If buying a home were simple, real estate agents wouldn?t exist. While it?s nice to have someone you can trust handle all the messy details, it?s important you know what goes on during the process. The first steps are a given: meet an agent, set a budget, find a house. But what comes next? What?s going on behind the scenes while negotiations and paperwork are being passed back and forth? That?s what we?re here to talk about today. Consider this…Buying a Home: The Cliffnotes version.
There are 6 steps to purchasing a home. It?s Step #5 that sees the most action. And if you?ve hired a real estate agent (which we hope you have), then you don?t see much of it. It?s good to know what?s happening though, even if you?re not directly involved.
Step 1: Meet an agent and/or lender. Once you find an agent, they?ll help you find a lender or vice versa. Both are necessary before getting started. While working with a real estate agent might not seem completely necessary, they take a lot of pressure off the buyer during the process. It makes everything 100x less stressful for you. Besides finding an agent, you also need to find a lender before you start looking for a house . They will help you help with step 2: determining a budget.
Step 2: Determine Your Budget. Setting a budget is much more than setting a comfortable price for the home itself. It also takes into account mortgage options, interest rates, utilities, moving costs, repairs, etc. Speaking with a lender and your real estate agent, you should have a realistic number to get your home search moving.
Step 3: Find A House. The search for your future home is one of the more exciting parts of the process and opens you to a wealth of possibilities. A great real estate agent has the ability to guide you in the right direction. They’ll find exactly what you (and your family) need within a comfortable price range. They can also make sure the home is in a great location whether that?s a top rated school district, close to an office, or in a community with a lively social scene.
Step 4: The House Goes Under Contract or Into Escrow. This is technically the beginning of Step 5: the due diligence process. Whether your house goes under contract or into escrow depends on your location but it will happen nonetheless. This means that you?ve put an offer on the table that was accepted. If the house goes into escrow, it means that a third party is handling the transaction including any money or documents. The bottom line is, you?ve made an offer and the buyer has accepted.
Step 5: The Due Diligence Process Begins. This period of time is otherwise known as what we like to call “investigation central”. There are several steps, most of them happening behind the scenes and handled by your real estate agent. These include:
- Chain of Title Investigation: Your agent will make sure that the owner who is selling actually owns the house and has the right to sell 100% ownership to you. In Colorado specifically, a title company is hired to research the chain of title and then provide title insurance to secure everything.
- Home Inspection: A crucial part of the process, you should always have your own inspection done. Even if the seller has an inspection, you should still get your own but at the very least, ask for the report the seller has received.
- Appraisal: An appraisal is ordered by the lender and owned by the buyer. It?s an evaluation to determine a home?s value. The seller only receives a copy if the buyer agrees to share it. Depending on the results of the appraisal, the buyer can ask the seller to come down on the price. If an appraisal comes in low, the deal typically goes back into negotiations.
While everything is happening during the due diligence process, you are submitting your loan for approval. By the time step 6 arrives, you should have a mortgage secured and a home insurance policy ready to go. So while your agent is working hard behind the scenes, there?s a little due diligence required from you as well.
Step #6: Closing. Finally, the moment you?ve been waiting for. The home you?ve set your sights on is officially yours. Home purchases usually close within 30 days. All the negotiations are complete and a final offer is agreed upon.?On the date of closing, the buyer has ownership transferred to them. It?s a heady feeling, we get it!
If we didn?t already provide enough reasons to hire a real estate agent, having someone you can trust handle each of these steps might just be the convincing argument. We bet you?re two seconds away from a Google search to find an agent in your area. Are we right?