Here are the basic steps of the real estate buying process:
1) Hire a Realtor: I’ll just give three example reasons: First, my state requires a Property Condition Disclosure from the seller. Most buyers and sellers don’t know this requirement; therefore, it would be easy for a seller to hide behind ignorance to avoid disclosing problems with the property. Second, it’s not always easy to find a good home inspector-I’ve gone through 8 myself; a real estate agent should have this connection. Third, it’s estimated that a real estate agent makes 200 phone calls during the closing process. Do you have time to make an extra 200 phone calls in a month?
2) Loan Approval: As a best practice, get approved for the loan first. Unless you have a very large bank account, then the buying process requires a lender. It’s horribly frustrating to find the perfect house and not be able to qualify for the loan. In addition, getting approved at the beginning makes sense logically: if you get in touch with a lender first, they’re able to give you advice about improving your credit score; within 4 months you could improve your score enough to get the loan. On the other hand, if you search for a home for 4 months, find the perfect home, and can’t get the loan, then you’ve wasted 4 months.
3) Find a Home: This is actually the easiest step. Finding a home is an emotional process. It’s best to look at a large amount of homes on the same day and weed down to your favorites. Then, go back and look at your favorites on another day. It’s amazing how buyers’ opinions will change based on mood, so it’s best to visit your favorites a couple of times.
4) Paperwork: There are generic contracts available at Office Depot and similar stores. Any document that says you agree to buy and the seller agrees to sell for a certain amount on a certain date could be considered a contract. The difficulty arises in the details, especially inspections and closing costs. Once again, it’s best to hire a real estate agent.
5) Inspections: Real Estate should always be inspected prior to buying, even new construction. A home inspection costs between $250 and $400 depending on the size of the home. Most home inspectors will do a 2 to 4 hour inspection of every visible part of the home, including attic and crawl space. Once you receive their report, you can use it to demand repairs from the seller. The inspection can save you $1,000’s down the road or keep you from buying a problem house, and even if the inspection doesn’t uncover anything, you’ll have the peace of mind.
6) Repairs: Once you have the inspection report, you’ll need to negotiate repairs with the seller. It’s usually best to ask for more repairs than you actually expect; then you can negotiate down if needed. A good knowledge of construction is also useful because many sellers will try to convince you that your repairs are cosmetic or nit-picky; you need to be able to explain why their not.
7) Insurance: Home owners insurance is the most forgotten step in the real estate buying process. The lender will require it, so not having it can hold up closing. Of course, you don’t want to wait until the last minute because shopping the policy can save you a great deal of money.
8) Closing: We must remember that closing on real estate is a complex legal and financial process. State and county taxes, home-owners insurance, title insurance, lender’s fees, and attorney fees are all paid out of closing. First-time home buyers are usually shocked at the amount of closing costs, which are usually 2% to 3% of the purchase price. If neither party expects to pay $1,000’s of extra dollars at closing, it’s easy for a transaction to fall apart.