6 Steps to Buying a Home
In General Information, by Anthony Bayardelle
Along with choosing a spouse, picking a career, and having kids, buying a house is one of the biggest decisions you will make in your life. Even to someone who has previously bought or sold a home, it can still seem like a daunting process.
However, just like anything, if you break the home buying process down into simple, bite-sized steps, it goes from complicating, stressful, and nerve-wracking to something that you can get excited about and actually even possibly enjoy.
Step #1: Finding a Realtor
In the age of Zillow, Trulia, and a seemingly endless array of home search websites, more people are making the mistake of trying to save money by not getting a realtor. Even it I weren’t a realtor, I would still advise you that this is a huge mistake. Here’s the (very) short version of why you do still need a realtor, even though you can see pictures of almost any house you want with the click of a mouse.
Research and Area Knowledge
Even though you’re thinking of your new home in terms of where your favorite sofa is going to go and what color to paint the master bedroom, it is still a financial investment as well. Between 1968 and 2004 the average house increased 6.4% in value each year (thanks, Investopedia). This means a home might actually be one of the biggest financial investments you ever make.
You wouldn’t make a stock trade without doing a substantial amount of research about the company, the market sector, and as much other information as you could dig up. Similarly, you shouldn’t buy a house without doing research. However, getting a realtor could save you some time and effort, especially you have one of those pesky jobs that don’t give you 12 hours a day to conduct in-depth research on historical home prices, community development projects that could occur in your intended area, market conditions, comparable sales, and a million other things.
You aren’t hiring a realtor to physically let you into houses. You’re hiring a realtor because they spend their entire work day getting to know the specific area you’re moving into. They have a wealth of area-specific knowledge that could save you time, money, and heartache throughout the home-buying process.
Negotiating is the other area where having a realtor can make your life hugely easier. While the average person might buy a handful of houses in a lifetime, a realtor does that in the average year (sometimes the average month). It’s very hard to remain rational and unemotional, especially when negotiating a price on a house you’ve already fallen in love with. This is where a realtor could save you more money than any realtor’s commission would ever cost you.
A good realtor has experience negotiating with selling agents. An area expert also brings to the table a knowledge of other recently-sold houses (comparables) as well as a personal knowledge of or relationships with many of the seller's’ agents you might come across. Finally, a realtor you’ve decided to work with exclusively will act as your advocate, pushing your best interests in the deal and, if circumstances call for it, telling you when it is in your best interests not to proceed with a negotiation when they feel you aren’t getting a good deal.
You don’t hire a realtor to do a Vanna White impression as you “oooh” and “ahhh” over crown moulding. You hire them to leverage their experience in your best interests to make the smartest decisions possible when negotiating one of the biggest purchases you’ll ever make.
Don't Be Afraid to Interview
Just like you would interview a potential employee at your company, you shouldn't hesitate to interview multiple candidates for realtor. If someone balks at the idea of being interviewed before you agree to work with them exclusively, chances are they're more focused on getting clients quickly than working in the best interest of their clients. If you need help, check out this blog on 8 Questions to Ask When Interviewing a Realtor.
Step #2: Financing Your Home Purchase
Unless you are in a position to pay all cash for your home, you will need to obtain a home loan (mortgage) to complete the purchase.
Being pre-approved for a loan before you submit an offer will put you in a stronger negotiating position and can save time in the loan approval process. We can put you in touch with experienced loan officers at leading mortgage companies. Your loan officer will be your principal guide through the financing process.
Various financing options may be available to you, including a fixed rate mortgage, an adjustable rate mortgage (ARM), government-assisted (FHA or VA) financing, or seller-assisted financing. You can expect the lender to ask for standard information regarding your income, expenses, and obligations.
It may seem daunting at first, but a good realtor will explain all the different options and help guide you through the whole process.
Step #3: Your Home Search
Identifying up front what is affordable will save time and frustration in the home finding process. From the multitude of properties currently on the market, you probably only want to see the ones that most closely meet your unique needs and interests. Usually previewing only a few homes at a time across multiple days of home touring.
You don't want to buy just any house. You want to buy the right house.
While I could write hundreds of pages on all the things you should do when looking for a house (and if you want more info, I’d start with this blog that gives you 6 basic keys to looking at houses), but instead, I’ll leave you with my top three bits of wisdom.
Figure out what you want before you set foot in a house.
If you go into a house with a completely open mind, you are taking a pretty sizeable risk. We humans are pretty emotional creatures, so if the first house you walk into a house is (for example) way out of your price range, it’s going to make everything else you look at seem drab and depressing. Similarly, if you fall in love with a house only to realize it’s a hellish commute from your future office, you’re in for one tough choice.
Before you start in person visits, make a list of your parameters, desires, and needs from your future house and stick to houses that meet those criteria.
Separate your list into “needs” and “wants”.
Unless you’re made of money it’s most likely that the first house you buy (or the second or third) won’t have everything you’ve ever wanted and more. However, that doesn’t mean you can’t get a house that will make you 100% happy. You just need to go into your home search knowing what you are (and are not) willing to compromise on.
Is the view from a house the most important thing to you? Would you be willing to trade a few hundred square feet of space or an extra bedroom in order to get that huge yard you’ve always dreamed of? Is all you really care about the kitchen and the distance to your new job?
You can get exactly what you want in your top priority areas, as long as you know what they are. Take some time and order the list you made in the last step in order of how important things are to you. That way when you’re comparing two houses that are roughly equivalent except for one is bigger but the other has a better neighborhood, you’ll know exactly which one is more important to you.
Pay attention to the area.
This last one is a sneaky one. Usually people think of buying a house as buying the four physical walls and the lot, but they don’t realize that you’re also buying the neighborhood, the school system, the distance from the highway, the local restaurants, and a whole host of other factors that play a pretty sizeable part in your day-to-day happiness.
Take some time and investigate the surroundings of each potential home. It’s not as exciting as imagining what color you’ll paint your future bedroom, but your future self will definitely thank you.
Step #4: Making (and Negotiating) an Offer
This is the part of the home buying process where your realtor really earns their money. As you start contemplating making an offer on a house, you need to determine the price you want to order, get your financial qualifications in order, decide if there are any pressing issues you want to include in your offer, present it to the sellers, and be prepared to negotiate any counteroffers that are presented.
This process can be complicated, stressful, and emotional. Arm yourself with the right information, stay rational, and lean on a knowledgeable realtor so you come out on top.
Step #5: Escrow Services
We know all you want is just to get the keys to your new home.
However, there are many important tasks that need to be accomplished during the escrow process to ensure there aren’t any nasty surprises later down the road.
During the escrow process, there are important inspections to perform, contingencies to meet, title reports to review, and a number of other important tasks that could jeopardize your home purchase.
Although you’re in the home stretch, you’re not done yet. Make sure you work closely with your realtor to ensure you’re fully prepared for closing day.
Step #6: After Closing
After your escrow period closes, your home is officially yours!
Now you get to break out the moving boxes and packing tape. However, staying organized during a move can make the difference between a smooth transition and a painful month of eating take-out pizza while sitting on moving boxes.
Take some time before moving day hits to get organized and make a solid plan for what happens when. This includes all kinds of not-so-fun minutiae like researching your future cable company (and garbage company, and water company....), forwarding your mail, making sure you have enough boxes, figuring out your future gate code and getting it to the movers, and a million other small tedious details that make moving the lovely headache we all know it to be.
Fortunately, you’re not alone in this. Ask your realtor for area resources or moving tips. In that line of work, they happen to come across a lot of people who move houses and should have a wealth of knowledge for you.