Buying a Home: An Overview
Each and every real estate transaction is different, although they all share common elements. Whether you are a first-time buyer or a veteran, we think you will find this outline of the steps involved in the purchase of real estate helpful.
Typically, buyers are very excited about getting a new home and they don’t take the time to adequately prepare. This omission can lead to frustration and failed efforts to purchase the property that you really want. Begin by investing the time and energy necessary to become informed and “ready.” You will be happy you did.
FIRST, HIRE AN AGENT
I have a bias here, but a good agent will be invaluable to you from the beginning to end of the home buying process. Experienced agents who have been in the business for a long time are a great source of expertise, insight and inspiration.
I recommend interviewing several agents to find the “right” one. Who is the “right” one? Only you can be the judge, but you should feel comfortable together and communicate effectively. You needn’t be best friends, but you should like one another because you are likely to be spending ample time together. As you consider agents, heed your intuition and you will probably make a good decision.
I think that you should complete your shopping for an agent before you even begin shopping for a home.
GET PRE-APPROVED FOR A MORTGAGE
Banks, mortgage companies, mortgage brokers and credit unions all will issue you a written pre-approval, usually at no cost. It’s important to understand the difference between “pre-qualified” and “pre-approved.” Lenders pre-qualify buyers based on income and other information received by them that is subject to verification. This may be helpful but gives no commitment or assurance that the money will be available to you. A pre-approval, however, is a commitment to make the loan subject to a satisfactory appraisal and a fully executed Agreement of Purchase and Sale. It’s almost as good as cash and provides a strong position for you when negotiating with a seller. My recommendation is ”don’t go shopping until you are pre-approved”.
FIND THE RIGHT PROPERTY
Now the fun begins! You’ve found a great agent, you know how much you can afford, and you’ve found a lender who has committed to loaning you the money. It’s now time to meet with your agent to discuss your needs and wants – your “must haves” and “would like to haves.” Geographic areas are defined and a price range that is comfortable for you is decided upon. I ask my buyer clients to “paint me a picture” so that I have an understanding that goes beyond the technical specifications of square footage, number of bedrooms and baths, and location. It is with this assembled body of knowledge that your agent begins the search; by programming a MLS computer system with your customized criteria, scouring other sources and networks and initiating other creative methods of locating properties that meet your needs.
The listing information on all properties that meet your criteria should forwarded to you immediately upon availability via email, phone or fax, for your review. If time and market conditions permit, it’s best if you drive by the properties prior to making appointments to view them. This enables you to screen locations and neighborhoods to make sure they meet your qualifications. And, understand that your goals and objectives can change. Constant communication will help your agent stay focused on your needs so that he or she can find the property that is right for you.
Finding the “right” property can take days or months. Supply and demand in the market at any given time will have a profound effect on the number of properties that you see, as well as how broad or narrow your search criteria. As long as you are realistic in your expectations, though, patience and diligence are the keys to success.
MAKE AN OFFER
Once you have found a property you wish to buy, your agent will complete a Comparative Market Analysis which is an objective comparison of similar properties that have sold in the recent past. This should help you understand whether or not the property is fairly priced and develop an overall negotiating strategy. It’s at that point you will formalize your interest in the property with a written Offer to Purchase that is prepared by your agent and negotiated with the seller, in conjunction with the listing agent.
I can’t emphasize how critical this component of the entire process is. You must be adequately protected with the inclusion of terms, conditions, and inspection clauses that minimize your risk. All required disclosures must be included and signed. Dates and deadlines must be realistic and carefully considered. It’s a “big picture approach” that requires experience and expertise. Make sure your agent has it!
SATISFY CONDITIONS
Once the negotiations are over and you and the seller have come to an agreement it is time to take care of the contingencies in the contract that allow you to cancel if they are not satisfied. Examples of a few typical contract conditions are; home inspection, mortgage appraisal and financing approval, water test, septic inspection, sale of existing property, etc. Occasionally, some of these items will be addressed prior to a agreement being fully executed. When each condition is satisfied your agent will notify the listing agent in wtiting.
Making sure all the conditions are satisfied and coordinating, scheduling, attending, and following-up on inspections is part of your agents job – you are not left to take care of all these details on your own. In addition, your agent will make sure all contracts, addenda, notices and paperwork are properly signed and/or initialed, and that all appropriate parties receive copies. The paperwork and follow-up requirements for a real estate transaction can be complex – your agent needs to be “on task” for these very important details throughout the transaction.
Your lawyer will perform a title search of the property you are buying and provide you a title opinion that ensures your legal and ownership rights. Any easements, deed restrictions, liens, or title “defects” are included in this opinion of title. And, if there are defects that would prevent the transfer from happening, your lawyer notifies the seller’s lawyer, who assumes the responsibility of fixing the problems.
CLOSING
The closing takes place on the appointed day. Prior to the actual closing, you will need to contact utilities to arrange for future service, purchase fire and hazard insurance, discuss title insurance options with your lawyer and make sure you have the necessary funds needed to close in the form of a certified cheque. You will attend your lawyers office a day or so prior to closing and he or she will explain in some detail all of the documents you will be signing. The actual closing usually takes place “online” and once money is exchanged and the title is registered you are the owner of a new home.