Realtor® Speak 101: 7 Steps To Buying A Home

By rerockstar • July 12th, 2009

Home Buying Process - How To Buy A Home

What goes into buying a home?

This post could be a mile long (and probably will be) as there are so many details that go into the steps to buying a home. I wanted to write this as a basic look, so there will be many more details in the process, but I thought a good overview was in order.

Contact – First thing to do is contact me. I’ll have a lot of questions for you – what you’re looking for, where you want to live, have you been pre-approved, and whether or not you’re ready to commit to working with me (and I’m ready to commit the same to you).

This last one is important, but often misunderstood. In order for me to work for you, we must commit to each other and begin an agent-client relationship. We do this by entering into a contract called the “Residential Buyer Representation Agreement.” This agreement covers my duties to you, your duties to me, and defines the legal framework of our relationship. In my opinion, it’s one of the most important documents you’ll sign (up until you close on your new home). In Texas, without that agreement in writing, I technically represent the seller when we look at houses and not you. Why go look at houses with someone who legally doesn’t work for you, but rather for the seller? It’s a no brainer in my book.

Search – Now that we’re working together, we need to get down to business and find you that perfect home. I’ll perform searches of our MLS based on the criteria you gave me (and we will refine it over time – adding and subtracting criteria to get the best results) and send you homes that match what you’re looking for. This is the fun part. You’ll start to think about the details of homes and what is really important to you. Much of this step is done through email and phone calls until we’ve identified a handful of properties you’d like to investigate further. At that point, we begin setting up a schedule to view the homes and we’re off on our house hunt.

Showings – This is what most people remember the most about the process of buying a home. Going out and looking at the homes we’ve identified as potential matches. I recommend comfortable shoes, an open mind, and a camera. I’ll give you the MLS printout for each property so you can take notes as we go along and I do recommend you take them. After you’ve seen a few houses, the details tend to blur together so those notes will help take you back to the home later when you’re trying to remember if you liked it or not. As we find homes you like, you’ll start to get a picture in your mind of the top few choices…we may need to go out once, we may need to go out several times, but somewhere out there is your new home and we’re going to find it.

The Offer – When we find the home you’re ready to buy, it’s time to make an offer on the home. We’ll take a look at what’s been selling in the neighborhood to get a good picture of the fair market value of the home and discuss a price. Making an offer is more than just price though. When do we want to close? Do we want them to leave the pool table behind? Who pays for the survey? What title company will we close at? Do we need them to fix anything before we agree to purchase the home (and before we get an inspection)? Do we need help with closing costs? Each detail needs to be weighed into the overall offer. Asking for the home at half the listing price with $50,000 in closing costs, is probably not going to get us the house. We need to look at your needs as well as what will look best to the seller (my job is to get you the best possible terms in the contract, but we need to be mindful that the seller and their agent will be doing the exact same thing). We not only want the best terms for you, but we want to make it a good solid offer so that we can get it accepted.

During this time, we will also more than likely have some additional paperwork to sign off on. Some will be Addenda to the contract – Third Party Financing, Seller’s Disclosure, Lead-Based Paint Addendum – there is a form for just about everything you can imagine. I usually also have some office specific forms for you to sign – information about Oak Wilt in Texas, home inspections, and residential service contracts (commonly known as home warranties) are just a few.

Negotiation – Unless the seller’s accept your offer as is, the next step is the back and forth of negotiations. If the seller makes a counter-offer, we will discuss the pros and cons of their offer and decide what to do next. We can accept or go back to the drawing board and counter their counter-offer. The idea is to get everyone to come to an acceptable agreement, but of course, since I work for you and not the seller, my goal is to keep the offer as close to the original as possible. This part can be frustrating for buyers (and sellers too) because some people get stuck on one thing in an offer at this point and won’t let go. My job is to make it as easy on you as possible and we will be in constant contact back and forth until we come to an agreement. I’m looking forward to a day of this as I write this post. When all parties are in agreement, we’ll get all the signatures and turn it in to the title company. We have a contract.

Option period – Now that we have a contract, it’s time to get working. When the house was on the market, it was considered an “active” listing. The home now moves to “active option” (as long as we provided for that in the contract – which I always suggest we do). I see a lot of questions about “AO” and what it means, so please check out “Realtor® Speak 101: Abbreviations” for more info on the abbreviations Realtors® use in the MLS to define what the status of a property is. During the option period, the buyer has the right to terminate the agreement for any reason. Because of this, we do our inspections during this time. After the inspector does their work, we decide if we’re going to ask for any repairs or not. If we do ask for repairs, we will need to negotiate the terms with the sellers once again and come to an agreement.

Pending status – This is typically the period where most buyers and sellers feel like nothing is going on. It feels like you’re waiting for ever, but there is a lot of work going on behind the scenes. Lenders are preparing to make the loan, the title company is making sure no one else has a claim on the house, property insurance quotes are being looked at, appraisers are coming out to the home to make sure the price reflects the value of the home. During this time, you’ll receive a lot of paperwork and phone calls asking for more information or documents to support the loan. We need to stay on top of all of these details. If something arrives in the mail, call me and we can go over it. Don’t let anything sit unopened on your kitchen table – some of the documents you receive may need a response and we need to act right away in order to make sure everything runs smoothly.

Closing – The day is finally here! The house is about to become your home. We’ll need to do a final walk through of the house to make sure it’s in the condition we expected it to be. If the movers dropped the Steinway Baby Grand down the steps while packing up and left huge holes in the wall, we’ll need to address those with the seller and their agent. Once we’re satisfied, we head to the title company. The enormous stack of papers on the table is waiting for you. You’ll sign your name a lot today. The escrow officer at the title company will explain each document and ask you to sign or initial where appropriate. Do not be afraid to stop them and ask questions. You are signing a lot of legal documents, so it’s best you understand them fully. When you’re done, you’ve officially bought yourself a new home. However, here in Texas (and other states I’ve lived) you may not be handed the keys. Possession of the home typically takes place upon closing and funding. This means the bank has to wire the money to the appropriate places to get everyone their funds. At times, this can take another day or two. We try our best to get the bank to move quickly, but in my own experiences I have walked out of a title company with less money, a sore hand from signing, and no keys. As soon as the funding occurs the title company will contact us and we can get your keys and enter your new home. Congratulations!

photo courtesy of cloneofsnake