Tuesday, June 26, 2018 / by Robert Woessner
12 Steps to Buying a Home
Buying Step #1:
Figure out what you can Afford (Search for Homes)
You know by now that home buying complex process. Buyers will often feel troubled because of the huge home rates.
So before buying a home, consider its affordability. In other words, you need to know if the particular home is in your budget or not.
The actual cost of the home will end up being more than the selling cost indicates, because there are added agent fees, as well.
Upon first glance, a home may seem affordable to you, but there are hidden expenses involved in buying. These expenses may lead you into financial problems.
You need to take a detailed look at the housing market to figure out your price range. You will also need to figure out requirement issues.
Do research on schools, districts, impending constructions, crime statistics, or anything else that could increase or decrease a home’s value.
Buying Step #2:
Make Sure you can get a Loan (Contact a Lender)
Buying a home requires a huge amount of money that is normally not possible for a buyer to have in their pocket or bank account.
For this reason, buyers may contact lenders for loans. There are lenders who will provide you with loans outside of your budget. For potential homebuyers, it is important to stay disciplined and go for an affordable home buying.
Buying a home is expensive, but it can also be an emotional process. It requires careful thinking about your current financial situation.
There needs to be emotional control and you have to make decisions solely based on your budget. Do not go out of your budget because it could cause you to experience financial problems.
Buying Step #3:
Create a List of Wants and Needs
A certain amount of energy is required when deciding your list of wants and needs for the home.
Based on your specific budget, you must figure out what’s important to you and what you are willing to compromise.
Wants and needs play an important role in the buying decision. If our dream home is outside of our budget, we may need to settle for something cheaper. `
When estimating all your needs and all your wants, it can be productive to put a value on the items that are important to you. While visiting homes, you can then see which homes have the highest value to you.
Buying Step #4:
Looking at Homes
After making a list of needs and wants, a complete search should be done on all houses available for sale.
Home inspection is very important work to do for the buyer of the potential house.
The houses that come under our budget requirements should be visited and everything within them should be inspected.
It is the duty of the buyer to inspect everything in the house before buying. This includes: the sanitary system of the house, garden, porch, electricity and water connections along with doors, windows and cupboard locks and durability.
When buyers have selected a home to purchase, they must not assume the selling cost of the house as the actual cost.
Buying Step #5:
Deciding the Location
One of the choices people must make when deciding on a home is the location.
Before buying a home, the buyer is required to visit the home and consider every aspect of it. This includes what the other members of the family think of the house.
Every family has different demands for their home. Home is a place you are connected to, not only physically, but spiritually and mentally, as well.
It’s a demand of every buyer that their home be in a peaceful location. There are some very successful places in the city that facilitate this need for tranquility.
Every place has its own specifics related to the water supply, sanitation and market access. These things can increase the market value of the property (or decrease it). Look at all surrounding areas to see if this is the place in which you can see yourself and your family.
Buying Step #6:
Decide Home Location and Design
After the price of the home has been discussed, home design is the next most considerable aspect. Every buyer wants their demands met and for the house of their dreams.
Location and commute to work are also important factors to be looked at before purchase.
The rooms should have a proper design and up-to-date ventilation system. All these investigative points are necessary to ponder when buying a home.
Buying Step #7:
Contact an Agent
Searching for a home on the internet is an easy job, but it could lead to scams.
Contacting an agent is necessary. The agent will find a house for you, according to your demands. It is not easy to go out and search for homes. Let a person who has a deep knowledge about homes help you find the right one for you and your family.
Agents will note all details about the houses and will find a perfect home for you.
By contacting an agent, it’s possible to find a less expensive house. Agents will have all kinds of details and listings you may not have found on your own. If you don’t contact an agent, then you may find yourself in trouble. It can be difficult to make a correct and viable decision on a home, all on your own.
Agents not only have all kinds of different choices and options to present you. They can show you various quality locations and guide you through the buying process without any scams involved.
Buying Step #8:
Making an Offer
The first step to buying a home is to make an offer. This means proposing a price to buy the property.
In the real estate arena, oral promises never carry any legal validity. In this sense, you will find the assistance of experienced real estate agents highly useful.
There are some standard kinds of forms you need to comply with, like Residential Purchase Agreements.
If you chose to work without an agent, there are a few things to keep in mind. Real estate laws vary from state to state. These laws can also change after time. You must keep yourself up to date on the latest home buying information available.
Some states require disclosures. This means the seller must answer any questions the buyer may have.
The offer made must conform to the local regulations. It must also make a mention of the price, including the terms and conditions governing the purchase.
For example, if the seller says they will help with a given sum of money on your closing costs, make sure to mention it in the proposal.
Upon drafting and signing the offer, it is forwarded to the seller through your real estate agent or through the seller’s agent. In some places, the sales contracts are drafted by the lawyers representing both the parties.
Know that the purchase offer is nothing different from a sales contract that has a binding. If it is accepted, it is something equivalent to a money agreement or a deposit receipt.
Therefore, the offer must contain every aspect, like a blue print, guiding towards the final sale.
There are many important aspects to be included in the purchase offer.
These include: the physical address and the legal description of the property, the terms of purchase (whether it is an all cash transaction or a mortgage purchase), the promise by the seller to give the clear title to the buyer, target date of closing the deal, the value of the earnest deposit associated with the offer and the mode of depositing the same (whether through cash or check), the implications of the earnest deposit of whether it would be returned if the deal fails or kept as damages if you happen to back out from the deal for no good reason, the plans for adjusting the taxes, rents, fuels and water bills between the buyer and the seller, information on who will pay for the title insurance, survey, inspections and others, the kind of deed that will be granted, the other legal requirements pertaining to the state, attorney review of the contract if needed, disclosure regarding the environmental hazards and the time after which the offer will expire.
The most important aspects of a purchase offer are the contingencies.
For instance, say your offer was given contingent upon a particular event. This means you will go ahead with the offer only after that event is satisfactory.
In this regard, we can make a mention of two kinds of contingencies, namely financing and home inspection.
This means the home buyer must succeed in getting the specified financing from a lending organization. It also means the recommendations made after the home inspection must be satisfactory.
If any one of these two contingencies is not realized, then the contract would be void. Also, it is important to mention all of the inspection conditions in the purchase offer.
Buying Step #9:
Putting Money in Escrow when you Make an Offer
While purchasing a home, the buyer is expected to put money in escrow. This makes the contract a binding one and also moves it subsequently through closure.
Escrow is the period occurring between the time a property enters into the purchase offer and the time when its title is transferred in the name of the new owner.
The initial deposit amount collected as part of escrow is also referred to as good faith earnest money. This is the payment that will follow the home purchase process subsequently.
How much is to be deposited in the escrow will depend on the terms mentioned in the purchase offer.
The escrow agent is a kind of third party, enjoying a neutral state between the two parties. He carries an assurance to both the parties. The escrow agent is involved in the transaction so that the different clauses of the offer will be met completely.
In the real estate arena, the escrow process is essential in cases where the ownership title is to be changed. The escrow is the manager of the trust account that holds the funds that will cover the value of the transaction.
The money collected from the buyer is held in escrow till the seller completes the obligations and transfers the title to the buyer. After this, the payment is remitted to the seller.
Actually, the earnest money is the first deposit the buyer makes through escrow.
This marks the interest of the buyer to acquire the property.
The earnest money is used to cover all or parts of the spending towards down payment, purchase price and closing costs. If for some reason the buyer or the seller is not able to fulfil their corresponding obligations, then they must mutually agree on how to deal with the deposit.
The other payments from the buyer include the advance down payment, as needed by the purchase contract and the closing costs estimated.
Buying Step #10:
Negotiating with the Seller
Perhaps this is the toughest aspect of a home purchase. In this step, you will find the help of the real estate agent highly useful.
You must always know how to make a winning kind of negotiation. This requires thorough market research and is achieved through successful negotiation strategies.
Once you find your dream house and intend to make an offer, you must first review the comparable sales in the area. This validates the asking price.
You must be able to compare the comps with the target house. Once you have researched properties similar to the one you wish to buy, take the average price of all the homes and mention it in the offer. It is important to visit the homes you are using as comps before deciding on a price.
If the target home has some additional features, then you need to consider them in the price quote. It is best to mention the comparable sales deals in the purchase offer. It will give the seller an idea that you have done your research on this.
A purchase offer can evoke three possible responses from the seller. First, the home owner might accept your offer as it is. Second, he might counter act the offer by demanding some changes. Or third, he might reject the offer altogether with a counter proposal.
To deal with the response effectively, you must first have the idea of the maximum amount you are prepared to spend on the deal. You have made the offer come down from the listed price (as guided by the comps) and now the seller comes down on the price through a counter offer. Now you need to figure out how badly you want to go ahead with the deal.
If you persist with your offer price when there is high market demand, then you might lose the property to some other buyer.
Always remember home buying negotiation is a professional business transaction, so don’t approach it with personal sentiments.
If the price that the seller demands is too high to the comparable value of the property, then you must know when to walk out of the deal.
Buying Step #11:
The Closing Process Begins
Also referred to as settlement or escrow, the closing process is highly automated and computerized. These days, the signed papers can be forwarded to the closing agent in no time. However, the closing process is meant to bring all the parties involved to the same platform.
During the review of the property ownership, there might be some errors, unreported claims, or flaws in the review. These issues necessitate the title insurance.
During closing, all of the prevailing transfer taxes must be paid. You must also settle all other claims, such as closing costs, legal fees and adjustments. In several cases, it is the responsibility of the closing agent to do the documentation regarding the loan.
When compared to the other processes connected to home buying, closing is a brief one. It only involves the completion of the transaction agreed upon.
In most cases of closing, the buyer and the seller are present in an official setting. They commit themselves to completing all the papers concerned. The objective of the closing process is to transfer the title of the property to the buyer.
While the buyer receives the keys, the seller gets the payment. The closing agents deduct the costs to pay the existing mortgages and other costs connected to the transaction.
During the closing process, the deeds, loan documents and other papers are prepared, duly signed and submitted to the offices maintaining the property records.
Before the closing process, the buyer needs to inspect the property personally. You want to check nothing has changed with regard to the property following the signing of the agreement.
Since the closing agents take care of the documentation with regard to the title companies, lawyers and the lenders, the buyer will have little work.
The paperwork will enable the parties connected to the transaction to verify their interests.
The outcome during the closing process is that the buyers receive the titles to the property, the lenders get their loans documented in the public records and the state governments get to collect the taxes towards the transaction.
Buying Step #12:
It’s not yours Until You Close
While all looks set and going well, nothing can be worse than the deal falling apart. This could be due to multiple reasons including home inspection, low appraisal etc.
It would be easy for buyers to ensure the deal goes through if they know these potential pitfalls beforehand:
It is better to have a preapproved loan to make sure finance is not a problem. Many applications get rejected during the mortgage approval process.
As you are finalizing the deal with the seller, it is a good idea to be in contact with the agents to know the status of your finance.
Finalizing the deal with the seller, but faltering in getting loans will send the deal in a rut. Low appraisals are one of the major breakers of these deals.
If the appraisal is low, the lender will not give you a loan for the deal, which may cause problems for the buyer.
Title insurance and home inspections should also be expected. The lender will make sure to check whether the seller fully owns the house or not.
Defaulters will not own the house fully. If during the home inspection physical damage is noticed, the deal could be called off.
All these cautionary things need to be kept in mind by the buyer. If anything goes wrong, some contingency measures may be taken and the deal could be sealed.