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The Process of Buying a Home Made Easy
May 8th, 2019
The Process of Buying a Home Made Easy
Allen Tate REALTOR® Paige Smith breaks down a complex process to show you that it isn't actually that scary.
by Paige Smith
One of the most significant moments in anybody's life is when they buy a home. Whether it is your first home, or you're selling an old one and moving to a new one, each purchase of a home is one of the most important financial transactions you will conduct.
That may sound pretty terrifying, especially to a first time home buyer. The truth is, while some parts can be confusing, it isn't all that bad. Stressful, maybe at times. But certainly not bad. To prove this, you'll notice that this blog isn't written by the crew at Second Nature. Hey there, I'm Paige Smith, an Allen Tate Realtor, in Raleigh, NC. It's nice to meet you! Although there are a lot of quickly overlooked intricacies and steps, it's a realtor's job to relieve the stress and make this big life step fun. Now, let's break down the whole process, and you'll see just how painless it can be.
The first step in any home-buying process is to enlist the help of a realtor. For anyone who may not know, a realtor's job is to represent buyers and sellers of property throughout their buying or selling process. More specifically, a realtor must protect and serve their client's best interests, and not only guide but also advise their client through a complex and heavily detailed process. Having one as you seek to buy a home will make the whole process astronomically easier.
Selecting a real estate agent.
When it comes down to finding the right realtor for you, it's a relationship. There are some helpful tips below, but consider this a relationship or partnership. You don't have to be friends with one, but hopefully, by the end of the process, you feel that way. You just need to trust them, and you'll probably want to find one you like. Considering the time you may spend with your realtor, enjoying their company will make the process less stressful and more fun.Word-of-mouth
Chances are you know people who have bought or sold a home in their lives. Talk to your friends. Ask them about their experience with the realtors they worked with and ask if they would recommend them. This is the most effective way to ensure you'll get what you're looking for with the realtor you've chosen. (You could also see that Second Nature might know a realtor they'd trust enough to write a blog, just sayin')Do your research
There are resources available, like the local real estate commission, to ensure you can trust the real estate agent, by making sure the license is active (meaning they're up to date on continuing education) or haven't had any "incidents." There are also certain types of specializations or certifications that agents can take if they want, although not a necessity. Some examples of these realtor designations include:
- ABR (Accredited Buyer Representative): Trained in the process of representing buyers, a realtor with this is a wise choice for someone looking to purchase a home.
- ASR (Accredited Seller Representative): An ASR credentialed realtor is like an ABR but with a focus on representing the needs of a seller as a listing agent.
- CRS (Certified Residential Specialist): A CRS is a good thing to look for if you're a home buyer. These agents have completed professional courses on residential real estate and how to handle the needs of residential clients.
- E-PRO (Certified Internet Professional): This designation denotes an agent who has completed training on the use of the internet and technology specific to the field of real estate.
- SRES (Senior Real Estate Specialist): A SRES credentialed agent has been trained particularly on how to represent senior clients best.
SN Tip: regardless of certifications, a lot of realtors will represent sellers and buyers, which makes sense when you're selling your home and looking for a new one.
When you first interact with a realtor, they should educate you on the different types of agencies, what it means to work with a real estate agent and how they bring value to a home transaction. In North Carolina, it's called the "Working With Real Estate Agents" brochure.
Check experience and knowledge.
If you've zeroed in on a specific agent that you think might be right for you, ask them about their experience overall and specifically their involvement in the area you're looking to live. An inexperienced realtor shouldn't be an immediate turnoff, especially if they are backed by a recognizable firm that supports them with the tools and technologies they need for a successful transaction (like say Allen Tate who's the number one firm in the Carolina's). In today's world, you can also get a good indication by checking out their social media business pages for activity, presence, and participation in the local market.
Don't ever be fearful of interviewing more than one agent, either. Again, at the end of the day, you'll be spending a decent portion of time with this person, so trust and good vibes are critical.
Getting pre-qualified and pre-approved.
Sure, you can hold off on this (and maybe you should if you've only just started thinking about moving). But you'll definitely need to get pre-qualified and pre-approved when you begin to look seriously, especially in a hot market. This is for your own good, so you don't waste time. At the end of the day, would you want to look at homes out of your price range? Or even lesser of a home than you could be in?
You must get pre-approved before securing a loan to pay for the house. And while getting pre-qualified may help your offer, pre-qualification and pre-approval are not the same things. Pre-qualification is the process you and your lender or lending broker go through to determine how much you can expect to borrow. It's a quick and straightforward process where the lender estimates the amount you would be able to borrow based on a snapshot of your financial situation that you provide.
The pre-qualification process is not in-depth and does not include any credit checks or extensive research on the part of the lender. It is based entirely on the information that you provide them, so make sure what you're supplying is accurate, else you may receive an incorrect estimate that can lead to headaches later.
SN Tip: A pre-qualification letter is essential to exercise your buying power, and while not technically required, it might as well be for any serious buyer.
The pre-approval process is quite a bit more intensive. The process begins with an official mortgage application. Credit checks and a more extensive evaluation of your financials will result in the official word as to how much you're allowed to borrow. This is also the stage where the interest rate on your loan will be locked in based on your credit score and market conditions. You'll be pre-approved by your lender up to a certain amount, and that amount will represent the maximum offer you can put on the home.
This part comes hand-in-hand when initially starting to work with a realtor. If you're a first time home buyer, or new to the area, ask your agent for a recommendation. They can recommend several lenders for you to speak with, and they'll suggest those who they trust to get you to your end goal: the closing table.
Finding your home.
The right home is out there, you just need to do a little searching (and be a little patient). Once you've acquired the assistance of a realtor and (hopefully) have a consultation, you and your realtor can figure out what's right for you, your family and your lifestyle. From there, the fun begins with private showings or tours with your realtor. There's always open houses on the weekend if you have spare time, too. If you're going to open houses, just remember to check back in with your realtor to provide feedback and to keep the lines of communication open, so they can get you in your dream home. When touring with your realtor, they'll have their eyes open and your back for any significant red flags on a property. But at the end of the day - know that an inspector (an expert in this arena) will be the ultimate source for all property hesitations if you think this is the dream home!
Either way, there are a few key things to look out for. The first and most apparent is any signs of damage. Damage to any part of the home should obviously be a dealbreaker, but minor areas of neglect within the house should be a red flag as well. The previous owner is putting their home on the market for sale. If there are parts of it that couldn't be cleaned up and made to look suitable for buyers, how might the home have been treated when it wasn't on the market?
Any significant concerns will probably be discovered during the later inspection, but you'll definitely have to deal with some headache and hassle if you get that far in the process only to find there is a lot wrong with the home.
- Carefully examine ceilings for any significant cracks, as well as doors for any unevenness, as these can indicate problems with the home's foundation.
- Check any visible pipes for corrosion, rust, or any signs of leaking.
- Examine floors for any damage. Check under rugs, if you can without looking like a weirdo. Rugs covering damage to hard floors is a good indicator that maintenance has been deferred in the house.
- Check windows for condensation on the inside. That usually indicates a broken seal.
Most issues aren't deal breakers, and your realtor will help you determine what is and isn't. Not all problems are severe.
Determining the value of the home.
So you've found a house. You checked it out, and there were no red flags or deal breakers. You're considering an offer, but you're not sure how much, because you're not sure if the list price is fair. If you're a first time home buyer, this is not a unique situation. Fortunately, this is another opportunity to rely on your realtor.
If they haven't already, they can run a search on similar properties in the area, which recently closed or are currently under contract and active. You'll hear this comparison referred to as "comps." This will help determine whether or not the asking price for the home you're interested in is too much or just right. More often than not, you'll find the asking price relative to the current market to be pretty fair, because the seller has enlisted the help of their realtor to do precisely the same thing.
Putting forth your offer.
When it comes time to put an offer on a home, it's essential to know how to make your bid as attractive as possible, and that includes more than just the money. Depending on the market, some buyers send a handwritten letter to the seller that emphasizes how much you like this house and how much it would mean for your bid to be seriously considered. It's a small gesture, which can be received positively or negatively.
Being flexible on the closing date is another small thing that can be big for the seller. The seller is going to have a schedule that works best for them as far as getting out of the house and turning it over to you. Being willing to work with their plan, whatever it may be, will help put you in the seller's good graces.
There is a lot you can do to make your offer more appealing to the seller, which your agent can definitely help guide you in the right direction due to their market awareness and understanding.
Understanding due diligence.
Your offer has been accepted! Upon the acceptance of your offer, you enter what is known as the due diligence period. During this time, there is a multitude of inspections and tasks that will occur. A home inspector will come and conduct a thorough review of the home, which is typically paid for and arranged by the buyer. The inspector will create a report for the house, and the buyer and sellers realtors will negotiate who pays for what repairs if any are necessary. This document may be long, but they usually are. Every little thing is noticed by a home inspector, which is a good thing.
The due diligence period will require an appraisal from the bank to ensure that the final asking price is within reason of the value of the home. This is necessary to secure your loan.
This is also the buyer's last opportunity to move away from this if they have a change of heart. In addition to the investigation of the physical condition of the home, the buyer can also use this time to become acquainted with the neighbors, the area, and any other elements of their new living space. The buyer can terminate the contract during the due diligence period for really any reason, but after that period, we're one step closer to closing.
This period involves two financial transactions directly related to the home purchase. The first is due diligence. This fee is non-refundable and paid directly to the seller upon the beginning of the due diligence period. The amount is agreed upon in the contract signed at the time of bid acceptance, which is determined by the buyer and can be advised by the agent.
The second is the earnest money or "good faith" money that is put up at the same time. It's similar to due diligence money and serves as a sign that the buyer is serious about the house. Unlike due diligence money, earnest money is placed in escrow—it's refundable should the buyer terminate the contract during due diligence. If the deal is not terminated, this money is credited towards the purchase.
Does anyone else sing the Semisonic song here?
The very final step in the home buying process is closing. The closing day is the day the house officially transfers over to the buyer. By this point, you're over the hump, and it's hopefully smooth sailing. You'll have received a Closing Disclosure from the lender that outlines all financial information (loan amount, rates, closing costs, etc.) and any documents from the closing attorney ahead of time. (If you plan to review the contracts and all the paperwork, it's better to do it before you get to the attorney office to save time!) Make sure you perform hand exercises on your way to prepare for all the signatures you're about to go through. At the table, the attorney will run through the critical points with you, and you'll give your autograph more than several times.
Granted there are no hiccups, the entirety of the closing process could be as quick as three weeks depending on the loan type (cue an entirely separate blog). But the closing date agreed to with the offer will determine this length of time from contract to closing. Delays could be issues such as remaining items not fixed that we're agreed when you conduct a final walk-through before closing or financial reasons. And by all means, when talking to your lender from the start and throughout the home buying process, listen to their advice on how to maintain the best credit and secure the loan.
After your hand is worn out, the attorney will record the sale which officially transfers the title over. Now you're officially a homeowner, congrats!
Now with the beauty of being a homeowner comes home maintenance! And one aspect you'll need to maintain is the air filtration system. INSERT Second Nautre. I'd be remiss if I didn't include this in my blog post. Second Nature's air filter subscription is a service I'd recommend to my clients. Changing air filters is a home maintenance requirement that you'll most likely either forget - or don't even know about! With Second Nature, you can set it and forget it because when the filters show up at your door, you'll remember to replace them!
When it comes to breathing healthier air, reducing your utilities, preventing costly HVAC repairs, and potentially lengthening that system's lifespan, Second Nature is a no-brainer. And trust me, replacing your HVAC or roof is a cost you don't want to undergo as a homeowner.