The Process as a Buyer Part 1
Don’t have time to read all this? Get the short video version here : https://youtu.be/lCLRhLBFgPA
This week I am going to break down the PROCESS for everyone involved in a Home Buying Transaction. I will talk about the buyer, the seller, the lender, the inspector/appraiser and of course, The REALTOR (that’s me).
I will start with the Buyer (that could be YOU) – as usual, I started writing and the length of it got away from me, so I am going to break it down for the buyer into two parts. Part one will be mainly the preparations and everything you should do before making an Offer. Part two will deal with everything that happens after that magical moment. So onto step One:
START – Obviously, you gotta start somewhere right? This is an intangible step. It simply involves thinking and considering your options, along with all the preparations like financial planning and saving.
DECIDE – This is not a decision to be made lightly. This is a big deal. This also isn’t a yes or no question. The decision isn’t just “should I buy a home or not?”, you also need to think about what KIND of home you are looking for. What are your needs? What are your wants? What are your deal breakers? You also need to decide if you want to buy or build. If you just aren’t sure yet, go ahead and meet with a lender and an agent and talk about the possibilities and pros and cons. My map is simply a guide. Everyone is different. Reasons for buying a home are different. Reasons for where, how, and what are all different. So consider what it is YOU want. Also remember, you are allowed to change your mind.
GET PRE-APPROVED – This is an important step. Before you start looking at homes based on what Zillow or an online Mortgage calculator says you can afford, actually meet or speak to a HUMAN in the lending field. Go to a bank and ask questions. Yes, there are a lot of loan tools online, but if you decide to go that route, just be prepared to get several emails and phone calls about loans in the next few minutes after clicking submit. Home loans are a big business, but it doesn’t have to be a hassle or complicated. You can shop around for lenders, not every lender offers the same products, rates and packages. You can ask your friends, family, neighbor or Realtor if they have a lender that they recommend. This is also an important time to discuss buying vs. building with your lender. Loans for existing homes are different from loans for Land and Construction. It is important to speak to a professional that is familiar with the difference if you are interested in one or the other. When you meet with the lender you will discuss your income, your debts, your credit score, your employment history. Be honest with your lender. Do not attempt to hide any facts because eventually everything will come to light and it would be heartbreaking to learn later than you cannot afford what you thought. Now is also a good time to recognize the difference in Pre-qualification and Pre-Approval.
Basically, Prequalification tells you what you MIGHT be able to afford based on general information and a soft credit check. Preapproval is given by a lender stating that based on evidence (specific information provided and a Hard Credit Check) what they are willing to lend. When making an offer, many sellers will ask that the buyers include their Pre-Approval Letter to try to prevent any issues with financing later on.
For more info on Pre-Approval vs. Prequalification, or to see what you can be approved for check out Prosperity Mortgage Advisors or Farmer Bank Home Mortgage
MEET A REALTOR! I love this step. It is also an important one. Since you are reading this, I hope you will consider me – but the important thing is for you to choose someone that you LIKE, and that you TRUST, and that doesn’t intimidate you so that you feel you can share exactly what you are thinking and feeling. Yes, they should be knowledgeable about the industry as they will be advising you and guiding you through the process, but you should also feel you are able to speak your mind, ask questions without being judged and share your concerns and fears so they can HELP you. You do not need to work with the first agent you meet. You can get referrals from friends, but if it doesn’t “feel” right to you, you shouldn’t feel obligated to work with that agent just because your friend, co-worker, mother, or cousin told you to. This is an important relationship, and it is vital that you work with someone YOU choose. You can meet agents at Open Houses. You can research online and reach out to request an appointment. Give them a call, send a text or an email. You can judge how responsive they will be right off the bat. If they are difficult to get a hold of, or to set up a meeting, that could be a red flag. Be open with agents when you meet them, let them earn you as a client. Once you choose your agent, you can have a nice long conversation about what you are looking for. That would be an excellent time to review the little document called ‘The Buyers Wish List’ .It is up to you if you want to be flexible and let them make suggestions you hadn’t considered, or if you know exactly what you want and hold a hard line. A good agent will respect your wishes and work WITH you and FOR you.
SHOWINGS: Working with an Realtor has many benefits – one of which you may notice right away. Realtors have access to the MLS, or multi-listing service. We can view homes that have not yet been listed but will be coming soon. We can see detailed histories of properties and have connections with other agents to share information and intricacies to ensure the accuracy of information, unlike sites like Zillow. Don’t get me wrong, I love Zillow – to an extent. I would spend a lot of time on it before I became an agent and will still browse it occasionally, but I have learned that unfortunately Zillow can be inaccurate. A Lot. Their algorithms sometimes get things wrong. They will list properties at incorrect locations or prices and the foreclosures, pre-foreclosures, and ‘make me move items’ are either guesses or assumptions and mostly plain wrong. You can use your agent as a resource but continue to look on your own as well, if you enjoy that part of the hunt. Go for a weekend drive in your ideal area and look for ‘For Sale’ signs. Some homes that are being sold by the Owner without an agent may not be listed on the internet. Look on Facebook – keep your agent in the loop so they can set up showings for you and advocate for you once in the door. Considering a new build? Check out the new neighborhoods. Research some builders in your area. Or ask your agent what they know about them. Developments are popping up all over, so I made visits to all of them. I keep a spreadsheet of current developments so I can easily see the differences, the availability, and the features so if my client is curious, I can save them some time and trips to narrow down which would work best for them.
If you are serious about buying a home, you may need to be flexible. Good homes go FAST. It can be scary and stressful and intimidating. A home may list and sell on the same day. That is why it is important to have your financing ready, your decisions made, and be working with a responsive Realtor - so you can be ready to make an offer as soon as you find that home you love.
*MAKE AN OFFER! Review the details with your agent. They will look closely at the comps to be sure the house is priced right and you can decide together on your best offer. Will there be a lot of competition? Is there an issue of concern? You have options. Decide with your agent the amount you are willing to offer and if you want to include any contingencies. Speaking of contingencies, let’s discuss some typical contingencies:
A financing contingency gives you time to obtain financing for the purchase of the property. Even if you have been pre-approved, that doesn’t necessarily guarantee the financing. Once the loan application is submitted, a possibility does exist that that lender may not approve the loan, as the property is now taken into consideration as well. This contingency gives you the time to secure financing, be it with your Pre-approval institution or another lender. Should the loan not be approved, the contingency outlines the terms in which the contract will be cancelled, and the status of any earnest money provided with the offer.
An inspection or a due diligence contingency gives the buyer the right to have the home inspected within a specified time period. This contingency protects you (the buyer), who can either cancel the contract, renegotiate the purchase price or negotiate repairs based on the findings of a professional home inspector.
One more example of contingency would be an appraisal contingency. That means that if the home doesn't appraise for the amount you've agreed to pay, you can walk away from the deal with your deposit or earnest money. An appraisal determines the fair market value of the home you'd like to buy. Often a lender will not approve a loan for greater than the certified appraisal value. When that happens with this contingency in the agreement, the buyer has the option to cancel the contract or renegotiate the purchase price.
The offer process can be an emotional ride, try to be patient but decisive, and don’t be afraid to lean on me, your Realtor, for support.
*NEGOTIATE - There may be a counteroffer, or they may be other competitive offers. Decide what you are COMFORTABLE with, if a bidding war ensues, do not be swept into a competitive frenzy and bid a higher figure than you can afford, or omit any contingencies that could protect you. The right house will come along. It is important for you to figure out what is most important to you and what you can be flexible on. For some, timing is the most important thing and projects can always be done later. For others, they may have plenty of time to look and wait for the perfect home to come along. It all comes down to what will work for YOU.
*ACCEPTANCE – Hooray! The offer has been accepted (or the counteroffer, or counter-counteroffer) You are officially on the road to Home Ownership. It is exciting and a bit of a relief – but the journey has not ended! There is still much to be done.