Buyers need a basic overview. This is especially true for first-time homebuyers who aren’t familiar with the process. Bear in mind that the steps in the home buying process can vary from state to state, depending on local custom.
However, when you strip away all of the crap—which may or may not happen to you—there are only five basic steps to buying a home. You can do these five steps in any order you want.
Hire an Agent
You don’t have to hire a buyer’s agent if you prefer to go to open houses and look through a mumbo-jumbo of homes online, but hiring an agent will save you time. Here’s why:
- An agent can send you listings directly from MLS that fit your parameters, and you won’t waste time looking at active short contingent listings that are under contract.
- Agents often know of new listings coming up that are not yet on the market.
- You can waste the agent’s gas and not your own when you tour homes.
- Some agents will preview homes for you.
- An agent can generally spot overpriced listings and advise you accordingly.
Get a Loan
It’s not always necessary to have a mortgage broker or bank in your back pocket before buying a home, but it’s smarter to get loan pre-approval in advance. This way you know for certain how much home to buy. Many sellers won’t look at an offer if the seller doesn’t have an assurance that the buyer can get a loan.
Popular first-time buyer loans are FHA loans because the minimum down payment requirement is much less than a conventional loan. However, if you are thinking about buying foreclosures, for example, conventional buyers tend to get priority with REO banks.
You can ask your agent for a referral to a mortgage broker or check with your own bank/credit union. Compare the types of mortgages available to you and your GFE.
Find a Home to Buy
Buying a home can be an overwhelming process and emotionally draining. Finding the right home is not always an easy task. Schedule a maximum of seven homes at a time because any more than that will make a buyer’s head spin.
Most buyers conduct a lot of research online before ever stepping foot in a home. Buyers spend an average of six to eight weeks, according to the National Association of Realtors, trying to figure out where they want to live. Once the neighborhood is selected, most buyers end up buying a home after two or three home tours.
Negotiate the Offer
Buyers sometimes make the mistake of comparing the sales price of a home to other homes they have seen. It’s a mistake to compare sales prices among homes for sale. That’s because sellers can ask any price they want. It doesn’t mean the home will sell at that price.
An agent can provide comparable sales and examine the pending sales. Comparable sales are similar home types in the same condition and location that have sold within the past three months. Pending sales will become the comparable sales by the time your home closes.
You may need to pay over list price in a seller’s market, especially if many buyers are vying for the same inventory. Your agent can give you a reasonable price range and help to manage your expectations. A good buyer’s agent knows there is always more to an offer than its price, but the price is paramount.
Do a Home Inspection
In some states, a home inspection is conducted before buyers make a purchase offer. In other states, a home inspection is a contract contingency. A contract contingency means a buyer has the right to cancel the contract. You might not want to be locked into buying a home that has a faulty foundation, for example.
Sellers are generally not required to make repairs if problems are discovered during a home inspection. A home inspection is for the buyer’s edification. However, sometimes when a buyer gives a Request for Repair to the seller, rather than blow the deal, the seller will often agree to repair.