Let me just begin by saying that buying a home is a little different in every state. The basic components may be there but the process in California is not the same as Florida, which is not the same as New York, which is not the same as Virginia. So this is going to be a basic step by step guide for buyers in Virginia. The local market conditions will have some impact on the following information but a good Realtor will certainly set the expectations when doing their initial orientation with the buyer. Here is what I do.
1) Find a Realtor that understands what you are looking for. This is not a sales person. This is a facilitator and they should know what your basic criteria will be, what you can afford, the type of financing you will be using and a little bit about your lifestyle and personality. This can only be understood if they are asking you a lot of questions and listening to your answers. The experienced agent will navigate you through the process and help set appropriate expectations along the way. A buyer agent will ask you to sign a buyer representation agreement that spells out their responsibilities to their client and the responsibilities of the buyer to that agent. You want someone who is looking out for your interests.
2) Get a great lender. It can be tempting to go with the lender who offers the best rate. This is important and you should certainly do a little shopping to make sure you are getting the best terms possible for your financing. But this is just the tip of the iceberg. Make sure the lender is experienced enough to look past the basic qualifying information. They should be checking your credit score, verifying your income and looking at your debt. They should also be considering things that a mortgage underwriter will require later in the process. Having a lender who is prepared, up front, will save a lot of grief later in the process when unanticipated issues sometimes become known. Most sellers will require a pre-approval letter with the offer. Be ready so when you find the right house, you’re ready!
3) Search for a home. Especially in todays world of internet access and information, it is possible to find homes for sale from many sources. Here are the 3 main sources:
- a) MLS (Multiple Listing Service)- This is the system used by the realtor community. It offers information on the listing being offered and it offers a cooperating compensation to the agents who show the property. This is important to understand because if you are represented by a buyer agent, there is a fee for their services. When considering a home in the MLS, the listing agent will post the compensation that they will offer any cooperating buyer agent; which often covers the fee a buyer agent would charge their client.
- b) New Construction– Sometimes a buyer will find a home in a new development. The homes may be listed in the MLS but often they are not. When visiting a new construction site, understand that the agent is representing the developer/ builder and they have a responsibility to that builder to sell the homes at the terms the builder has spelled out. If you go to a site without your agent you should always let the site representative know that you are being represented by your own agent. This removes any confusion down the road and allows your agent to negotiate on your behalf.
- c) FSBO – Many homeowners feel that they can list and sell their homes themselves. Some will offer a compensation incentive to the buyers agent and some will not. (or it is reduced and less then needed to cover the fees of your agent) Whenever you find a home that is not listed with an agent, call your agent first so they can verify any offer of compensation with the seller. This allows everyone to understand before entering the home, and negotiating terms, who will be responsible for the agents compensation. If the seller will not pay the agent fees, the buyer has an opportunity to move forward, and cover the buyer agent fees, or… move on.
4) Once a home is selected your agent will assist you in writing an offer. At this time you should be prepared to provide an earnest money deposit. (the amount depends on local customs and price ranges)
5) Once negotiations have been finalized, your agent will ratify the contract. The ratification is important because all other timelines are typically tied to this date. The timelines are important and your agent should play close attention to them in order to protect your interests.
6) After ratification you will need to begin the loan application process and arrange for inspections. This will involve having funds/money available for appraisals, credit checks, and home inspectors. Your agent will be helping to coordinate inspections, negotiate repairs, communicate with lenders, title companies/attorneys, and make sure everything is moving as planned.
7) Once contingencies (for home inspections, homeowner associations, etc) are removed, you will head to the closing day. About 1-3 days before closing you will perform a walk through inspection to ensure that negotiated repairs were completed and the house is in still in the expected condition. This is also a good time to arrange for the utilities to be set up.
8) On the day of closing, you will get verification on the funds that may be needed at the closing table. and FINALLY, you will sign your documents and receive your keys to your new home!