The Home-Buying Process

An Introduction

Maybe you are tired of renting. Maybe you’ve had a baby or two and are outgrowing your current home. Or possibly you have just started a new job in a new town. No matter the reason, you are considering buying a new home.

Buying a new home is both exciting and scary. Even if you’ve bought one before, a home is the single largest purchase most people will ever make. Thus, the decision should be made with careful consideration. It’s easy to let emotion rule in a house hunt, but because of the amount of money and time involved it is important to make the decisions with the head and not the heart.

Also, remember that you are not alone in this process. A real estate agent is not just a person with access to the MLS database. A good agent knows the area and can help you find what you need in your price range. She can also guide you through every step of the process, from deciding between a pre-owned home or a newly built one, to making the offer, and negotiating after the inspection.

The home buying process can be intimidating, but with the right preparation you can confidently buy a new home to live in for years to come.

What’s in an Offer?

Now that you have found a home you wish to purchase, the next step is to make an offer. The real estate agent will have a printed form that will list all the legal talk, leaving blanks for the pertinent information. As with any legal document, be sure you understand this document before signing.

The primary item in an offer is the price you are proposing. This price is often a negotiating tool, setting the stage for a give-and-take that will eventually lead to final sales price. The price the buyer offers will depend on many factors: the market conditions, what comparable properties in the neighborhood have sold for, the condition of the home and your budget. Your realtor is an invaluable guide during this process.

The buyer must also list in the offer any concessions he wants the seller to include. For instance, will the seller be asked to cover any of the closing costs? Also will certain items, like appliances, be included in the price.

There are also stipulations on the sale put into an offer. The sale can be contingent on an inspection of the property, the mortgage approval of the buyer, or the sale of a buyer’s other home. Also an offer states how soon the closing will take place after an offer is accepted.

Finally an offer will limit the time a seller has to respond to the offer. The offer is no longer binding on the buyer after that period of time end

Earnest Money

Once the seller accepts an offer, the buyer and seller are under contract. This means that the two parties are in a legally binding agreement. The next step for the buyer is to pay earnest money.

Earnest money is a portion or percentage of the sales price that is held by a third party in escrow until closing. Earnest money is given to show the full faith of the buyer, that he is “in earnest” in his desire to purchase the property. Thus the seller is obligated to take the house off the market and not accept any other offers. The third party who holds the earnest money varies by state. In some states, it is the title company or settlement company. In other states, the real estate broker holds it.

If the offer is rejected or rescinded because of contingencies listed in the offer, the earnest money is returned. For example, if the property’s inspection shows multiple problems that would take a great deal of money to repair, and the offer was contingent on an inspection, the buyer can withdraw the offer and receive the earnest money back. However, if the buyer backs out for any reason other than those stipulated in the offer, then he forfeits the earnest money to the seller.

Once the sale of the home has concluded, the earnest money is counted towards the purchase price.

Closing Time

You’ve found a home you love and made an offer. The seller has accepted the offer and you have given the title company or broker a check for earnest money. The next step in the process is closing time – which is to say, a lot of “hurry up and wait” time.

This is the time in which a home inspection takes place. If the inspection shows significant problems, then further negotiations may take place. The buyer may either ask the seller to pay for the repairs or to lower the sales price.

During this time, the financial issues will be finalized. The mortgage company will appraise the property, if needed. If the appraisal is lower than the selling price, further negotiations will be required. The buyer will also need to finalize approval for the mortgage and be prepared to pay the closing costs and down payment.

Start packing – it’s time to move to your new home!

Ownership Transfer

The day has finally come: the day you get the keys to your new home.

In some parts of the country, this day is called closing. In others, it is settlement. Either way it is the day ownership is transferred from the previous owner to you, the buyer. This day is normally at least 30 days to several weeks since the offer was accepted.

Several things happen during this process. If the buyer is paying a down payment, he brings a check to the title company covering that, as well as one covering closing costs. If any of the selling price is being covered by a mortgage, then mortgage paperwork will need to be signed and finalized. The seller brings the deed, keys, and any other needed items to the title company to be transferred to the buyer. The seller’s mortgage is paid off with the proceeds, and the real estate agents also receive their percentage payment at this time. If there is any money left after the mortgage pay-off and realtor fees, this money is given to the seller. The title company then registers the transfer of deed. All these parties are not required to be at the title company at the same time.

In states where ownership transfer is handled by a settlement company, the same process takes place. However all the parties – buyer, seller and agents – appear at the settlement company’s office at the same time so that all steps are done at once.