A Step by Step Overview of the Whole Confusing Home Buying Process
This is a detailed description of everything that will happen between now and the time you take possession of your new home. There’s a lot here, so the best way to use this is to read through it once and keep referring back to the appropriate section as you move through the process. Please note that the process of purchasing a home varies by state and county and this is specific to Westchester County, NY.
The first time I bought a home I was overwhelmed by the process; I felt like I was blind-folded on a roller coaster. There were twists and turns and ups and downs and I never knew what was happening next. The problem was the real estate agents I dealt with never told me what to expect of the process, and just as importantly, what to expect of them. What’s worse, I didn’t know enough to ask the right questions. That’s why I wrote this when I became a Realtor so my clients wouldn’t have that same awful experience.
Defining Your Needs
Our first step is defining your needs and taking our first look. It’s rare anyone finds the perfect place on the first try. At this point, it’s all about refining your tastes, needs, preferences, etc. Generally, you should be able to find the right place by the time we’ve seen about 10 houses. If that doesn’t happen, then we’ll talk about whether we are looking at the right sort of places.
This is also the time to do your research about every aspect of the home buying process. You can use this site to search for homes and figure your mortgage payments with the Mortgage Calculator.
Financing Your New Home
Before we get started, we will have a conversation about how you will be paying for your new home. Do you need a mortgage? Are you paying for your new home with the money from the sale of your current home? Do you need to sell your current home? Do you have enough money for the down payment, which is generally 10% of the sale price?
If you need a mortgage, we will discuss getting pre-approved. This is vital for two reasons: first you’ll get a very clear understanding of how much house you can afford, how much your monthly payments will be and what your closing costs will be. Second, we’ll be ready to negotiate with speed, confidence and credibility when we find your perfect home. As a very, very general rule of thumb, the closing costs are about 10% of the sale price of the property and you will be required to put down 10% at the contract signing.
Exploring Your Options
Now we get to work. Each buyer likes to work differently. If you want, I can send you new listings that match your criteria as soon as they come on the market (or get a price reduction). This is an automated process. Or, you can sign up yourself by going to www.dianesilverman.listingbook.com.
At our next meeting, we’ll check out some more properties and I’ll continue to ask questions to make sure I understand what you are looking for.
Where possible, I will preview the houses for you if they are holding Open Houses for agents. But please be aware that, as of this writing, there are 4,901 properties on the market in Westchester County and I can’t be expected to know all of the details of all of them. (I’m good, but not that good.) After we see places that really interest you, I would be happy to find out as much as them as possible.
Assuming everything goes as planned you’ll find one or two places that you can see yourself living in. We’ve gone back to see them a second time, you’ve planned out how your furniture will fit; what you’ll put where. You’ve worked out the commute to work, checked out the school system and the community. You’ve run the numbers and it all fits. You’ve asked a bunch of questions about the place and I’ve investigated and gotten you all the answers. It’s important to note that the information on the Listing Sheet is not always correct and I will confirm the key information.
Making an Offer
Now, we make an offer… but remember that an offer is not binding. You can make an offer and withdraw it any time before you sign a contract. An offer will include the price, the date you want to close (or move in) by, how you will be financing the purchase, how much money you will be putting down, whether the deal is contingent on the sale of your current home and the date by which you will have the home inspected.
I will prepare a Comparative Market Analysis which will show what comparable properties have sold for in the last six to 12 months, how long they were on the market for and the List Price to Sale Price Ratio. I will recommend an Opening Offer and a negotiation strategy. There is almost always some negotiating that takes place. There may also be other buyers who are making offers too. Generally speaking, the shorter the time a property has been on the market, the closer to the asking price we need to be in order to be considered seriously. If a house has been sitting on the market for a while and I find out that the seller is motivated, and there are no other interested buyers, we might have more flexibility.
I will make the offer and send the Listing Agent your pre-approval letter from your mortgage lender.
It takes a few days to negotiate back and forth. During this time it’s a good idea to call your lawyer and mortgage lender to give them a “heads up” that you are working toward a deal and might need to sign a contract soon. If you don’t have a real estate lawyer (and I emphasize that you need a lawyer who specializes in real estate), let me know and I can refer you to a terrific one that use.
Once we have an accepted offer, it is essential that we move quickly. You see, an accepted offer is not binding. The seller can withdraw anytime before the contract is signed. In most cases, the seller will continue to show his house and other buyers can come in and make higher offers that can be accepted.
First, we will arrange for an engineer to inspect the house to make sure that there aren’t any structural flaws or major repairs that are required. Please be aware that the cost of the inspection is not refundable if you decide to not buy the house.But it is money well spent because it will alert you to any problems with the property. I can recommend a great engineer for the inspection if you want.
If we find serious issues, it’s possible that we can negotiate with the seller to either have the repairs made or give you a credit at the closing or lower the price. We need to be careful, though, because again, the seller is free to accept offers from other buyers at this point.
During the inspection, it’s a good idea to follow the engineer around and take notes and him any ask questions. He will issue a formal report within two or three days.
Going to Contract
The Listing Agent will issue a “Memo of Understanding” that details the terms and send it to your lawyer and to the Seller’s Lawyer. The Seller’s Lawyer will prepare the contract and send it to your lawyer. You will meet with your lawyer and review the contract, and go over the terms. When you sign it you will also be required to write a check for a down payment which is generally about 10%. That check will be deposited in the Seller’s Lawyer’s account and will be held in escrow.
Once you have signed the contract it goes back to the seller’s lawyer and the seller signs it. Now we can breathe a little easier. But we need to be aware of the fact that something can go wrong at any time along the way. That’s why I will still stay on top of the process.You will see that the contract has a Closing Date on it. It’s important to note that the closing date is not etched in stone; it’s an estimated date. The actual language in the contract is “on or about ____” which means the Closing Date can be either 30 days earlier or later than the date in the contract.
From Contract to Close
At this point I would appreciate it if you fax me the first page of the contract. Additionally, you will be asked to send a copy of the contract to your mortgage lender and he will send you an application and a list of documents that he needs to confirm your financial situation. You will have 30 days to complete the application before your commitment expires. The quicker you can do this, the quicker the whole process moves along. The mortgage lender will also arrange for an Appraiser to confirm that the property appraises for at least the sale price.
In other words, the bank will not lend you money if the Appraiser reports that you are over-paying for the property. Why? Because if you default on the loan, they will be left with a property that is not worth what they have paid for it. The appraiser looks at the house and the other homes that have sold in the area to come up with its true value. I will take the appraiser to see the home; you don’t need to be there.
The mortgage lender will also discuss locking in the current interest rate, so if the rates go up, you will be protected. Please talk to me before you lock in the rate so that we can make sure you will be closing in time.
Your lawyer will order a Title Search to make sure that the seller is the true owner of the property and that there are no other claims on it.
So you’ve got the bank working on your loan and the lawyer working on the title and me staying on top of things; moving them along to make sure nothing sits on anyone’s desk. If you need to go to the house to take measurements, please let me know and I will arrange it.
At this point you should contact your insurance person to arrange for homeowners insurance; something that many people wait until the last minute to do and then they have to scramble. Might as well do it now. If you need the name of a recommended insurance company, let me know and I can recommend one.
You can also start calling movers for price quotes, but don’t schedule anything until you have the actual closing date.
When the loan is approved, you will receive a Commitment Letter from the bank and your lawyer will arrange for a Closing Date. The mortgage lender will give you a Good Faith Estimate of your closing costs and your lawyer will inform you of what checks you will need get in advance. Usually, one of the checks needs to a Bank or Certified check. Make sure your lawyer has explained exactly what you need.
After you have the closing date, then call the movers (also in my resource list). Don’t schedule the movers until you know the exact closing date.
The day before or the morning of the closing I will arrange for a Walk Through of the house. We will go through the house to make sure everything works. I will send you a checklist before hand so we can go through it quickly.
The closing is usually the bank’s lawyer’s office and takes anywhere from 45 minutes for a co-op to 2 hours for a house. There will be a lot of people at the closing: you, your lawyer, me, the seller, the seller’s lawyer, the seller’s agent, the bank’s lawyer and the title company. You’ll be signing a lot of papers that your lawyer will review with you. You will be writing a lot of checks that your lawyer and mortgage lender will review. My check (in case you are wondering) comes from the seller.
Bring your photo ID and if the closing is in White Plains or Peekskill, bring quarters for the parking meter.
Something that’s good to know, if you can’t be at the closing you can get a Power of Attorney so that you can sign the papers in advance your lawyer or someone you designate can represent you at the closing.
At the end of the closing, the seller gives you the keys to your new home.
We will take a moment to say “Hooray” but just a moment, because chances are, you’ll have to run back home and finish packing or moving because you are now officially able to take possession of your new home. This is bound to be a very busy day.
I’ll be around to help in any way I can with resources and advice even after you move in. I’ll be checking in with you after you move to make sure everything is OK.
So, there it is in a nutshell (well a rather big nutshell). There will be more details that will pop up along the way, of course, but this covers the basics. If you have questions about the process please feel free to ask them at any time. If you know of anyone else who is planning to move, please feel free to send them a link to this page and let them know I would be happy to help.