The Buying Process
While no two transactions are identical, the process of buying a home typically follows similar paths.
There are actually three different timelines taking place during the buying process, I've separated each of
them, however they are running concurrently during most of the process.
Working With Your Realtor
Identify the Property to be Purchased.
Sounds simple, however the trick lies in matching up what you are looking for with regard to area, price,
amenities and layout, (not to mention bedrooms, baths and square feet) with what the market has to offer
in all of those areas. Sometimes you can't get exactly what you want, where you want it, for the price
you are willing to pay. This is where my market knowledge will guide you in the direction of where to
look, what's negotiable, and what the best alternatives may be.
Making the Offer.
Once you've identified which home, or homes, you would like to purchase (yes I said homes, a not too
common, but viable negotiating strategy is to submit offers on more than one home at the same time) the
offer is put together. I will provide you with the sales information of competing properties in the
area in order to come up with an offer amount. You should also receive any disclosures, previous
inspections, etcetera from the seller. After reviewing all the information available we will discuss
the different strategies you can use to get the property that you want. Price isn't always the key
term in a transaction, however it is probably the term that most people put emphasis on. Once that
strategy is determined, I will handle all the paperwork. Once you've signed the offer, it will be
submitted to the seller's agent. While no money is required to make an offer it is good to have checks
ready for the amounts offered for the earnest money deposit and the termination option fee as they are
usually required to be delivered to the title company or seller's agent almost immediately after an
agreement has been made.
Responding to Counter-Offers.
Not all offers are accepted on the first try. In fact most offers are countered by the seller.
With a counter-offer you should get a better idea of what terms are most important to the seller.
At this point you have three options:
- Accept the counter-offer
- Reject the counter-offer and move on to another property
- Counter the counter-offer.
While it is not uncommon to counter a seller's counter-offer, this "going back and forth" normally
only lasts a couple of rounds as one or both parties are stuck on something that the other will not
budge on, or both parties are moving towards a compromise slowly.
Once the Property is Under Contract.
Now that you have a property "under contract" or an "executed contract" all the timelines within
the contract begin. Starting with the deposit of earnest monies and delivery of termination option fees.
You will be well aware of the timelines of the contract during the "Making the Offer"
stage, so you will be prepared to take care of the things you need to, within the time allowed.
Payment of Earnest Money and Termination Option Fee.
The dollar amounts related to the Earnest Money and Termination Option Fee, commonly referred
to as the Option Fee will vary based on the offer strategy chosen, and the outcome off the final
agreement. The Earnest Money deposit is typically delivered to the title company and the option fee
to the seller's agent, or seller. The Earnest Money, if any, is used to show or guarantee your
"good faith" in abiding by the terms of the contract. Typically if you breach the contract,
the seller retains the Earnest Money. However, you may terminate the contract within the terms of
the contract and receive a full refund of the Earnest Money, less any fees charged by the Title Company,
if any, if you have negotiated a Termination Option Period.
The Termination Option Fee, if any, is
essentially buying the right to terminate the contract. The "option fee" is a negotiated
amount of money for a negotiated number of days, the "option period." During the option
period you should be doing your due diligence such as getting an inspection, checking on the
insurability of the property, finalizing your financing with your lender, checking on the rules and
regulations of the homeowners' association, if any, and anything else that once discovered would
effect your desire to purchase the property. The opportunity exists to ask the seller for an extension
of this time period; however the seller is not required to grant an extension, so your preparedness is
very important with regard to the option period. Typically if you purchase the property in which an option
fee was paid, you will be refunded that money at closing, and if you terminate the contract, the option fee
will not be refunded to you.
A note about condominiums, townhomes, and houses located within a Mandatory Homeowners' Association.
Condominium communities are created with legal documents, during the buying process the buyer is to
receive copies of those legal documents, the rules and regulations of the association, and the Condominium
Resale Certificate. The resale certificate is a list of questions answered by the president of the
Homeowners' Association, or their managing agent. It should also include a copy of the operating budget,
and insurance summary. Mandatory Homeowners' Association for townhomes and houses provide similar information.
A separate timeline exists in the contract for the receipt of this information from the HOA, so the receipt
of this information is not required during the Option Period. Within this separate timeline, the buyer
still has the right to terminate the contract, even though the option period has expired.
Repair Issues.
On occasion, after the inspection is complete, repair issues will arise, either due to buyer or lender
wants/needs. If this is the case, an amendment can be prepared to essentially renegotiate the original
contract asking the seller to compensate the buyer either with repairs or monetarily to resolve the issue.
Again, the seller is not obligated to comply with the request, so it is best that these "renegotiations"
take place during the option period so you still have the right to terminate the contract if you do not feel
you were getting what you were paying for.
Waiting for Closing.
The majority of the items related to the contract are now complete, and you are waiting for closing.
The closing date was negotiated in the contract, typically 30 to 45 days out from the date the offer was
submitted, however it can vary depending on the situations of the parties involved. While you are waiting
for the closing you may be revisiting the home for measurements for new items to be purchased, changes you
will be making to the home or getting estimates for work to be done after closing. You are also working
with your lender on obtaining your financing and the title company is working on your file preparing for the closing.
At Closing.
At closing, an escrow officer of the title company puts together a settlement statement which details all the
money involved in the transaction. The numbers come from the contract, which was previously agreed upon,
the lender handling the financing of the property, if any, and the title company who is facilitating the
transfer of ownership between the seller and yourself. The settlement statement should be very close to the
Good Faith Estimate (GFE) received from your lender, so there should not be any surprises related to the
numbers involved in the transaction. After reviewing the settlement statement the escrow officer guides you
through the necessary loan documents from your lender, such as your Note and Deed of Trust along with disclosure
documents from the title company. At closing you will need to bring any money due from you in certified funds,
along with a valid, government issued identification.
Possession.
When do I get keys? A common question, but really this question was answered a long time ago and the
answer lies within the contract. Typically you receive keys after Closing and Funding. Closing was the
previous step where you (and the seller) went to the title company and signed all the necessary documents
for the transfer of ownership and loan documents. Funding takes place when all the money (down payment,
closing costs, and loan amounts) are received by the title company and are ready for disbursement. Typically
you are responsible for getting the down payment and closing costs to the title company, and the lender is
responsible for getting the loan amounts to the title company. Many lenders are out of state and have different
procedures on getting their money to the title company. However, funding is dependant upon their getting their
money to the title company. So, if the date that you receive keys to your new home is of major importance,
bring this up during the "Making an Offer" stage so that a plan is put into place to get you the keys
when you want them. This step is dependant on the performance of the lender, so choose your lender wisely.
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