Buying a home is not just a duet between the buyer and the real estate agent. Although these two parties will spend a lot of time together in the process of looking for and buying a home, there are many other players involved in this process. Hence, “It takes a village to buy a home.”
The first players may not even know the Realtor whom the buyer chooses: these are your financial planner and/or CPA. These players will help you decide the right time to buy a home, and the implications for your savings and taxes.
Your next step before beginning to look for a home is to get pre-approved by a lender and to secure a pre-approval letter that you can submit along with your bid on a specific property. You may already have a relationship with a bank that has a mortgage department, so you may want to start there. Your Realtor (if already chosen) will probably also have some suggested lenders with whom she has prior positive experience. The lender will analyze your financial suitability to buy a home at the current moment, and will figure out your “allowance” in terms of what you can afford to buy given the loan program you are using. Although you have seven days after getting a signed contract to make formal loan application, it is usually a good idea to stay with the same lender with whom you are pre-approved. Even though another lender may offer slightly better rates, you want to make sure that they have the same kind of program under which you were pre-approved, because you may not qualify for as much otherwise.
Choosing a compatible real estate agent is critical because you will be spending a LOT of time with this person over the course of house-hunting, negotiating (perhaps several offers), and closing on a new home. A good place to start your selection process is by asking your friends for recommendations about Realtors to use (or to avoid). Make sure that your agent is a licensed Realtor, that is, a currently licensed agent in the jurisdiction where you are looking and also a member in good standing of NAR (the National Association of Realtors) and the regional Realtor association, GCAAR (Greater Capital Area Association of Realtors). When you first meet with your potential Realtor, he may ask you to sign some forms creating a Buyer Agency Agreement between you and him. This agreement protects you by creating an advocate on your side who will represent your best interests in the transaction. Although there is no financial commitment on your part, you may wish to wait to sign these forms before you have had an opportunity to read them and ask questions, as well as to go out on at least one viewing trip to judge the compatibility between you and the potential Realtor.
The average buyer looks at 12 properties (3-4 viewing trips) before making an offer. Once you find a property you’d like to bid on, you should strategize with your Realtor about the most attractive offer you can make: How much down payment can you offer? How much earnest money (a deposit that accompanies the offer) can you put down? How quickly can you close? What kinds of contingencies will you place on the offer? (For example, will you require a home inspection?) You will also go back to your lender to get a pre-approval letter with exactly your offering price so that the seller doesn’t see that you could offer more.
It’s pretty safe to say that in this market, the contract wins with the biggest down payment (especially all cash) and the fewest contingencies (especially none). Many homebuyers are now performing a pre-offer inspection to identify any problems with the property before they make an offer, as well as to remove one of the most common contingencies (home inspection) from the contract offer.
Congratulations, you’ve got a ratified contract offer signed by all parties! Now you’ve got about another month of activities before closing on your home:
• Your agent should send your earnest money and a copy of the ratified contract to the title company specified in the contract to begin the legal process of preparing title (ownership) transfer and to schedule an appointment for the closing day.
• You will need to make formal loan application. This process is more detailed than the pre-approval process.
• You may need to have a home inspection done if you didn’t do so before making an offer. Make sure your inspector is licensed. You and your agent will want to be present for this inspection.
• Your lender will order an appraisal to be done on the property to make sure the contract price is justified by fair market value. Although you are paying for this appraisal, only the seller’s agent is typically present at the appraisal visit, but you will receive a copy of the report when the lender does.
All of these activities are bound by deadlines specified in the contract. (“Time is of the essence,” it says there.) Your agent should stay on top of all these deadlines to make sure things are flowing smoothly and in a timely manner.
Some additional players are also involved in the final stages before closing:
• You (or your agent or the lender or the title company) will need to secure homeowner’s insurance on the property that begins the day you close.
• You’ll want to schedule a cleaning service to perform a “deep cleaning” before you move in (but after closing day).
• You’ll also need to make arrangements for your move. Although this happens at the end of the process, you’ll want to reserve your date as soon as possible because most movers’ schedules fill up (and their rates increase) quickly, especially in the spring and summer.
• Don’t forget to arrange for utilities transfer. The owner is required to have utility service maintained through the closing, but you are responsible for them immediately afterwards.
At last closing day arrives. You’ll do a final walkthrough of the property before closing, attend the closing document signing (usually an hour), and receive the keys to your new home.
Ted Smith is a licensed Realtor with Real Living | at Home specializing in mid-city D.C. Reach him at TedSmithSellsDC@rlathome.com and follow him on Facebook, Youtube or @TedSmithSellsDC. You can also join him on monthly tours of mid-city neighborhood Open Houses, as well as monthly seminars geared toward first-time homebuyers. Sign up at meetup.com.
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