So today I will dive into the 3rd step in the 3 step process to having a smooth and successful home buying experience. Last week we talked about the importance of learning ahead of time as much as you can about the real estate market and the housing inventory in the area where you are looking to buy. The week before that we talked about the importance of meeting with a lender 3-6 months before you are planning to buy a home if you are planning to purchase your home using a home loan. Today we will be talking about the importance of learning about the actual homebuying process before you are ready to buy. When I say the homebuying process, I am talking about what happens between the time you find the property that is right for you all the way to the day you close on and take ownership of the property.
Meeting with the lender to find out about your financing options and learning about the real estate market where you are looking to buy is only the beginning. Once you find the right home, there is still a lot of ground to cover before you make it to the closing table. Before you are ready to make an offer on a property, you need to be educated about the homebuying process. You need to know what to expect between the time period you make an offer on the property all the way up to the closing. The better educated you are about this process, the more likely you will successfully making it to closing.
There are many things that happen during this time period that you need know about. Some of these things are as follows. Negotiating your offer is the first step. To successfully negotiate the terms of your offer, you need to have the right information. You need to know what similar properties have sold for recently as well as what similar properties are currently selling for. If possible, you need to have an idea of what the seller's motivation for selling is. You also need to know what is customary in your area with regards to who pays for certain closing expenses and make sure you are not paying for expenses you don't have to. For instance, in Tallahassee it is customary for the buyer to pay for owner's title insurance. However, in other areas in Florida it is customary for the seller to pay for this. If you are coming from a different area, you might be paying for something because it is customary in your area, but you should not be paying for it now because it's customary for the other party to pay for it in the current area you are in. Finally, you need to be educated on the dynamics of the real estate market where you are buying. Is this a buyer's market that is flooded with properties or are you in more of a seller's market where demand is high and supply is low? This will make a difference in how much negotiating power you have.
After you successfully negotiate the offer and you put the property under contract, now you have do your due diligence. You will need to order a home inspection, a wood destroying organisms inspection, and whatever other inspections you might think are needed. Other inspections might include a radon inspection, a lead based paint inspection, a mold inspection, a septic tank inspection, a well inspection, a structural engineering inspection if you have concern about possible foundation issues, ect...
In addition to ordering inspections, you will probably need to order a survey and appraisal as well. A survey is important because it tells you where the property's boundries are and may uncover easements or encroachments on the property that you did not know about. An appraisal is something the lender will make you order if are getting a home loan to buy a property. The appraisal will determine whether or not the value of the property is in line with what you are offering. In this day and age, it is common for appraisals to come up lower than what you offered on the property. This will leave you unable to get a home loan at the price you offered on the property unless the seller reduces the price or you come up with the cash to make up the difference between the contract price and the appraisal price. It's a good idea to prepare for this situation ahead of time, and consult with your REALTOR and have a game plan ahead of time in the event that the appraisal comes back low.
Finding a good attorney or title company to handle the closing of the property as well as to issue title insurance and perform a title search is also another important step to take when you are buying a property. The title search will uncover any liens, breaks in the chain of title or any other title issue which could cloud the title to the property you are buying. This is important because you don't want to buy a property and later find out that there is a $10,000 lien or some other title issue on the property that you are now stuck with. The title search should uncover any of these issues. However if title search happens to miss something, title insurance will fix the issue if something comes up later on that the title search did not catch. So that is why you need to have title insurance too.
In addition to title insurance you will need to find out about homeowner's insurance and flood insurance (if you are in a flood zone). As soon as you put the property under contract you need to find a reputable insurance agent and inquire about getting homeowner's insurance and flood insurance if it applies, and find out if the property you are buying is insurable and if so, how much your insurance will cost. Sometimes you might discover that your insurance costs for a certain home are going to be well above what you expected. The sooner you know this information the better.
In addition to the steps mentioned above, you will need to stay in close communication with your lender to make sure your loan is moving smoothly along in the underwriting process. Sometimes lenders will need additional documents from you in order to keep the file moving along in the underwriting process. Lenders sometimes have a lot of loans they are processing, so it could be days before they let you know they need something. For this reason, it would be a good idea for you to call your lender at least once a week once the property is under contract to make sure they have everything they need from you to keep the loan process moving foward.
Before closing, the last thing you need to do is a final walk through. The purpose of the final walk through is to make sure the property is in the same condition that it was when you made the offer. What would happen if the house was vacant and a tree fell on the house or if the toilet sprung a leak and flooded the house the day before closing( this really happened to a house a client of mine was buying). If the house was vacant, no one might know until after the closing at which time you will now be stuck with the issue. A walk though the day before closing can help you discover any possible issues like this if one arises thus allowing you time to let the seller know so he/she can fix the issue before closing.
These are the main things you need to do during the time period from when you find the right property up until you close. Each property is different though, so there might be other steps you need to take as well. For this reason, it's important to consult with your REALTOR ahead of time and find out as much as you can about the buying process before you make an offer on a property. This is especially true if you are buying a short sale or foreclosure property, as these properties present another complete set of unique potential issues and problems .
If your REALTOR has a homebuying packet or has any literature he/she can give you about the homebuying process, this would be good for you to have as well. If you want to learn more about the homebuying process, you can view my homebuyers packet that I give to my clients at http://www.bobbynahoom.com/106/--Home-Buyers-Packet
I hope you have enjoyed reading about my 3 step process to having a smooth and successful homebuying experience. If you have any questions or comments, please contact me at firstname.lastname@example.org or call me at (850) 567-0037.