Sequence of events for finding/buying a home:
I really enjoy helping the First Time Buyer(s) to navigate the whole maze of arranging financing, sorting through homes, selecting a good investment, negotiating a sales price, arranging inspections, etc. through to the closing day when they get the keys and the deed/title to their own home.
To avoid some costly mistakes there really is a method to the madness of the financing/home-search and closing process. To simplify the whole process for you, I have outlined what I consider to be the best approach for finding and financing your first home. There are several parts to this approach which are listed below with a general explanation.
1. PRE-QUALIFICATION – This is when you communicate directly with a mortgage lender and exchange information regarding income, debts owed, credit standing, etc. This lender may pre-qualify you over the "net" or the phone so that you will know the approximate limits of what you can borrow and therefore what price range of houses you may seriously consider purchasing. This is a good time to discuss any credit or debt issues that may need to be addressid in order to improve your credit rating and your borrowing power. Please click on the link for "Home Loans" for moreinformation and/or to reach a mortgage lender for quick pre-qualification.
2. HOUSE SEARCH – Now that you have been pre-qualified, you may notify your Realtor (hopefully me) of what price range you qualify for. This is a good time to discuss your preferences, i.e. area of town, style of house, size of house, number of bedroom/baths, etc. Once the Realtor understands what your needs and wants are, he can do a thorough search of the city and provide you the details (photos, house size, rooms, etc.) via email, fax, snail mail, etc. as you wish.
You may receive a number of houses from very few to dozens. To avoid hours or days of trudging through houses that do not really meet your needs - you need to do some homework. This homework will quickly bring you up-to-speed on what the homes have to offer in your selected price range.
Here is what you do:
Review each house in detail on the internet or on your printout. Study all of the photos offered on the "net". Read the description and watch for "home improvements" or words like "sold as is" or "handyman special". After you have reviewed the information sheet and the photos of each house, you may be able to rule out some by personal taste.
Drive by each house and see how you like the distance from work, the neighborhood and the appearance of the house and lot. You will rule some houses out for location, house appearance, lot size, etc.
Now you should quickly call your Realtor to set up a showing appointment before your 'favorite' homes are SOLD. If they look good to you - they will look good to some other buyers.
3. HOUSE REVIEW AND SELECTION - Now you have a good "general idea" of what you can get for your money. If it is a seller's market like it is around most of the country, you need to review your 'favorite' house soon before they are gone. Now let's look!
As we tour each house, I will point out pros and cons as I see then, i.e. new carpet vs stained carpet, replacement windows vs deteriorated windows, remodeled kitchen vs very dated kitchen. You need to point out your preferences and any negatives so I may form a mental image of what really "fits" your needs in a home.
You will soon have a very good "feel" for which house designs you prefer and which items on your "wish list" are most important to you. You will find yourself mentally noting "this is my first choice ... so far, this is my second choice ... and so on". When your review is complete, you will know which properties most nearly fit your needs and in which order you prefer them.
4. NEGOTIATING A SALES PRICE – Now that you have been pre-qualified and have selected on or more houses that will fit your needs, let's write an offer-to-purchase before someone else buys your first choice. Timing is very important at this stage because we are in a "seller market" where the more popular houses sell very quickly and hardly any houses are available for long. If your offer is made in a timely manner and without multiple offers being considered, we may be able to negotiate either a lower price or for the seller to pay some of your "closing costs". However, if we tarry long enough and "other" buyers also decide that this house fits their needs and they write an offer on the same property - then we have a "multiple offer" situation (two or more written offers at the same time).
When this happens often times one or more of the buyers will offer full price or higher to try and get the house they want. As you can see, it is important to move quickly and know what you want.
Presuming we have the "only" offer, we will consider the condition of the house, the recent sales in this neighborhood, the location and any other things of value to you to determine our offering price. Now we may commence with the completion of the five page Offer-to-Pruchase and related forms. Some of the key components of this offer, that you need to decide on in advance are:
How much of an earnest money check do you wish to put with the offer. (In Kentucky something of "value" usually money, must be given with the written offer to make it legal.) Often with 'first time' buyers, the earnest money can be as low as $100 to $500. When an offer is accepted and becomes an actual "contract" (signed and agreed to by all parties), then the earnest money will be deposited in the real estate company's escrow account as per the law. These deposited funds will be given back to the buyer at closing to use towards the purchase.
What type and how much of the loan are you applying for? (Your lender that has pre-qualified you in advance should have already provided this information to your Realtor.)
How soon do you wish to close and take full ownership of this property? Usually 30 to 45 days for first time buyers for "existing" homes. If new construction allow at least four to six months depending on the builder.
Now you complete and sign or initial all the pages of the contract.
Next your Realtor takes your offer and meets with the seller's agent and tries to get everything accepted just as you wish. Many times if it is a really "fair" offer coming from a well qualified and/or pre-approved buyer, the seller will accept it completely. Sometimes however the seller will make minor changes (slight change in price, or closing date, etc.) that are fully acceptable to you the buyer. The seller will write out his changes and initial (with date and time) them and send the offer back through your agent for your approval. When you approve and initial with date and time, you have a contract.
5. Now that the sales price is determined and the contract is all official, it is time to arrange the buyers inspections (usually "whole house" and "wood destroying things" - often called "termite" inspection). You are allowed to have these important inspections because they are automatically pre-printed in our five page Offer-to-Purchase contract. If you wish to review a 'sample' of these forms, please email me. Your Realtor may provide you with a list of inspectors or you may get a list on line or in the yellow pages. I highly recommend that you ask your Realtor which of these inspectors are recognized as experienced professionals in your community.
You will call the respective inspectors to order the "inspection" then they may call your Realtor to coordinate the appointments. It is usually most convenient to have all of the inspections done at the same time. Many home inspectors will ask you to join them at the property, upon completion, to review any significant short comings that they have discovered.
Please keep in mind that the detailed home inspector will give you a long list of items that are not "like new". They may mention older furnace, older electrical service, older plumbing, worn carpet, cracked plaster and on and on. Well ... guess what, you are not buying a "new" home, everything in the home may be somewhat older. The main things that you are looking for are "safety" items and that all of the home's systems (electric, plumbing, HVAC, etc.) and appliances are in 'normal' operating condition for their age. Your Realtor will probably review, with you in detail, the printed home inspection results. Together you can decide what is a 'fair' (request for repairs) proposal to make to the seller. If it is a fair request - the seller will usually correct the listed deficiencies.
The ('home inspection' and 'request for repair') evolutions usually are completed within 10 to 15 days of the contract acceptance. When the buyer and seller agree on "the repair list" then the buying process (obtaining the loan) continues. The lender will order an appraisal on the buyer's behalf. Your Realtor will coordinate for the appraiser to access the home. Usually the appraisal is fine because the housing market competition generally ensures that a property is 'fairly priced' and 'fairly sold' or else it just "sits there" and does not sell.
6. THE CLOSING - Now that the sellers have made any needed repairs, your loan has been fully approved and the closing date of the contract is fast approaching. Are you prepared to own this "first" home? If you are truly prepared, you will have done the following;
Insurance - Arranged for a one year prepaid home insurance policy for your new home. (Your Realtor and lender will help arrange this.) You will need proof of insurance in order to close on all the paperwork and get deed/title to this property.
Utilities - Arranged to switch all appropriate utilities on this property to your name as of the date of your closing.
Advance Closing Statement - You have reviewed the advance closing statement, usually called the "HUD" and have the appropriate funds in your checking account prior to the closing date.
Check Book - Bring your check book or the closing probably will NOT happen at this time.
CONGRATULATIONS! You now own your own home and may take tax form "deductions" for your interest and taxes paid each year.
In recent years – a number of “Disclosure” Forms have been developed and included in the “Buying Process”. These forms, when properly completed and fully executed, offer a lot of information and protection for the Home Buyer. You may be familiar with some or all of these forms but you may re-familiarize yourself by requesting those of interest to you. They are listed below.
Free Real Estate forms for your advance review:
• Agency Disclosure
• Seller Property History Disclosure
• HMS Home Warranty
Click here for Real Estate Forms