The process of purchasing a home is not as daunting as you may think. Whether it is your very first home purchase or you have bought and sold multiple homes, the steps of the transaction are likely very similar. Here is a concise order of the process from start to finish.
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1. Pre-approval letter from lender
This is a one page document issued by your mortgage professional that will accompany any offer to purchase. This letter will prove to the seller that you are qualified to buy the prospective home. A lender will need to verify your financial history in order to produce this document. If the purchaser is paying cash it is likely they would need to provide a proof of funds available to close. "Cash is King", In most cases cash offers improve a purchasers bargaining position because the offer is not contingent on a lender's approval. NOTE: the seller would receive the same amount at closing from a cash offer as from an offer of the same value in which the purchaser financed 100% of the sale price.
PRO'S TIP: It is not uncommon that a cash offer for less money would be more desirable to a seller than an offer for more with a condition of financing approval.
2. Finding a Real Estate Professional
It is extremely beneficial for a prospective purchaser to consult with a real estate agent before they begin their home search. It is understood that homebuyers spend weeks to months of online "window shopping" before they start to actively search for a home. When you are ready, make sure you find an agent you can work cooperatively with. A buyer/agent relationship should be a team effort. Communication and availability are both indispensible qualities of a good buyers' agent. Buyer agents, in most cases, receive their commissions from the fee provided by the seller and require no additional fee from the buyer they represent.
PRO'S TIP: A homebuyer is entitled to representation by a real estate agent whether the property is listed by a realtor or not. A listing agency represents the home owner (seller) and has a fiduciary responsibility to represent the interests of their client above those of the customer(buyer). Question: What is the difference between a customer and a client in a real estate transaction?
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3. Making an offer
When you locate a house you want to buy you often need to act decisively. As real estate professionals, we write contracts frequently and are well versed in all the technicalities of a purchase and sales contract. Terms and price for the purchase are presented to the seller in a timely fashion. At this point negotiations between the buyer and the seller take place. If terms are mutually agreed upon, a "good faith deposit" will be required from the purchaser to make the agreement to purchase binding. It is not uncommon in the Burlington, VT real estate market to encounter multiple offer scenarios where a bidding war may arise. In these cases terms and price become even more critical.
PRO'S TIP: You may likely have one chance to make your best offer so make it count. In a bidding war a purchaser may/should be willing to pay more than a seller asks. A deposit should represent your commitment to the seller and the transaction. Don't skimp on this if you are able; it may make all the difference.
4. Property Inspection/Contract contingencies
Home property inspections are most often required by the buyer as a contingency of the purchase contract. This means that a buyer can have a professional thouroughly inspect the home at their own expense. The property inspector will produce a detailed report as to the overall condition and safety of the home. At this point the buyer can determine if they want to go forward with the purchase or terminate the contract. At this point the buyer can also ask the seller to make improvements to the home or correct any existing defects or safety issues that may need to be addressed before the sale. In some cases negotiations arise after the property inspection that require changes to the original contract. In some cases a purchaser will waive their property inspection in order to make their offer more appealing to the seller.
PRO'S TIP: Proceed with caution when offering to buy a property "as is", or, to be on the safer side, offer to have the property inspection on a pass/ fail basis. We recommend property inspections to all of our clients. Home Inspectors should have the appropriate knowledge and experience to spot potential or existing problems in a home and provide sound advice in regards to repair and ongoing maintenance requirements that should be performed. Obtaining a loan approval is another significant contingency in most Purchase and Sales contracts. As with any inspection or contract contingency, time is of the essance. When in doubt, get it in writing!!
5. Hire a real estate attorney
Real Estate attorneys are experts in VT real estate law. Among many things the attorney will research legal title and prepare deed for the transfer of real property. Their research and opinion will be insured. This insurance will be required from your lender, as well. The attorneys will prepare a closing (HUD Statement) document that will show all the credits, debits, and proceeds that buyer and seller have accrued, incurred or will benefit from . The attorney will receive the closing documents from the purchaser's lender, if applicable, and will likely host the closing.
PRO'S TIP: Hire an attorney that specializes in real estate law so that they are appropriately qualified to handle potential title issues or any municipal and state zoning questions that might arise.
After you have received final approval for the loan, and the loan underwriter has reviewed the file, you will receive permission from your lender to close. Your agent will take you through the home one last time before the closing. At this time you should make sure that the home is in the condition that was agreed upon and that the smoke alarms are working.
PRO's TIP: Make note if any problems are encountered in the walk through and get them settled before you settle.