The 10 Steps to Buying a House

A fair question that I field often as a licensed real estate agent is why do I need a realtor – can’t I buy a home on my own? In short, yes you can. However, my response is do you have the time and expertise to ensure you and your family are contractually protected in quite possibility the biggest transaction of your life and have the real estate market knowledge to justify and obtain a great deal? It’s also worth mentioning that working with an agent as a prospective buyer doesn’t cost you anything! The buying agent’s payment is already built into property listing prices. That’s important to understand.

Experts in the field can clearly articulate how the real estate buying process transpires for clients. The goal of this post is to do just that. I will explain the steps of the transaction from a buying perspective and highlight where a real estate agent’s input is valuable and in most instances, necessary.

A lot of my clients are/have been first time home-buyers. Generally speaking, initial conversations with people that fall into this category revolve around counsel – where do you start – who is involved – what documentation is needed – is the home you like worth the listing price – do you qualify for a loan that covers the property of your dreams? Understandably, it can be overwhelming. However, hopefully the essential steps that I’ve identified will help ease any anxiety.

  1. Get Pre-Qualified with a Lender
    • Getting pre-qaulified will give you an understanding of how much your lender will most likely allow you to spend. If you have the fortunate circumstance of having the ability to pay full price in cash, skip this step. If you do not fall into this category,  getting pre-qualified will help define your budget. Real estate agents can direct you to lenders they’ve worked with previously.
  2. Shop the Market
    • Find the home that fits your needs.
      • Arrange property showings.
      • Attend open houses.
      • NOTE: Your real estate agent to help you with scheduling these in-person walk throughs.
  3. Put in an Offer
    • A real estate agent has the ability to advise you on a fair offer based on the value of comparable homes that have sold in a reasonable time frame in the same neighborhood. Once you feel comfortable with a price, tell your real estate agent to put in an offer to the seller.
    • NOTE: counter offers are a common practice in a real estate transaction. You may go back and forth several times before both parties agree to a deal.
  4. Get an Offer Accepted
    • Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying.
    • NOTE: Earnest money or a downpayment is typically provided by the buyer. Deposits can range from $100-10,000. The higher the amount demonstrates how serious you are about purchasing the property. That money is also put in Escrow and handled by a third party. That money can be used towards the real estate transition. In summary, you don’t lose it. It isn’t a direct payment to the seller but a financial commitment to transaction.
    • NOTE: In a typical transaction, the buyer has 3 days to rescind an offer. After 3 days, if the buyer wants to pull the offer for no reason other than getting “cold feet” the seller can advocate for the earnest money deposit that is in escrow. This is seen as a payment for the seller’s time.
  5. Get an Inspection
    • Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.
    • Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. This is called a remedy. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.(https://www.discover.com/home-loans/articles/10-steps-to-buying-a-home)
  6. Obtain a Loan from a Lender
    • If you have the fortunate circumstance of having the ability to pay full price in cash, skip step 6 and 7. If you do not fall into this category,  getting a loan from a lender will secure the additional payment required to purchase the property.
    • Lenders have a wide range of competitively priced loan programs. Popular programs include the following: VA, FHA, 15-year fixed, 30-year fixed or Adjustable Rate Mortgages (ARM). Have your lender explain the benefits and challenges with each of these programs. Shop the market and pay attention to federal interest rates.
  7. Obtain an Appraisal
    • Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.
    • NOTE: If your appraisal doesn’t reach the listing amount, the buyer is required to pay the difference in full at closing. For example, if you put in an offer on a property for 100k and it only appraises for 95k, you will be required to pay 5k cash at closing. Further, that amount isn’t attributed to you loan downpayment. This is an added cost. In summary, make sure your offer reflects a price that will appraise.
  8. Schedule a Closing
    • Closings are usually scheduled 30-45 days after an offer has been accepted.
  9. Attend the Closing
    • As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.
    • At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, you are ready to move into your new home!
  10. Get the Keys
    • Cheers! You’ve completed the real estate buying transaction and get the keys to your new home.

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