Home Buying Process

Whether you are buying your first home or your tenth you go through the same basic steps when buying a home.

1. Gathering information

Although people still talk to family and friends for advice, most people now start the home buying process by gathering information online. In fact, 87% of all home buyers and 94% of buyers aged 25-44 used the Internet to search for homes in 2008. This process often starts months, and sometimes even years, before moving on to the next step. Buyers are better prepared than ever, but so much information can also be confusing. Having a real estate professional working with you to sort through it all and guide you through the process is more important than ever. Click here for answers to common buyer questions about the role of a Realtor, costs involved, etc.

2. Selecting a Realtor – signing documentation
3. Selecting a Lender – getting pre-approved for financing

These two steps often happen pretty close to the same time. When you are ready to move forward you should have both…a Buyer's Agent to represent you and help you find a home, and a lender to help you determine how much home you can afford and provide the financing pre-approval you need when you make an offer.

Most people either start with a Realtor, who in turn refers them to a lender, or vice-versa. Buying a home is likely one of the biggest purchases you will ever make, and it is important to work with someone you feel comfortable with and can trust. That's the reason so many people ask family and friends for recommendations. People are also using the Internet more and more in the selection process…in fact, I met with a new buyer this weekend who found me by searching Realtor profiles online.

4. Finding your home – identifying wants & needs, looking at homes

It is important to identify your wants, needs and priorities in a home as you start your search process to find the perfect house. How long it takes to find a home is different for everyone…it may be the first home you see or it may be the 40th. Whichever it is, most people know when they have found the right home for them…they can just feel it and know it's time to move on to the next step.

5. Making an offer – negotiating & submitting earnest money if coming to an agreement

Your written offer to purchase a property will include such things as how much you are offering to pay, how much earnest money you are submitting as a deposit to be held until closing, how you plan to finance your purchase, when you want to close and take possession, and whether your offer has any contingencies.

In a traditional transaction the seller usually responds to your offer within 24 hours and negotiations can involve counter offers back and forth. If banks are involved it can take longer and they do not always negotiate…they may simply accept or reject your offer. With bank owned foreclosures you usually have a response in 2-14 days. With short sales you negotiate first with the seller as in a traditional sale, but it then must be submitted to the bank for approval. That process usually takes 30-60 days, but can take much longer…the longest I have experienced is five months. If you find a 'pre-negotiated' short sale, it usually must close quickly…it usually means another buyer backed out and if you agree to the same terms you can replace the previous buyer for a quick close.

6. Inspection – usually takes place within a week of coming to an agreement

If your offer was contingent upon an inspection, you schedule an inspector of your choice within the specified time frame and pay for it at the time of the inspection. Buyers usually go through the house with the inspector, it's a great learning experience. After the inspection you can accept the property as is, request that the seller fix or give financial compensation for certain items, or cancel the purchase agreement and have your earnest money refunded. In foreclosures and short sales you are buying the property in 'AS IS' condition, which means you only have two options…move forward or cancel your purchase.

7. Underwriting – final mortgage loan approval & preparing for closing

Many steps take place after coming to an agreement, including property appraisal, title work and final approval of your loan…all of which are managed by your lender. You are responsible for locking your interest rate, securing property hazard insurance and arranging for certified funds to be available for the cash you will be bringing to closing.

8. Closing – usually 3-6 weeks after coming to an agreement

Your closing date is set as part of your purchase agreement. While closings usually take place as scheduled, know that there are some exceptions and it's more common with foreclosures and short sales…I had a foreclosure close two weeks late last week. In foreclosures, if the buyer causes closing to be delayed the bank charges a per diem penalty…if the bank causes the closing to be delayed, it's just 'too bad'!

Shortly before closing you will do a final walkthrough of the property with your Realtor to assure it is in the condition agreed to in your purchase agreement.

Closing is when you bring your money and sign the papers assuming your mortgage (if any) and transferring title to you…it's when you get the keys to your new home! Traditionally present are the buyer, buyer's agent, buyer's closer, sometimes the lender, the seller, seller's agent and seller's closer. With bank properties there is often only one closer for both buyer and seller, with no one else present from the seller side.

Sharlene Hensrud, RE/MAX Results - Email – HomesMSP.com