In any residential purchase there will be six steps you will always go through and this applies whether you are a first-time homebuyer or you are an experienced purchaser. Each step will vary in how long it takes and how complicated it is from deal to deal. But the basic overall procedure will essentially remain the same.
Step One – Where are you going?
When you are relocating for work or moving closer to family, this step may already have been completed for you. In other situations you may know you want to be in a certain state but don’t know what section or city. In some cases you may not even know yet what state you want to move to.
In this step it is important to narrow things down to one or possibly two major areas. This might require some travel to the areas you are considering in addition to online research. To make this step a little easier on yourself you should write down why you want to move from where you currently are, what you want to accomplish by moving, what 3 features are ‘musts’ for the area you move to and what 3 features are ‘must-nots’ for the area. The more clearly you define what you want the easier it will be to determine when you have found it.
Step Two – How are you going to pay for it?
Sometimes buyers get to steps three and four faster than expected and then they have a problem if they didn’t get step two done. Whether you plan to pay cash or you will be getting financing, you need to know how you are going to pay for your purchase. If you are not prepared when a home, condo or townhouse comes up that fits your needs and is priced well then you risk losing out on that property and run the risk of having to settle for something you won’t like as much.
If you are going to pay cash, are the funds accessible easily or do you know what you have to do to make them so when needed?
If you are getting financing have you worked with a loan originator to get a loan commitment letter or at least a pre-approval letter? Do you know how much you will need for your downpayment and closing costs and do you have those funds available? Have you worked out what you can afford so you know what price range to look in?
Do not take this step for granted or just do it quickly. This is going to be one of the largest purchases of your life and you do not want to make mistakes you’ll regret later, and that includes working with someone on your financing that isn’t a real professional.
Step Three – Which one?
This step can be done after or at the same time as step two but really shouldn’t be done before. In this step you will start looking for a specific home, condo or townhouse that meets most or all of your needs and that you can afford.
By this time you are ready to act when you find the right place – you know what you want and don’t want, you know which neighborhoods or areas of town you want to be in, you know what you can afford.
You should already be working with an experienced Realtor by this time, getting notifications of any properties that come on the market that fit your criteria and should be going out to see anything that is a possibility as soon as you can. It is very important in a market where there is a low level of inventory that you act quickly both in going to see properties that come on the market and in making an offer when you find something you want to buy.
Once you have found a home, condo or townhome you want to buy you have completed step three and are ready to move on to step four.
Step Four – Offering and Negotiating
At this point you will get with your Realtor and they will go over all the paperwork which is needed for submitting an offer. If you haven’t already done so, you should get them either a loan commitment letter or pre-approval if you are getting financing or a bank statement or letter from your bank if you are paying cash. Sellers often want to make sure that a buyer is financially qualified to make the purchase before accepting an offer and having this documentation available for submission with the offer will help speed up the process and may help avoid having a competing buyer in certain circumstances.
Your agent can present you with information to give you an estimate of the value of the property so you can decide how much to offer based on data rather than opinions. You’ll discuss how to write the offer to protect you while still making it attractive to the seller.
Once the offer and all of its terms are acceptable to you and you sign it, your agent will present it and begin the negotiations phase. If you have a good agent, they will work to get you the best possible deal and at the same time help you avoid making any errors that will kill the deal.
The ultimate outcome is that you will either have a contract to purchase the home, condo or townhouse you want to buy or you know you need to move on and find something else.
Hopefully you will only have to do this step once. But if you are not successful at this step with the property you’ve chosen to buy, then just go back to step three and start there again.
Step Five – Escrow Phase – Contract to Closing
After getting the property under contract you will now open the escrow phase which is all steps required for a successful closing must be completed. This includes all inspections, disclosures, title work, renegotiations if necessary, loan approval steps, etc. There are time frames that must be followed which your agent should make sure you are aware of at the beginning and should remind you of as things progress.
There is a lot to get done during this step and you will want calm and experienced professionals working for you who are good at solving anything that might come up. Getting from the contract to the closing requires hundreds of tasks to be done correctly and all it takes is one done incorrectly, ignored or missed to have a deal fall apart. You want both a Realtor and loan originator (if getting financing) that know what they are doing and can guide you through all of the steps you need to do to make sure you successfully close and that anything negative that comes up is handled correctly.
When all steps needing to be completed have been done, you will schedule the closing.
Step Six – Closing
The closing is where the buyers sign all the necessary paperwork to complete any financing through a lender or 3rd party and where the seller and buyer sign any paperwork needed to allow for the transfer of property. The closing agent should go through all the paperwork you will be signing so that you understand what it is and you can get the paperwork sent to you ahead of the closing to review yourself or with your attorney.
Once all the paperwork is signed and all the funds for the purchase have been received, the property can be transferred and you can be given the keys. The timing of the transfer and receipt of keys will depend on what was negotiated in the contract – it could be immediately at closing or it could be a few days later.
This may seem like a lengthy article but it really is only a brief summary of the 6 steps so that you have an idea of the basic flow and procedure. Your real estate agent will be your best ally in getting through all this, especially if you have chosen one who has experience and expertise in working with buyers.