want to take possession of the home).
Your contract should be contingent upon getting an inspection and evaluating the results. If the inspection reveals a big problem, you and the seller can renegotiate the purchase price if you are still interested in buying.
In many local markets, inspection contingencies are waived, especially if the situation is multiple offers. I encourage a buyer to have the inspection done even if your offer is not contingent on the results so you, the consumer, know what issues have to be dealt with down the road.
7. GET THE LOAN UNDER WAY
As soon as the seller agrees to the contract, you must start following through on your loan. Take the contract to the lender and let them start the loan process. If you have been preapproved, some of the legwork has already been done and your loan will process more quickly. Keep in mind, there are literally dozens of people that help process your loan and the process works somewhat like an assembly line. You want to give plenty of time for all the parties to participate and get their parts done so you can close on time.
8. THE HOME IS INSPECTED
In many markets, you will have the inspection after the contract is signed, rather than before. In many cases, the results are minor repairs but an inspection can also reveal some nasty shocks.
Your inspector may find a dirty furnace or he may find a cracked foundation. These are problems that must be negotiated between the buyer and the seller. If negotiations cannot come to a reasonable solution for all parties, then the transaction may be terminated and the buyer's deposit will be refunded.
9. THE HOME IS APPRAISED
The lender/bank will arrange to have the home appraised, which is part of the assembly-line process for getting a loan granted.
The likelihood of a home "not appraising" is slim as the real estate industry not only keeps up with how quickly homes sell, but how much they sell for in an area.
Most lenders will have criteria and data on average dollar per square feet and other comparable home sales to confirm a home's value. If a home is overpriced, it will quickly be obvious. You can then go back to the seller and renegotiate.
10. GET READY TO MOVE
As you find a mover, pack your things, and arrange days off work around the closing date, you will find that things can still change.
It is the most intense, nerve-wracking time of the transaction -- waiting for the end to happen. You think you may have addressed all the issues and closing should proceed without any other hitches, but negotiations can still continue as you suddenly find out the chandelier (you thought was included) is actually excluded from the contract.
As you get ready to move, your hopes rise, even though you lack confidence that the home will ever be yours. Hang in there!
11. CLOSING: BE PREPARED FOR ANYTHING
Until closing, and even during closing, anything can happen. You find out that your closing costs are higher than you thought they would be because some additional service fees have been added by the lender. A glitch could come out in your credit report that delays the sale; a problem the owner was supposed to fix wasn't repaired in time; the appraisal may come in the day before closing and be short of the asking price of the home.
If so, the buyer, seller, and their agents have to figure out how to make up the shortfall. Do they lower the price of the home? How will last-minute problems be handled? The negotiating table can be an emotionally explosive place. That is why closings are generally held in private rooms with the buyers and sellers separated. A good Realtor will help keep the transaction together by providing sound solutions so you can ...
12. GET THE KEYS
It's all over. The home is yours. Celebrate. And congratulations - you've succeeded in accomplishing the American Dream.
Debbie Walter is with RE/MAX NW Realtors in Kirkland and is a member of the National Association of Realtors, a trade organization that promotes real estate information, education and professional standards.
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