Time and again, after eleven years of being a
real estate broker, the question by far on the top of the "Frequently
Asked Questions" list when representing buyers is hands down "what is
the process?" The purchase of a home is obviously a more long term
commitment than the purchase of a car and usually for far more in value, so why
ever should you be any less informed on the purchase of home? The answer to
that should be, never, so let's begin.
The first step in
this process is BUDGET. A budget is one of the most fundamental parts of
the process. I highly recommend that individuals, or if married, spouses sit
down and develop a budget to see what they can afford and most importantly what
they cannot. Have this number in your head before you go and see a
mortgage lender, that's important.
After that is
settled, contact a mortgage lender to discuss anticipated closing costs and secure
a preapproval. Closing costs are just that, the costs that are incurred to
close the transaction. And as to
preapproval, in simple terms, a preapproval is a higher level of review by
the lender than a prequalification. A preapproval generally requires more
documentation. Once you secure the preapproval, you can ask your lender
for a preapproval letter. This is what most agents require to consider
your offer to know that you can back up what your bid is, so your real estate
agent should ask you for it before any offers are submitted.
After you have your
preapproval, evaluate what your needs are and how they match against your
budget. Make a list of must haves and find a real estate agent that fits
your needs and style. I would say if ever you find one that seems overly
pushy to get you in a home, don't just walk away, run. Your home buying
process should not be rushed, it is a huge decision, skilled and ethical
realtors know that and will respect the process. Our firm provides buyer
binders to assist in the organization of data to make the process a little
easier, other firms have different resources, however nothing beats our
binders. #shamelessplug
Your realtor will
generally be able to set you up in their system to send you updates on homes as
they hit the market that meet your budget and criteria. Also search on
your realtors website and other home search engines as preferred, be vigilant
about looking at homes as well, you never know what you may find and love. I
always recommend buyers attend local open houses as well to get a feel for the
market. After you have some homes selected that you would like to see,
send them to your realtor. Your realtor will schedule viewing times and
appointments (if needed) for the properties you select. I find that it is
beneficial for most to see the homes same day, and write down your initial impressions,
the features that you liked about each home, and features you didn't see as
well.
When YOU are ready
to make an offer, let your agent know. Ask for a comparative analysis
(also known as comps) and a recommendation for offer price BEFORE
your agent submits your offer. This is a study of recent sales, pending,
and listed properties to evaluate what makes sense for you to offer and what
you should not. This has many implications if not done correctly and must
be conducted very carefully. With your approval, your agent then drafts the
contract, and sends over the contract to you for signature.
Then, the wait
begins. In California, the default contract language provides that a seller has
three days to respond, however this can be changed by the buyer's agent to fit
needs of the transaction.
If your offer is
accepted...
Congratulations are
almost in order. The seller has accepted your offer, your agent will
forward the signed contract to your lender.
You will need to drop off your Earnest Money Deposit (EMD) aka Deposit due to escrow
within three days of the accepted offer. You will need to drop off, mail a
check payable to the escrow company, or wire the fund to escrow once your
agent provides you with the escrow information. I recommend wire information
NEVER be sent by email or phone, get the information in person. It's too
risky these days, just don't do it.
Your lender will then send you initial loan
disclosures to sign. Beware delays in signing possibly affect the purchase of
the home. The lender will also ask for supporting documents to secure
the loan throughout the escrow period, provide all items requested
asap. During this time you should also search for a homeowner’s insurance
policy and provide your choice to your lender.
Once your offer is
accepted, it is highly recommended to have your home inspected. The main types
of single family residential inspections include: Home Inspection (+/-
250-600+), Pest inspection (mandatory for VA loans) (+/- 100-185), Sewer inspection
(+/- 99-200), Roof Inspection (Free -100 +/-), and HVAC Inspection (65-200 +/-).
There is a time frame for you to complete this as negotiated in the purchase
contract. Thus, these inspections must be ordered and completed right away.
Right now is the time to find out the extent of damage to the property, and
mitigate surprise potential. You don't want to find out about any
large sum repair after the fact. After each of the inspections is the
rough estimate of costs in the Sacramento area for standard single family
homes. Once your offer is accepted, it
is highly recommended to have your home inspected. Home Inspection, Pest
inspection (mandatory for VA loans), Sewer inspection, Roof, Possible HVAC if Home
Inspector finds a possible issue. There is a time frame for you to complete
this as negotiated in the purchase contract. Thus, these inspections must be
ordered and completed right away. Right now is the time to find out the extent
of damage to the property, and mitigate surprise potential.
You don't want to find out about any large sum repair after the
fact.
Your and expert inspections may find that repairs are needed. If
repairs are needed, a request for repairs will be drawn up for seller’s
decision. Per contract terms the buyer has a time to remove the inspection
contingency (assuming you had one).
Once satisfied with the inspections the appraisal must be ordered with
your lender. Your lender will coordinate this process. Your lender will need payment of the appraisal
form you before it can be ordered. If the appraisal has been
completed and it is at value is there and there are no conditions, you
will then remove the appraisal contingency (assuming you had one). If the appraisal has been completed and value
is lower than purchase price and or there are conditions noted by
appraiser for repair the following will generally need to be done: i.
Addendum requesting purchase price to be reduce to appraisal price and the
appraisal will need to be released to the seller for review. ii. Request
for repairs for items the appraiser noted on the appraisal for repair and
appraisal will need to be released to the seller for review.
The next step in the process is final disclosures. Disclosures from the seller, Natural Hazard Report and Preliminary Title Report
will be reviewed and with need your initials and signatures. Your real
estate agent should point out items of concern, if any exist.
Once all items
have been satisfied and lender has given loan approval, we will
remove the loan contingency and at this point there is generally no backing out without losing the
Good Faith Deposit.
Alas, closing; a few days prior to the negotiated
closing date, a signing date and time will be set with escrow and you to
sign your loan documents. Prior to the signing, your lender and real
estate agent will review the final number and let you know if there are
any more funds you will need to bring to escrow to close the purchase. These
funds, if any will need to be by wire transfer or cashier’s check made payable
to the escrow company. Once you sign and the lender reviews your loan
documents they will fund the loan and escrow will release the file to
record with the country records office.
Congratulations and a champagne bottle are definitely in order. Keys! Typically the day after you sign, your real estate agent will receive a notice notice the file has recorded with the country recorder’s office
and you will get the keys to your new home!