Becoming a Buyer
Buying a home is a multi-step process. Here are a few of those steps to give you a better picture of how it might look.
Deciding to Buy
Purchasing a property is likely one the biggest financial decision you will ever make. So, whether this is your first purchase or your tenth, this decision must be made carefully.
Have you ever dreamed of purchasing a home for yourself, rather than paying someone else’s mortgage? Do you want to experience the pride of ownership, build some equity, or leave something to your family or loved ones? If so, make sure your motives are in line with your position in life and then start doing your homework!
Preparing to Buy
Owning property is an excellent investment. Whether in the short, medium, or long-term, it is a critical cornerstone to any investment portfolio and remains one of the least-risky ways to build equity or see a handsome return on investment. However, always make sure you look at investment restrictions early in your decision process so you understand what time commitments are involved.
Preparing to buy a home can be both daunting and exhausting. Ask yourself what kind of experience you would like to have and how you are going to get it. A great real estate agent will work very hard to make this experience as painless and positive as possible so you can focus on you.
Shopping Considerations
Choose the location that will best serve your everyday life’s needs while keeping in mind:
- Affordability, investment over the duration you plan to own a new home,
- Proximity to schools, hospitals or other potentially necessary healthcare concerns. In short, imagine yourself living there and go through your everyday routine from the new location. Write down pros and cons.
- Start a conversation sooner rather than later with your real estate agent so those factors you may not have considered, or other pertinent information, can be shared which may affect your decision.
- Make some appointments with your real estate agent to see those homes of most interest and start out on your journey. Make sure to ask how the property has done over the last five to fifteen years (or more).
- Make an informed and educated offer with your agent that the owner will accept. Make sure your agent presents the offer favorably against other offers while staying true to your wishes.
Escrow and Beyond: What Comes Next
Once seller and buyer have come to agreeable terms, escrow opens and a series of administrative steps will initiate to consummate the transaction. While this can be as quick as a few weeks, it can also take several months depending on outside factors.
It is important to treat each and every step as a business transaction and maintain written records. This process is facilitated by the real estate agent which includes getting copies of all items to their client.
There will be several steps during escrow which have dates that correspond to specific actionable items that each party must adhere to in accordance with the agreement. Your real estate agent is there to make sure you are educated, on track, and informed.
The Closing Agent
A closing agent (traditionally a title company or attorney) will research the complete history of the property in order to determine whether a property has certain encumbrances, restrictions, which are not limited to building and parking restrictions, along with easements and encroachments (i.e. restrictions on those rights you have over the property).
Titles
What kind of title is right for my transaction? A title refers to the legal right possessed by an owner (or owners) to own or use a property. It refers to the legal documents that chronicle the property’s history, defines the property’s boundary lines, and dictates how the property is permitted to be used. The title is recorded and filed at a local government office each time the property is legally bought and sold. You should consult your attorney or tax advisor to find out which type of title is appropriate for your situation.
Inspections
Once an offer is accepted, a licensed property inspector will need to inspect the property as specified in the effective contract to purchase. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure). Employing several different inspectors is always recommended.
Depending on the outcome of these inspections, any potential issues will be resolved and the terms of the original contract will continue to proceed, or the buyer will request a renegotiation of the contract (i.e. the price).
Appraisal and Lending
Lenders play a key role in this process, as you can expect to be in regular communication with them regarding the documentation required for a loan application. When financing your purchase, banks and lending institutions always want to make sure the property you are considering is of sufficient value for them to lend you the money. So, a licensed appraiser will evaluate the property to help make this determination via an appraisal report.
Association Approval
If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time.
Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing, so that it can be recorded with the deed in the county public records.
Property Insurance
Whenever you are using a loan to purchase a property, you will be required to insure the property for the duration of the loan.
Final Walk-Through Inspection and Closing
You will visit the property to verify that all is in working order, and everything is the same as agreed to through the transaction. Once a final inspection is completed, the closing agent will furnish all parties involved with a settlement statement, which summarizes the financial transactions enacted in the process. You and the seller(s) will sign this statement, as well as the closing agent, certifying its accuracy.
If you are obtaining financing, you will have to sign all requisite documentation required by the lender. The seller should arrange to have all property keys and any other pertinent information for you at the closing, or as previously arranged.