By Barbara Hobbs, writer for New Homes & Ideas
Buying a home can be fun – going into new houses, imagining yourself living there. But when you get serious about purchasing one, you’ll have multiple needs—finding the right house, getting financing in place, scheduling an appraisal and a home inspection, and putting it all together for the closing. No home buyer is an expert in the process. Take advantage of the professionals to guide you through the process, educate you about details you need to be aware of, and to advise you in your choices. Home purchases have financial, emotional, and legal aspects that are important to plan for.
FIGURE OUT YOUR FINANCIAL PICTURE
For starters, you need to find out the loan amount you can qualify for. Do some research online for mortgage brokers, talk to your bank, or ask your realtor for recommendations. Choose a mortgage lender who will advise you about types of loans available and will help you choose which loan would be best for you. Getting pre-approved for a home loan can help you be realistic in your house search and will speed up the process when you find a home you want to purchase.
PICK A GOOD REAL ESTATE PROFESSIONAL TO WORK WITH
The home buying process is the specialty of real estate professionals who guide buyers through the requirements from the beginning of the search to the end of the closing. They can advise them about the best neighborhoods, school districts, local home values, builders and building trends, and long term values of housing areas.
“This is a need for first-time buyers as well as for experienced ones,” stated Mike Carswell, a Broker at eXp Realty. “Whether they are millennials buying their first home or seniors downsizing, buyers need education to be able to make important decisions. North Carolina requirements change, different states have different requirements, and elements of all the parts of the process have variables that a buyer needs to be brought up to date on.” These professionals are also essential when it comes to selecting an appraiser, a home inspector or a real estate attorney.
LOOKING FOR PARADISE
Finding your dream home will be the easiest part once you have prepared yourself with information provided online or by your real estate professional. Sites like realtor.com can provide parameters of current listings like cost, location, property details, age of home, etc. What online sources don’t show are environmental factors such as traffic noise, nearby airports, ongoing construction, or encroachment of neighboring houses. Your realtor can provide advice on the quality of these listings, but you also gain a lot by driving around the neighborhoods—especially at busy times like after school or work, on weekends, and in evenings. Be patient and be prepared to look at a lot of houses before finding the one that fits your needs best. Don’t let emotional attachment blind you to the reality of the home selection.
WORK WITH THE REALTOR TO NEGOTIATE THE PURCHASE
When you’ve found the home you want and you’re ready to make an offer, you need your realtor’s guidance more than ever. Carswell agrees, “This is an optimal moment for the buyer who always needs help with the offer—both the price and the contingencies like home inspections, appraisals, closing costs, and closing date. Trust your realtor to bring your attention to important aspects at this stage of the purchase.”
When the price and the contingencies are agreed upon, the buyer signs a purchase agreement with a down payment (earnest money). The due diligence period of about three weeks starts, and the seller is paid a contingency fee ($300 to $3000) to compensate for taking his house off the market while the buyer is checking out the house. If the buyer notifies the seller within the due diligence period that he does not wish to purchase the house for any reason, he will be refunded his earnest money, but not the due diligence fee paid to the seller.
BRING IN THE APPRAISER AND THE HOME INSPECTOR
After the contract for purchase is signed and approved by both the buyer and the seller, the onus is on the buyer to find any problems that should be dealt with. For that he needs an appraiser and a home inspector.
An appraiser is an unbiased state-certified contractor employed by the lender to confirm that the house is worth the amount of the pre-approved home loan. The appraisal fee, usually between $287 and $373, is added to the buyer’s closing costs.
The appraiser will create an appraisal based on the house’s age, location, condition, and additions or renovations, as well as on the sale of comparable houses in the area. If the appraisal is lower than the amount of the house loan, the buyer has four options: he can lower the purchase offer, he can pay the difference himself, he can appeal the appraisal or ask for a second one, or he can walk away from the contract.
A home inspector is an independent certified individual hired by the buyer to identify any problems with the property. The buyer and the realtor meet the inspector at the location as he does his inspection from attic to basement. After thoroughly checking all aspects of the house, the inspector writes a report detailing problems and providing estimates of repair costs. The buyer negotiates the payment of these expenses with the seller. If the end result of this negotiation is unsatisfactory, the buyer again has the option to walk away from the purchase.
CLOSING THE DEAL IS A BIG DEAL!
Barring last minute problems, at the closing you’ll sign the paperwork, complete the final payment of the purchase price and closing costs, and get those all-important keys. Be prepared for closing costs between 2% and 5% of the value of the home to be purchased. These costs may include fees, taxes, bank charges, and services. Your realtor and lender can help predict these costs approximately, but on a $150,000 house they could amount to between $3,000 and $7,500, a sum well worth negotiating for full or partial payment by the seller.
Real estate closings usually take place at an attorney’s office or at a title company. The services of a real estate attorney are required for closing real estate deals in North Carolina. “This is significant for the buyer,” stated Michelle Congleton Smith, an attorney with Impact Law. “An attorney is needed to explain the closing documents to the buyer and to make any necessary changes as well as doing a title search on the property.”
Allow at least an hour for the closing. Smith’s best advice? “Come prepared to give your full attention at closing. You are signing important documents so make sure you are not distracted. Ask any question you may have right away.”
GETTING TO THE FINISH LINE
As you can see, the process to purchase a home can be intimidating. Online websites like houselogic.com (a site made possible by NAR) are full of information, answers to FAQs, and helpful links. Your personal search for information is paramount to putting you on the right track, but real estate professionals are invaluable in navigating the process and should be involved early. Happy house hunting!