The Home Buying Process (in detail!)
Buying a home is often the largest, most complicated, and most emotional transaction during one’s life. There’s a lot at stake—not just money, but also security, happiness, and everything else that is wrapped up in the concept of “home.”
If your real estate agent doesn’t explain how the home buying process works, step-by-step, what the decision points will be, property drawbacks, and the options you have at each step, it can make the process extra stressful. Remember—you are the sole decision-maker throughout the process. A good agent renders honest, experienced counsel and helps manage and coordinate everything that needs to happen, always with an eye to protecting your interests, but never presumes to make decisions for his or her client.
Below you will find a detailed step-by-step description of the home buying process. It’s relatively self-explanatory, but will make even more sense when reviewed with your agent.
Finding Your New Home
- Buyer and prospective agent sit down for a buyer’s consultation. Is the agent you are interviewing the right fit? The agent should share their unique value proposition, their process for finding property (on and off-market), and getting buyers into contract.
- Agent and buyer determine buyer needs, wants, timeframe, and financial options.
- Agent reviews the search and buying process, current market conditions and trends, buyer costs, and real estate agency.
- Buyer and agent decide to work together as a partnership; relevant paperwork is signed and the process moves forward.
- Agent works with buyer to secure loan pre-approval and full underwriting, which is necessary for two reasons: 1) the buyer needs to know their financial options and financing costs, and 2) once the right home is identified, it is critical to have the lender pre-approval letter to provide to the seller at the time of offer submittal. Full underwriting of the loan is critical if the buyer wishes to write a non-contingent offer. When a buyer is underwritten, the loan is secured. There is risk to writing non-contingent offers and these risks should be FULLY explained by your agent.
- Agent sets up an automatic alert system for new listings that match buyer’s parameters. Simultaneously, the agent looks for off-market properties, which don’t appear on public sites.
- Agent identifies and previews properties through MLS, property websites and other online content, and brokers’ tours.
- In non-Covid times, the buyer tours properties at open houses and reports back to the agent; if there is a property they like, the agent will tour the property with them prior to writing an offer. At the time of this writing (December 2020), properties are shown by appointment only.
- Agent and buyer review benefits, drawbacks, and values of specific properties. For lead contenders, the agent provides comp analyses so the buyer has an understanding of where the sale could land.
- Buyer identifies new home to purchase.
- As appropriate, the buyer checks the online Megan’s Law database, seismic hazard map, and local crime statistics with neighborhood police.
Writing and Presenting the Offer
- Agent reviews with buyer the mortgage, closing, and ongoing ownership costs pertinent to selected property.
- Agent and buyer complete a thorough review of the property disclosure package from the listing agent.
- Buyer’s agent queries listing agent further on property issues, seller situation and preferences, past offers, existence of other current offers and offer presentation guidelines.
- A comparative market analysis is prepared and reviewed to determine offer price.
- Financing pre-approval letter procured from loan agent; buyer has funds prepared for a 3% deposit.
- Agent and buyer review offer and negotiation strategies—including offer price, due diligence contingencies, terms around fixtures and personal property included, and timing of close of escrow.
- Offer contract is written at buyer’s direction.
- If very short contingency periods are being offered for inspections and/or financing, the agent is to coordinate scheduling of tentative inspection and appraisal appointments.
- Agent prepares an offer for presentation to seller and/or listing agent: agency disclosure, offer letter, loan pre-approval letter, copies of buyer-signed disclosures, etc.
- Agent negotiates offers and counter-offers on buyer’s behalf and at buyer’s instruction to achieve the best possible price and terms.
- Agent receives back from listing agent the fully-executed purchase contract; carefully reviews it for completeness, and provides copy to buyer.
Due Diligence, Contingencies of Sale and Close of Escrow
- Escrow is opened, a fresh preliminary title report is ordered, and buyer’s initial deposit is delivered to the escrow company.
- Agent provides escrow information and a copy of the accepted contract to the loan agent.
- Agent prepares a timeline for the removal of contingencies and close of escrow.
- Appraisal appointment coordinated with lender and listing agent.
- Buyer confirms homeowner’s hazard insurance for new home. Buyer’s insurance agent contacts the escrow officer with required policy information; agent reviews home warranty option with buyer.
- Agent coordinates any additional buyer-specified inspections—structural pest control, contractor, structural engineer, soils, roof, fireplace, etc.
- Agent monitors the timely receipt of property disclosures, reports and other documents, as statutorily or contractually required, for buyer’s review, signature, and approval.
- Preliminary title report is carefully reviewed by agent, buyer, lender, and as necessary, buyer’s attorney.
- Agent attends all additional inspections with the buyer; agent completes the selling agent portion of the real estate transfer disclosure statement and agent visual inspection disclosure after careful walk-through of the property.
- Agent and buyer carefully review inspection reports for buyer’s approval, further clarification, or objection.
- Agent and buyer review county/city, natural and environmental hazard, and other required reports for buyer’s approval, further clarification, or objection.
- Agent facilitates collection of additional information—further inspections, contractor quotes, legal advice, etc.—necessary for buyer to understand/quantify issues pertinent to the property’s condition or circumstances
- Agent verifies property’s statutory compliance with energy/water conservation compliance, smoke detector installation, water heater strapping, etc.
- Agent verifies loan commitment and funding details with lender and escrow agent.
- As applicable, contingencies of sale—financing, investigation, title, etc.—are removed, or the agent re-negotiates the terms of the purchase at buyer’s instruction. Agent prepares appropriate addenda or contingency removal documents.
- Property repairs or remediation, if any, are completed by the seller as required by the purchase agreement.
- Buyer final walk-through of property to ensure property is in the same condition as when they ratified the contract.
- Buyer consults with the buyer’s accountant or attorney to determine the method of holding title.
- Agent provides final closing instructions to escrow.
- Agent and buyer review the estimated closing statement, and, if buyer desires, complete loan and closing documents for buyer’s review prior to signing appointment.
- Buyer meets escrow agent for signing of closing documents; buyer brings legal identification as documents will require to be notarized.
- Buyer makes arrangements for final funds—balance of cash deposit and closing costs—to be delivered to escrow by wire or cashier’s check.
- Buyer makes moving arrangements, schedules change of utilities, and alerts any Homeowner’s Association of pending change of ownership.
- Agent confirms with escrow agent everything is set for scheduled close of escrow, buyer loan funds; transfer of title is recorded.
After Close of Escrow
- Agent procures and delivers keys, alarm codes, garage clickers to buyer.
- Agents follow up to check in, offer help, provide resources, and solve any problems that might have arisen.
Here to Help
And, there you have it—from the house hunt to the key delivery. Have questions? Curious how we help our buyers? Reach out to us! Call us at 415-735-5867 for a no-obligation consultation. You can also email us at firstname.lastname@example.org. And, as always, feel free to connect us to anyone you know who would benefit from our expertise and services. If we can’t help them, we know someone who can.