Although the internet has made buyers better equipped to find a home than ever, about 90% of homes are purchased using a real estate agent.
Many home buyers don't know that there is a huge difference between Seller Agents and Buyer Agents. Although an agent can serve in either capacity, the difference is who represents whom.
Seller Agent - This agent represents the seller's interests, not the buyer's. This is the agent whose phone number and face are on the sign in front of the home. They're going to do their best to try to sell you their client's home despite the fact that there may be better options available that you don't know about. At best, they may refer you to one of their associates to try to pitch the home, often earning money from both sides of the transaction.
Buyer Agent - This agent represents the buyer's interests exclusively. The buyer agent analyzes the market using exclusive real estate data to be a powerful ally in the home search process. A buyer agent has the fiduciary duty to protect the buyer at all times, conducting research and advising the buyer in all matters (even when it means finding reasons NOT to buy!) Best of all, a Buyer Agent's services are FREE to the home buyer.
Here are some factors you'll want to consider when choosing a real estate agent:
A loan pre-approval is the formal process of getting written confirmation of your ability to get a loan. It begins by contacting your favorite bank, lender or mortgage broker. Usually a short phone call is all they need to start getting you pre-qualified - that is, to understand your financial situation and a ballpark idea of how much you'll be able to borrow.
To know what they'll be asking for, remember the word PAIL - short for property, assets, income, and liabilities.
To get preapproved, you'll need to submit some financial documentation to your lender. Most lenders follow "the rule of two" when it comes to documents. In order to get preapproved, you'll need to submit:
At this point, the lender will need to pull your credit to verify your credit score. You can get ahead of the game by getting a free credit report once a year.
Once the lender has compiled all the documents and done their calculations, you'll receive a pre-approval letter in your email that you can submit with the offer on any home you want to buy.
This is the exciting part! The best way to think about a home search is what we tell clients - work from big to small.
We'll be able to help you during this process to stay up-to-date on all the homes available in your search area. And down't be afraid to go a little outside of your criteria set, you might be pleasantly surprised at what you'll find!
Once you've found the perfect home in your price range, it's time to submit your offer. Your agent will analyze the market and recommend the best purchase price to offer to the seller. You'll need to know how soon you'd like to close (i.e., take possession of the home), if you'll request any closing cost assistance, what appliances or furniture you'd like to request stay behind, and whether you'll request a home warranty. You'll also decide how long you'll want to conduct inspections.
Your agent will complete the contract for purchase (the "offer") and send to you for signature. Then, the offer will be delivered electronically to the seller. Don't stress out! It will often be a day or three before you receive a response. At this point, there are three probable outcomes:
There is a lot that happens between the time that your offer is accepted and when you finally get the keys to your new home. First, you must submit an earnest money deposit, or "escrow". This is money you put down signifying your commitment to seeing the purchase all the way through. The check or wire transfer is sent to a title company to hold, and when you close on your new home the earnest money is credited toward the final amount.
At the same time, your inspection period begins. This is a time period in which you are allowed to have a licensed inspector check out the home you're buying to see if there are any major structural or mechanical defects. The inspector will also check for wood destroying organisms - termites and wood rot being the most common. At the end of the inspection you'll receive an inspection report detailing all of the inspector's findings. If there is anything seriously wrong, you may have an opportunity to request credit (money back) from the seller in order to fix it.
Following closely on the heels of the inspection is the appraisal - where an unbiased third party inspects the home to confirm a fair market value for the property. The appraiser analyzes recent sales in the area of homes that are similar in size, age, and condition to yours. Using these comparable properties (or "comps") the appraiser calculates a fair market value for your home.
About the time that your inspection is wrapping up you'll need to get in touch with an insurance provider to get a Homeowners Policy. This policy is to insure your home against damage or loss and is a requirement to complete your loan.
Meanwhile, your lender is working diligently to get your loan processed on time. In addition to the documents they already have, your lender may ask for any (or all) of the following:
It is ABSOLUTELY CRITICAL during this time period that you DO NOT make any large changes to your finances as it will jeopardize your loan approval and may cause you to lose your escrow money. This means no employment changes, no large purchases, no new loans, and (surprisingly enough) no large cash deposits into your bank account.
Your closing date is just around the corner and you're already thinking about new curtains, but there are still a few things left to happen.
When your lender has compiled all of your documents and completed all their calculation, you'll receive notification that your loan is approved and that you are clear to close.
A few days before your closing date your agent will receive and review your closing disclosure documents that show a line by line accounting of the entire transaction from the buyer's point of view. If there are any discrepancies now is the last chance to make any corrections or ask any questions.
The final walk through is usually scheduled for the day before (or sometimes day of) closing. This is a final opportunity to check out the home and make sure that it is still in the same condition and that nothing major is missing or damaged during the move out.
FINALLY - it's closing day. On the morning of closing you'll need to arrange for your down payment to be wired to the closing company per their instructions. Then you'll head personally to the closing table where you'll sign all the documents to take possession of your new home. Don't forget to bring two forms of identification to the closing. A few strokes of a pen and a big envelope full of garage door openers and door keys is yours. CONGRATULATIONS - you've just bought a new home!
The only thing left to do is move in (ha!) If you haven't already received it, request a list of utility providers from your agent - the seller will provide that information as part of the documents on the house. Have them switched over to your name right away to avoid a night without lights or a day without water. Contact the post office and ensure that you get your mail forwarded to your new address. If you've received a home warranty as part of your purchase, you should receive an information packet within a week or so of your moving date.