How to Buy a House
Typically when buying a house, there are literally hundreds of details that must be accomplished for a successful transaction. Too often, Buyers are unaware of the professional services a Realtor provides when purchasing a home. Having legal representation by a licensed Real Estate Agent is not only wise, it’s also FREE to the Buyer in almost all transactions. Why would you not want to be professionally represented in this very intense process?
While it is a complicated process, most of the specifics happen behind the scenes with your Agent doing the bulk of the work. Because people can look for houses online, they often believe that’s all there is to it. Conversely, Realtors generally assume their professional expertise, knowledge, and hard work are understood by their clients.
I can show you one home or I can show you a hundred houses (I sincerely would rather not). The job for which a Realtor gets paid doesn’t really start until the Buyer has identified a property on which they would like to make an offer.
Statistics say that a Realtor must “placate” at least seventy one (yes, 71) people from the first encounter until past the closing table. When viewed in that light, experience matters. Let’s break down the process into several phases. Some actions will take minutes, some may take hours, some may take days. Many may not be needed. I’ve provided links to more detailed blog posts that will allow you to dive into more specifics if you’d like further information.
What Do I Need To Buy A House?
When you decide on buying a house, getting a pre-approval letter from a competent lender is a must. If you have selected a Realtor with whom you’d like to work, they can offer suggestions for reputable lenders. You must determine before you begin how much home you can buy and verify your credit is acceptable.
With rising prices and rising interest rates, requirements are changing daily. You want a pre-approval rather than a pre-qualification letter. A pre-approval will go through the initial underwriting phase of a loan and generally takes two to five days. A pre-qual takes fifteen minutes and isn’t worth the paper it’s written on. In this competitive market, you want to make sure you’re in the best bargaining position when it’s time to make an offer.
When you have selected your Realtor, my suggestion is you discuss what you’re looking for, your wants and needs, neighborhoods, number of bedrooms, baths, etc. Then spend a day together looking at houses and figure out if your personalities mesh. If you work well together, be ready to sign a Buyer Agency Agreement. This is not something to be afraid of, but protects both of you during the transaction.
The word that best describes why you want to hire your own Agent is “advocacy.” Without this Agreement, the Realtor cannot advocate for you during a transaction. They can only be a neutral party. It is not in my personality to be neutral for my Clients, so I will only work with someone for a day or two without a Buyer Agency Agreement.
Like an engagement, I am going to totally commit to our relationship. I expect the same in return. I don’t want to work with someone who is playing the field.
Do you own a home that needs to be sold prior to purchasing a property? Discuss those details with your Realtor and get that taken care of prior to getting your hopes up about homes that probably will not be available after you get yours under contract.
When the time is right to start looking, your Agent (and most Buyers with access to a computer) will search for homes that meet your criteria. A Realtor can set appointments for you to view those homes at your convenience. Do not contact the Realtor who has the house listed. That’s cheating. An Agent can view properties electronically and physically to see if they meet your needs. The hotter the market, the faster you’ll want to get in to see properties you’re interested in.
How motivated are you? If you find your dream home, are you ready to make an offer that day? If not, it’s best to not waste your time getting your hopes up.
A competent Realtor will check with Agents who have the listings you want to see to find out what the status of a property is. In a fast-moving market, you may see homes that are already under contract and it’s not available. That’s a discouraging feeling if you found a dream home, only to find out it’s no longer available.
Have a sense of urgency, and be willing to step out of your comfort zone. What you think you want may not be at all what you end up with, so spread your wings and have fun with it.
There are certain things a Realtor can’t legally tell you. With communication and trust, I’m sure you’ll find a way to find the home of your dreams.
Making an Offer
It’s an exciting time. I hope you’ve found an Agent who has a sense of urgency and is excited for you. They should call the Listing Agent and “pre-negotiate,” finding out what the Seller is looking for in terms of dates, exclusions, options, and other information that might be valuable to you when making an offer.
Your Realtor should do a Comparative Market Analysis (CMA) on the property to verify what a reasonable offer might be. In a hot market, you should discuss if you want to offer more than asking price. The kind of market you’re in (Seller’s Market, Buyer’s Market, or Neutral Market) has a lot to do with timing and pricing strategy.
Most offers are electronic these days. Your Agent will prepare your offer and any necessary documents needed, and you can sign with the push of a button. You will go over the offer with your Realtor, understand the legal document you’re signing for buying a house, and after you’ve signed, it will be sent to the Listing Agent to present to the Seller.
Depending on what type of market in you’re in, they may take your offer under immediate consideration. Or they may wait a few days until they get multiple offers (what I call “Auctioning”). I will ask the other Agent what their highest offer is. Many won’t disclose. I believe it’s in your best interest to have this information so you can make an informed offer. I will always try to find out.
The basic ways a Seller can respond are: (1) they can accept your offer, (2) reject your offer, or (3) counter. How they respond will dictate your next moves, and then the ball is in your court. Once you have an offer accepted on a property, you are Under Contract!
This is a busy time. One of the first orders of business will be to get the agreed upon earnest money to the Title Company within the contractual deadline. You may send a wire or deliver a check. Your Agent will send a copy of the contract to your lender to begin the process of buying a house.
You should receive a Seller’s Property Disclosure (SPD) and other documents that will need your signature. Coordinate an inspection with all parties. Use the SPD if there are broken or repaired items disclosed to go over them with the Inspector. When you have your inspection report, you and your Agent should review it and decide if there are items you are going to ask the Seller to fix.
The more robust the market, the less likely a Seller is to do repairs. But you should get repair estimates and figure out what you can and can’t live with, and will you continue with the transaction if the Seller won’t do repairs? There is a specified period of time to negotiate these items and come to a Resolution with the Seller.
Your lender will require you to get homeowner’s insurance in place prior to finalizing the loan. They will also order an independent appraisal during this period to determine the fair market value. Your Realtor may share their comps with the appraisal prior to the appraisal inspection.
This is the time you will find out if there are any boundary disputes or liens against the title or property. Those will need to be resolved prior to closing. You should also discuss with your Realtor how the issue will be resolved if the appraisal comes in low. It is not a pleasant thought and doesn’t happen often, but you should be aware.
Closing on a House
You and your Agent should be keeping close track of your loan to make sure it is moving forward according to schedule. Did the appraiser call out any conditions that need to be met? The Appraiser will need to reinspect to ensure those conditions have been corrected.
Will all parties be at the closing? If not, it will be necessary to coordinate with the Title Company to mail out the documents in time for them to be returned by the day of closing. Colorado is a “wet funding state,” meaning funds and title are distributed on the day of closing. Will someone need a Power of Attorney? That also needs to be addressed with plenty of time to have it approved by the Title Company prior to the day of closing.
Contact your new utility company to have utilities (gas, electric, water, sewer, trash) changed into your name on the day of closing. You will also want to make arrangements now with a cable company/internet provider, subscriptions, the post office, voter registration, motor vehicles. Do a final walk-through. Verify all inspection items have been done and that your new home is in its contractual condition prior to close. It is important that the Seller remove everything that belongs to them prior to closing, unless something else has been agreed upon. Make sure you have it all in writing.
Get final numbers from your lender or the Title Company. Make arrangements to get a cashier’s check made out to the Title Company or a wire to arrive prior to closing. Bring with you a photo ID. A normal closing will last less than an hour for the Buyer. This is the big day. ENJOY!
After Closing on a House
In the State of Colorado, the Buyer owns the property on the day of closing. Make sure signs and lockboxes are removed. You should have received keys, garage door openers, and mailbox information at closing. The Title Company will send you electronic files with all your documentation, or you can ask for hard copies. You can also receive both.
After you own your new home, feel free to cancel any old insurance policies from a previous residence. After a month or so, verify that the County has changed ownership of your new home into your name.
Unfortunately, now you have the daunting task of moving. With the excitement of your new home, it will be exhausting, but I hope it will be thrilling. Wasn’t that easy? 😇
My hope is this brief overview of buying a house inspires you with more questions about the home buying process. Please do not hesitate to contact me with additional questions, or if I can be of service.
I’d love to hear from you!