First Time Home Buyers, steps to finding the right agent, getting prequalified, making a wish list of must haves and compromising, working within your budget, home buying process (showings to offer to settlement)
Step 1 – First Time Buyers – How do I find the “right agent”?
Buying your first home only happens once in your life. For most, this is one of the most important investments they ever make. Invest a little time in picking out the agent you want to work with.
Picking an agent is not a “one size fits all” process. You are going to be working with the agent you pick to represent you for several weeks to several months, and in some cases as long as a year. Find an agent you are comfortable with, and can talk candidly with. One you can trust to look out for your best interest. You want an agent who will take the time to walk you through the step by step process. Here are a few steps to help you get started on your search
- Ask friends, relatives, and co-workers for a recommendation. Someone who has worked with an agent and has referred that agent to other people is usually a good sign. Ask around. There may be someone working with an agent that you’re not aware they were even considering a move.
- If you can’t find an agent through the first suggestion and saw an agent advertised that caught your eye, contact them. Go for substance and information, not hype. Make an appointment and meet with them. If you are going to go this route, meet with at least two different agents.
- How easy was it to reach them?
- If you left a message, how long did it take them to call you back?
- Were they helpful with information?
- Do they work a lot with first time buyers?
- Do they have a sense of humor?
- Do you think they will “have your back”?
- Will they communicate with you the way you wish? (text, email, phone, etc.)
- Does their personality and style work well with you, or does in clash?
- Do you think you will be comfortable working with this person?
- Will you be working with the agent you hire? Some agents work in groups or teams. What does that mean to you? You may hire Agent Joe, but then Agent Mary may be showing you houses, agent Bill may be doing your contract and taking you to settlement, or maybe you will be speaking with the agent’s assistant when you call instead of the agent directly. Then there are agents that you hire, and you deal with only that agent directly from start to finish. There are numerous scenarios out there. One scenario is not better than the other. They are just different. It depends on what you as an individual are comfortable with. So simply ask.
- Experienced verses new agent. An agent being new is not necessarily a bad thing. It depends a lot on who is assisting them? Do they have an experienced agent, manager or broker “guiding” them, advising them? Experienced agents have a lot to bring to the table. While buying a house has a long list of “standard” steps that will take place, every transaction is different. An experienced agent knows how to help you avoid the pitfalls, how to handle situations that may occur, and basically can give you great advice.
- Does the agent have an ABR Designation? ABR stands for Accredited Buyer Representative. This designation is from the National Association of REALTORS. The agent takes additional education and meets an experience requirement to obtain this designation. The agent spent their money and time to obtain this designation to provide a higher level of buyer representation. Something to consider.
- Ask about cost. You are actually hiring a buyer’s agent to represent you. Don’t be shy. In our area, homes that are listed for sale through the multiple list show any commission to be paid to the buyer’s agent. Which basically means the agent can represent you, with the commission coming from the seller’s agent. Ask your agent if there are any additional commissions or fees that you as the buyer will have to pay and how much they are.
- While it’s very tempting to look on line, call and run out and look at a house, your very first step should be to find an agent and hire them to represent you. Why? Many, many reasons! A few are:
- You may not be able to purchase that property based on the type of financing you will be obtaining.
- It could cost you money! You may qualify for closing cost assistance through numerous programs. Many of these programs require you to take a class prior to entering into a contract.
- While looking on line is a great way to see photos of homes and neighborhoods, there could be a neighborhood or home you haven’t seen online or thought of, or even knew about that would be a much better choice for you.
- When you hire an agent, they can help you on all of the above and much, much more!
Buying a home involves many steps. It can be overwhelming. A buyer’s agent will advise you on how to negotiate your offer and how to protect yourself with contingencies like inspections and loan approval, as two examples. A buyer’s agent can help keep your stress level down! They will educate you on the process, before you even get started, so you know what’s going to happen and why. It really can make the difference between your first home purchase being an exciting positive experience, or a nightmare.
Step 2 – I picked out my agent! Now what?
These are the basic steps you will take with your agent to find your first home!
- Meet with a lender! If you have not already met with a lender, do this first. The lender will advise you on what you qualify to purchase and finance. How much cash you will need and provide you an estimated monthly payment amount. They can let you know about programs that offer first time homebuyer’s assistance, and show you choices in different type of loans.This is a very important part of the process. Not only do you have to qualify for the purchase, but so does the property you pick out. Different loan programs have different requirements on the property’s condition, and some on location. You also will need a pre-qualification or pre-approval letter from the lender to submit to a seller with your offer on the property you pick. Remember, you don’t have to spend as much as you qualify for. It is good to know what your limit will be.
- Viewing Homes Based on what you have learned from your lender, now you can view homes with confidence, concentrating on “do you like it? Not “can I buy it if I like it?”Discuss with your agent what type of property you are looking for and in what areas. Your agent can advise you on homes that may or may not meet the lender’s requirements for the type of loan you will be obtaining.
Make a list of items you need in a home, and items you want in a home. Example: you NEED 3 bedrooms but WANT 4 bedrooms. If you are buying with another person, the two of you should be making the list together. The two of you will probably not agree on everything on the want and need list! Keep in mind, even if you had a brand new home built, it’s highly unlikely that you will find a home with everything you need and want, within what you plan to spend. Decide what items you’re willing to compromise on, and what items you are not.
- Making An Offer Once you have picked out a property, your buyer’s agent will provide you with information on comparable sales in the neighborhood, closing cost assistance and more so you can decide on what price you wish to offer. Your agent will discuss with you negotiations, and how counter-offers work.They will prepare your contact and any addendum/contingencies that you agreed to that are needed to protect you. Then they will review it with you and have you sign it.
Then it is submitted to the seller. The seller may accept it as submitted, reject it as submitted, or provide you with a counter-offer. With your buyer agent’s assistance, you can either accept the seller’s counter-offer, negotiate and give the seller a counter- offer, or simply walk away, It’s important that you realize that while you are negotiating a contract, the house is not off the market, and another contract could be submitted and accepted by the seller, leaving you out. You are not under contract (the seller is obligated to you and your contract) until the contract is signed by all parties and delivered to all parties.
Once you have an accepted contract (signed by the buyer and seller) you have purchased a home! Afterwards is not the time to change your mind. Don’t panic. It’s normal to have that “what have I done” feeling right after the “oh I’m so excited” feeling. It will pass.
Through this process, you are making the decisions. You picked your agent based on being comfortable and feeling you can trust them. Let them guide you!
Step 3 – Contract to Settlement
You are now under contract to purchase your new home. There are many steps to complete prior to you taking legal ownership and possession of the property! There are also many items that you and your agent have no control over. Don’t start packing yet.
- The home has to go through any inspections agreed to. Once the inspection is complete. What happens will depend on the results of the inspection. In many cases, you may accept the home as-is, or ask for the seller to do repairs, or decide to walk away from the contract. In the case where you ask for repairs, the seller may agree to do some, none, or all. You would need to agree to their response. It’s all about negotiating through these situations. This process can take on average anywhere from 10-25 days.
- Your agent will forward your signed contract to the lender and title company of your choice. The title company is the vendor that will prepare all the paperwork, make sure you obtain a clear title, and conduct your closing/settlement.
- You will now work again with your lender. The lender will order an appraisal. What happens if the house appraises for less than the sales price? Negotiations! Why? Because your loan is going to be based on the appraised value or sales price, whichever is lower. The seller does not have to accept the lower appraised amount, and if they do not, in most cases you can walk away.When the lender receives the appraisal, and it meets the sales price or is higher, you simply proceed. Your lender will also be asking for updated financial documentation like bank statements, pay stubs, etc.
- Your lender will provide you with information, and you will need to purchase home owners insurance that will go into effect the day of closing/settlement
- Remember, for every contingency such as inspections, appraisals, loan approval and more, there is a timeframe in which they must be completed. These contingencies also state what the results will be concerning the contingencies. Will the contract become void? What is the time frame and choices for the parties to respond and come to an agreement?
- Your lender, once they receive all documentation requested from you and the appraisal place the loan in underwriting. This is where your loan receives its final approval and “clear to close” is issued, and you can proceed to closing
- Depending on the contingencies you have in your contract, will depend on when all of this happens. Your agent will coordinate with you, the seller, lender and title company the date and time for your closing/settlement. This is when you will obtain legal ownership of the property.
- The average time to close/settle on a property is 30-45 days from the date you have a complete, signed contract
This information is provided to give insight into the home buying process, providing you with general steps. Meeting with your buyer representative will help educate you in detail of the entire process.