It's that time of year again! Many people make New Year's resolutions.. to lose weight, stop smoking, travel more...the list goes on.... According to TReND Multiple Listing Service (MLS) over 3000 homes were bought last year in Mercer County, and if one of your resolutions is to move in 2014, especially if you are a first time homebuyer, you my be unclear about the steps involved in purchasing a home. If you fall into this category, read on!
Step 1) Get Preapproved for a Mortgage: Really, before you start looking for homes, you first need to find out how much loan you can qualify for. In fact, several months before you start looking into financing, you should check your credit report (for free up to 3 times per year) at www.annualcreditreport.com . Do you have any collection items that need to be cleared up? Too many open credit cards? These are all things important to know, especially since many times credit bureaus have incorrect information that you will need to resolve before moving forward. And this can take several months. Once you are satisfied with your credit report, look into financing options with 3 or so different lenders. If you are not sure, your agent will recommend some for you. Of course, it is not often wise to purchase the maximum home you can afford, but it is important to know what your lending limit is regardless.
Step 2) Begin Searching for Homes: According to the National Association of Realtors, over 90% of home buyers begin their home search process online. There are 100s of real estate search sites out there, including www.Realtor.com, www.Trulia.com, and www.Zillow.com. Pick one, and begin with your basic criteria in terms of location, price range and number of bedrooms and bathrooms. For the most up-to-date information, your agent can send you links to listings through the MLS, because often other websites are simply not current... often showing a home as still being for sale, when it is actually under contract with another buyer. Do you really want to be wasting your time looking at someone else's future home?
Step 3) View Houses with a Local Real Estate Agent: Many people think, "Why do I need to use an agent? I can just call the listing agent for a particular home that I'm interested in." Well, I am here to tell you why that is NOT a good idea. First, it would be a conflict of interest. Listing agents have a fiduciary duty to their sellers to obtain the best possible price, terms and conditions for their home. It doesn't make sense that they would have a buyer's best interests in mind as well. Second, it is simply easier for one agent, who has access to all available listings, to show you all the houses you are interested in, rather than you contacting several agents. Also you establish more of a relationship and your buyer's agent works in your best interest.
Step 4) Negotiate an Offer: Your real estate agent will help you put in a reasonable offer based on comparable sales in the area. The offer will include your offer price (not necessarily your highest and best offer), financing information, inspection and closing dates, and any other special conditions. You will be in the strongest position if you do not currently have a house to sell, and you put down a small ($1000 or so) good faith deposit, to be held in escrow usually by the buyer's attorney. You will also need to submit your mortgage preapproval. Again, if you do not have an attorney, your agent can recommend a few for you to choose from. Negotiations may go back and forth a few times, and there can even be multiple offers on homes at once! This situation can require a special strategy.. more on that in a future blog post.
Step 5) Attorney Review Period Occurs: Once your offer has been accepted, your agent will get the contract and deposit check to your attorney. And no, you don't have to use an attorney, but it is strongly recommended (costing between $600-$1000). The attorneys on each side routinely disapprove of certain aspects of the contract, and make changes in wording. Once both the buyer and seller agree to any changes, the contract will be finalized and the 2nd deposit, often 5-10% of the purchase price is deposited into the escrow account. Now the fun really begins!
Step 6) Complete Home Inspection: Usually you have between 7 and 14 days after attorney review to schedule a home inspection and request any repairs or credits from the seller as a result of the report. Inspections are worth the cost, usually between $400-$600, and are paid for by the buyer. A good inspector will look for basic plumbing and electric issues, check out the major appliances including furnace and the roof, and even look for signs of termites and test for radon. Your agent will have a list of qualified home inspectors in the area. It may be tempting to ask for the seller to fix everything that is wrong with the house, but it is often best to focus primarily on safety hazards.
Step 7) Lender Will Have Home Appraised: You will need to be in contact with your lender to get the mortgage ball rolling. During this time, the lender will be working hard on your loan, and part of this process is having a home appraiser appraise the home. There will also be title work to be done, surveys to complete and home owner's insurance to obtain (as it gets closer to closing). Usually there is a clause in the contract stating that if the house appraises for less than the contract price, the buyer can back out of the deal with all deposit monies refunded, or the purchase price can be re-negotiated. Eventually, if all goes well, the lender will issue a mortgage commitment saying you are good to go with getting your loan!
Step 8) Contact Utility Companies: The last thing you want is to move into your new home and find out the seller closed out their electric and gas account, and now your house is cold and dark! If you are not sure, your agent can provide you with the names and phone numbers of the local power and gas company, as well as phone and cable companies for the area. You can switch the utilities over in your name before closing. Often township public records get automatically updated for water and sewer changes.
Step 9) Schedule Your Walk-Through Inspection: You are all excited to move into your new home, then find out the seller has left a bunch of furniture in the house. Or maybe the rug that was in the dining room had been covering up some damage to the hardwood floors. Did the seller fix everything he said he was going to? This is why the buyer and his/her agent will give the home the "once over" before closing... to address any last issues that need to be taken care of, make sure appliances work, faucets aren't leaking, etc.
Step 10) Go to Closing, Sign Documents & Get Your Keys: Closings are usually held at the office of the buyer's attorney. It is here that you will need to prove your identity, bring money for any additional down payment and closing costs, and sign your life away (kidding)! No, seriously, there are numerous documents to sign with your lender, title company representative, and/or attorney. But once it's all over, you can collect your keys and you are ready to enjoy your new home! And if you have a nice enough real estate agent, they just might give you a nice house warming gift too!
So, what are you waiting for? There's a lot to do in this process and the spring market will be here before we know it! Happy House Hunting!
Anne-Marie Tustin, MBA, ABR
Sales Associate NJ & PA, Keller Williams Realty
100 Canal Pointe Blvd, #120, Princeton, NJ 08540
609.987.8889 Office
609.575.8801 Direct
atustin@kw.com
www.Anne-MarieTustin.com
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