Details of buying process
The home buying process can be very stressful as well as confusing if you don’t know what is going on every step of the way. As a Broker/REALTOR/ABR/SRS I completely understand this and go through it everyday which is why I make sure to keep my clients informed throughout the entire process!
Put my knowledge and experience to work for your family.
The first step is the pre-qualification with a lender; you will want this before you even start looking. This way we're not looking at homes that are too high or too low. It can be devastating to find to find your dream house and find out that you don’t qualify for it or loss the deal because they had another offer come in with a letter of commitment even though our offer was better. Just the same it can be very discouraging to look at houses lower than what you realized you could afford and not be able to find anything you like. If you questions regarding what type of loan to look for or who to even call to get started then I can point you in the right direction.
This brings us to the next step. We get to start browsing through homes and taking tours! I can provide you with information and pictures to help you sort through and decide which homes you would like to see in more detail. When you’ve come across one that you may be interested in we will go out and preview the properties. This can go very quickly or can be a long process. The real estate market here in Jacksonville moves fairly quickly compared to most, this is due to being by a military base and people are constantly coming and going. During the summer months it is not uncommon at all for homes to go “Under Contract” the same day they are listed. This being said, it is very important to move quickly. I, personally, don’t like to pressure my clients to make an offer on a home that they are not completely sure they want. I feel that when the right house comes along they will know. However, if they do want the house I do stress the importance of not taking too long to make a decision since they could lose out to another buyer.
Once you find a house that you decide it is time to write an offer. I, as your Broker, will take care of that part but will need a few things from you. These are things such as offer price, amount of emd (which is explained further in detail later), amount you plan on financing, what type of loan you will be getting (VA, FHA, conventional, or other), when you would like to close, if you want closing cost assistance and how much (get an estimate of these costs from your lender), and any other additional terms (if this offer is contingent on the sale of another home, if you want the sellers to provide anything else such as a home protection plan, etc.). The biggest decision for most is what price to offer. This can be very difficult and I as your Broker/REALTOR will assist you as much as possible but ultimately the decision is yours. Offer what you are comfortable paying. I have heard pretty often from clients relocating from another area that “you should always offer at least 10% under the asking price because the owners always jack the price up”. Once again…this is not your typical real estate market. I rarely see sellers accepting much less than asking price unless they are desperate to sell, the home does not appraise high enough or there are some issues with the home. Along the same lines most sellers do not expect to sell their home higher than the appraised value since the majority of our buyers are military and receiving 100% financing and the lack of money to pay out of pocket. Most sellers understand this and since they do it is not uncommon for a seller to help pay a buyers closing costs (your lender can give you a “good faith estimate“ of how much these costs will be by providing them with the price of the home and the taxes). They may advertise this or you may have to ask for it. Sellers may also offer a Home Protection Plan to ease a buyers mind when thinking about having to come up with a lump sum of money if appliances or heating were to break down. If the sellers do not offer or agree to provide this to a buyer they can still purchase one of these for a reasonable price (depending on the company these can run approximately $350-$475 for a year at which time the policy is renewable). I can once again provide you with brochures and information regarding these. When writing the offer you will also be required to place an Earnest Money Deposit, often referred to as EMD (DEFINITION: The earnest money deposit is a sum of money paid by the buyer at the time of submitting an offer to purchase real estate. PURPOSE: The purpose of the deposit is to show "good faith" by the buyer that he or she intends to follow through with the terms of the sales agreement. If the buyer does not live up to the agreement, the deposit shall be forfeited to the seller as payment for any damages suffered by the seller as a result of the sale not being completed as planned. If the terms of the contract are met this money will be put towards the buyers deposit or closing costs. AMOUNT: The amount of the deposit varies in different areas depending upon local custom or the specific needs of a particular transaction. The size of the deposit will have an effect on the desirability of the offer. Many buyers have won properties away from competing offers only because they gave a larger deposit than others being considered by the seller. If you really want a piece of property, make your deposit large enough to help your offer win acceptance). The average EMD amount here for a home under $130,000 is $500 and for homes above $130,000 average is $1,000 but as all parts of the contract this is also negotiable. At this point it can go one of three ways.
1. Offer Accepted (Sellers agree with ALL terms of the offer and sign. Congratulations you’re “under contract”)
2. Counter Offer (Sellers may agree with some terms but not all so in essence they have rejected your offer and have given you an offer of what they would be more comfortable accepting. If anything is changed it is considered a “counter offer”. This will be done verbally or written until all terms are agreed upon. Nothing is official until signed and initialed by both parties.)
3.Memo to buyer( This is a full rejection to the offer but they are giving you terms that if you want to make another offer would be most likely accepted.)
4. Offer Refused (Sellers may have received another offer they preferred. In most situations unless the seller has received multiple offers it is common to receive a counter offer/memo to buyer, to negotiate terms if they are not satisfied with the original offer. The sellers agent is allowed and encouraged to disclose to a buyers agent when there are other offers already submitted or being submitted this way you know when you are in competition with other buyers for a specific property however the can not disclose the terms of any other offer.)
If it is accepted (situation 1) or we come to an agreement on terms after the counter offer (situation 2) then the next step is to apply for your loan (you should have already been pre-qualified at this point). It is common in home buying to have to complete a step prior to being able to move on to the next. There are also deadlines that we must meet for each step. For these reasons, it is very important to do your part in a timely manner. For example applying for the loan usually must be done within a couple days of the offer being accepted. You will need to contact the lender you have decided to use and tell them that you have an accepted contract on a house and need to start the loan process. With the new contract that have come out and been enforced in Nov.1,2007 there is and 8% penalty to either buyer or seller for contract deadlines not met and not agreed to in writing; example 130,000 times 8%=$10,400 divided by 365 days of year=$28.493 per day damage charges to offending party I will supply you with all property information needed and I will fax them a copy of the contract and mail an original if needed. Lenders will require you to finish your application and will usually require documents such as w-2’s and tax returns, pay stubs, bank statements, explanations of credit report findings, explanation of gift funds or large deposits, certificate of eligibility (if using a VA loan), etc.
I highly recommend that you have the home and property inspected. There are various inspections you can opt to have done such as, a structure inspection, chimney, roof, septic, well/water, pool, property survey, etc. The charges for these are your responsibility and are due at the time of the inspection unless otherwise stated and agreed upon. In most cases these are considered pre-paid closing costs and will not be included in any closing costs that the seller has agreed to pay, unless specified. These costs vary by company, location and size of the home. Inspectors of course prefer that the buyer be present so they point out to you anything they may find but this is not necessary if you are not local. If you aren't local I can arrange for the inspector to get access to the property and will send you the report at which point you can contact the inspector to go over any findings.
After you have reviewed the inspection reports you will decide if and what you want repaired prior to purchasing (“closing”). The seller is not obligated to make any repairs. If you have requested repairs that the seller does not agree to do you may opt to not purchase the property or move forward with it. We attempt to come to terms that are acceptable to both buyer and seller. After repairs are completed your home inspector can come out and check to make sure the repairs were completed properly. In accordance we this we have what is known as a “repair contingency”(Since the Offer to Purchase and Contract gives the buyer the right to terminate the Contract and get his or her earnest money back if the seller won’t agree to make all required repairs and/or remediation, what’s the need for the Cost of Repair Contingency? This question is best answered by giving an illustration. Suppose that a buyer’s investigation of the property reveals a major problem with the foundation of the house, and a structural engineer estimates that it might cost as much as $50,000 to fix the problem. Although the sellers are very upset at this news, they nevertheless agree to make the repairs, resigned to the fact that they need to do so if they want to get their house sold. At this point, the buyer has completely lost faith in the condition of the house, may have reasonable concerns that the seller will spend the bare minimum to “fix” the problem and wonders whether the problem can really be fixed at all. If the Contract did not contain the Cost of Repair Contingency, this buyer may be in breach of contract if he refuses to proceed with the transaction. The Cost of Repair Contingency was developed to protect a buyer under this sort of exceptional circumstance. It was not intended that the provision would be used to give a buyer the right to terminate the contract in situations where repairs fall within the range of what might be considered “normal.”)
After any repairs have been completed we move on to the appraisal. An appraisal is an independent view of how much a property is worth. Appraisals are common at the time of sale or refinancing and may include a check of the home's interior, upgrades and general condition. Your lender may require some repairs to be completed before they will finance the home. Lenders will finance the property on the basis of whichever is lower—the appraised value or the sale price. Appraisal amounts usually differ from tax assessment values. Some lenders require that the appraisal be paid for prior to closing and some lenders will add this cost to your closing costs. The average price for an appraisal here is $350-400. If the home appraises at a value lower than the contract sales price many sellers in this area with lower the price to the appraised value rather than the buyer having to pay the difference in cash since this usually isn‘t possible. If they refuse to lower the price or we are unable to meet eye to eye on new terms then the contract can be terminated. If the home appraises at or above the contracted sales price then we continue to move forward. After the appraisal has been received and all requirements of your loan application have been fulfilled I will request the “loan commitment letter“ from your lender. During this time you should be comparing Home Insurance rates and deciding on which company to use. I prefer for you to have this set up and in place at least 1 week prior to the closing date.
It is preferred to do the “final walk through” once the seller has removed all their personal belongings from the home. We will usually do the walk through either the night before closing or just prior to the closing. The home is expected to be in the same or better condition. Closing constitutes acceptance of the property so if damages have been done now is the time to speak up. The day before, or possibly right before, the closing we will receive the settlement state also referred to as the HUD. This statement will include in detail how all funds are being disbursed along with how much money you will need at closing. This money will include any down payment and closing costs incurred minus the amount of any EMD or other deposits. You will be required to have these funds with you in the form of a certified check. In some cases the HUD may not be completed in enough time for you to get a certified check. If this happens the attorney may permit the closing to move forward as planned and you will have to deliver those funds once the statement is ready, usually right after the closing or depending on the time of day first thing the next morning. Your lender will usually deposit your financed funds into the trust account by wire transfer on the day of your closing. Once all funds (closing costs and your loan) have been received the attorneys office will record your “deed of trust” otherwise known as your mortgage at the county courthouse. When this has been recorded (usually at 3pm if your closing happened prior to noon or the next day by 3pm if it was after noon) then the finale step has been completed. The home is now yours and you will receive the keys. This is also when any funds are disbursed to the sellers and real estate companies.
I hope that this has answered any questions that you may have about the home buying process. I am aware that this may all seem a bit overwhelming but don’t worry, I will walk you through every step and take care of much of this on my own. I just hope that explaining each step and keeping you informed throughout will help to relieve some of the stresses that come along with it all. If you have any questions please feel free to ask. That is my job after all. Feel free to call and ask me any questions necessary to answer your question at office number (910)347-4066 or my personal cell (910)548-4677. As an SRS(Sellers Representative Specialist) and a ABR(Accredited Buyers Representative) that gives me an extra added insight into both aspects of the contract as to what both sides maybe thinking helping my clients with the best negotiation skills available.
