The Buying Process
On the surface, buying a home may seem like a relatively straight forward process. However there are dozens of variables in any transaction that can make home-buying quite complex. Being prepared and organized makes the process that much easier and more enjoyable. Here are some steps to take before beginning your search.
Choosing an Agent — Choosing an advisor to guide you through a transaction is as important as buying a home, this is serious business. So homebuyers should give just as much consideration to hiring a buyer's representative as sellers give to hiring a listing agent. That means conducting interviews, seeking referrals and researching the company as well as the individual.
While it’s important to ask potential agents a number of questions relating to their experience and routines, it’s also important to listen for the questions they ask you to get a feel for if they’re really intent on understanding your needs.
Experience in your preferred neighborhood and/or style of home is important, but so is the comfort level between agent and client, because buying a home is a highly personal experience.
Ultimately, you only work with one agent, so it should be someone you like, trust and respect and who feels the same way about you.
Assessing your Financial Situation — For starters, use an online mortgage calculator to get a sense of your buying power and monthly mortgage payments. As a general rule, most experts say that your housing expenses should not exceed 28 percent of your gross monthly income, but a variety of factors – from your credit score to other debt – can open this ratio up to a pretty wide range. Remember that there are other costs involved in buying a home, such as moving, decorating and remodeling expenses. You should also consult with your accountant or financial advisor to talk about how real estate affects your financial goals. Knowing where you will come out of the transaction will give you a lot more confidence going in.
Getting Pre-Approved — In today’s home-buying environment, a mortgage pre-approval is not only essential; it is also incredibly easy to obtain – whether online, over the phone or in-person.
A mortgage pre-approval lets you know exactly what you can afford to buy. It also demonstrates to a seller that you are a willing and able buyer. And it gives you a head start in getting an actual loan commitment. Learn more about pre-approvals by visiting with one of our preferred lenders online or in person.
Creating a Wish List — Almost every home purchase involves some degree of compromise, which is why it is important to prioritize your wants and needs before you begin your search. There are many variables to think about depending on your lifestyle, budget and future plans, but some universal considerations include:
Location – Dallas-Fort Worth offers many great neighborhoods each with its own character. Consider the factors that are important to you, such as schools; transportation; and neighborhood amenities like restaurants, shops and parks. Here are some ways to research an area you’re considering.
o Tap local resources like the Chamber of Commerce, which can provide information about area businesses and
o Seek out neighborhood residents and get their opinion about where they live.
o Drive or walk through the neighborhood at various times of the day and evening
o Leverage your agent’s expertise in the neighborhood.
Type of home - A great diversity of housing exists within the city: single-family, condominiums, l town homes, new-construction, high-rises, re-sales and fixer-uppers. You probably have a preference for a certain style of construction. Weigh the pros and cons to narrow your focus.
Features and amenities - Garage parking, hardwood floors, a fireplace, outdoor space, a doorman. In the end, these are the kinds of details that drive the decision to purchase one home versus another. In creating this list, some things to consider are resale value, your daily routine, and the cost of making changes or additions down the road.
The Buying Process (finding your Home)
Once you have obtained a mortgage pre-approval and selected a real estate agent, you are ready to begin you home search in earnest.
Today, approximately 80 percent of home searches begin on the Internet, and if you’re searching for a home in Dallas-Fort Worth, there’s only one web address you need to know: www.mersalrealty.com. Our web site includes tools, tips and access to all of the Dallas-Fort Worth properties listed in the MLS. Best of all, you’re in control. Sign up for mersal realty property alert to manage and customize your search, receive e-mail updates on new listings as they become available, conduct several searches at once and save and compare properties.
Review Listings — Using the guidelines you set forth, your agent will present you with available listings. In addition to price and property attributes, pay close attention to data like property taxes, market time and monthly assessments for condos and town homes.
View Properties — Your mersal realty agent will schedule showings and accompany you on each appointment. When you walk through a home, some things to consider are: how the space functions for your lifestyle; what’s included in the total square footage (balcony or garage); and, in new construction, which features are standard and which are upgrades.
According to the U.S. Department of Housing and Urban Development, the average buyer will view 15 homes before buying one. But that is just an average. Some buyers will purchase the very first home they see. Others will look at more homes.
Open Houses — Remember, if you are attending Open Houses without your agent be sure to mention that you are being represented by an mersal realty agent. This will save you from being inundated with calls from other agents trying to represent you. Ask your mersal realty agent to supply you with some of his or her business cards to make the Open House sign-in process even easier.
Compare Properties — Discuss each home you see with your agent, and provide candid feedback. Your expectations and the marketplace will begin to converge, and your agent will be able to adjust certain parameters such as location and features in order to present you with alternatives. When you find a home and are ready to make an offer, your agent will perform a Comparative Market Analysis or CMA. This report compares the subject property with other properties that are currently listed and recently sold to help you formulate your offer.
The Buying Process (making an offer)
Chances are, when you find a home you absolutely love, someone else may love it too. So it’s important to act quickly and make an educated offer based on a rational approach to pricing and negotiating that you and your agent have discussed. To start the process rolling, your agent will draw up a contract that includes your offering price and other terms and contingencies. Buyers often focus on price, but there are other important terms to a real estate contract. You can include any terms you like, but the more you add, the more likely the seller is to object. Here are the most common elements of a real estate contract:
Price — The market will determine the final price, but your agent will help you formulate an offer based on comparable listings and sales, and current market conditions.
Mortgage Contingency — A mortgage contingency stipulates that you will buy the home subject to obtaining a mortgage. If you cannot obtain a mortgage, and the seller will not agree to finance the sale, then the contract will be void. The terms of the mortgage must be stated in the contract, and you will also need to establish a timeframe for securing financing.
Home Inspection Contingency — A thorough inspection of the property by a licensed home inspector protects you against structural or material problems that are not detectable in a casual walk-through. Home inspections are just as important in new construction as they are in resale. Obviously, buyers can’t inspect a home that isn’t built yet, but they can request an inspection prior to closing. In new construction, an inspector will make sure that all mechanical systems are working properly. They may also spot repairs that need to be added to the builder’s punch list (a list of items that need to be completed before the home is delivered to the buyer). The buyer, not the seller, is responsible for hiring and paying the inspector.
Attorney Approval — Attorney approval is generally a one-week period,in which your attorney can review the contract and suggest alterations. In most transactions, the seller is also represented by an attorney. Alterations will usually focus on the language of the contract in an attempt to protect you from any undue obligations. Your attorney will also add language to address points that were agreed to as part of the negotiation but that aren’t a part of a standard contract.
Even if you are using a standard-form real estate contract, an attorney’s review is always highly recommended. It is also recommended that you use an attorney that specializes in real estate transactions. Something that is obvious to a real estate attorney might be overlooked by an attorney that isn’t familiar with real estate transactions or real estate contracts. Upon attorney review, if the contract is not acceptable to either party, both have the option to cancel. If the contract is acceptable, then the transaction moves forward.
Earnest Money — Earnest money is a deposit, given by the buyer to the seller, which secures the contract until the closing. An initial deposit, usually in the form of a check, must be given to the seller or seller’s agent along with the contract, and the balance of the earnest money is usually due upon attorney approval. Earnest money is typically held in an escrow account until the closing, when it may be applied to the down payment and/or closing costs. If the sale does not go through due to contingencies covered within the contract, then the earnest money may be returned to the buyer. However, if a buyer is in breach of contract, then a seller may be entitled to keep all or a portion of the earnest money.
Closing Date — One of the most important terms of a real estate contract is the closing date – the date when ownership changes hands. This is usually, but not always, the date that the seller must vacate and the buyer may occupy the property. Flexibility on the closing date can give a buyer a big advantage over other potential buyers. Occasionally, it can also allow you to negotiate a lower price or other, more favorable terms.
The Buying Process (counteroffers)
In many transactions, there is a fair amount of negotiation – offers and counteroffers – before both parties are satisfied. This is one aspect of a real estate transaction in which an agent is invaluable. Not only can an agent draw upon his or her experience and market knowledge to offer sound advice during a negotiation, but he or she can also serve as a buffer between the buyer and the seller/seller’s agent. Negotiating for a home can be a highly charged and emotional process. But the most emotional buyer will look like one cool customer behind the right agent, and in the end, you usually wind up with what’s important to you.
The Buying Process (contract to closing)
In a real estate transaction, there are dozens of loose ends to tie up between signing the contract and closing the sale. Mersal Realty is known for our attention to detail during this important phase in which we coordinate and oversee the following steps:
· Deposit earnest money with the seller or seller’s agent
· Recommend and schedule a home inspector and accompany the buyer on the inspection. It is always highly
recommended that the buyer attend the inspection along with his or her mersal realty agent in order to make
sure that any issues that come up are properly relayed to the buyer’s attorney.
· Recommend a real estate attorney
· Obtain important documents, such as property disclosure forms and condominium documents
(budget, declaration, condo association minutes), and deliver them to the buyer and buyer’s attorney.
· Recommend a mortgage broker and help expedite the loan-application process.
· Monitor all contingencies to ensure that they have been met
· Recommend service providers for moving, home-improvement and repairs
· Schedule a final walk-through. Again, both buyer and buyer’s agent should be present.
· Coordinate your closing
The Buying Process (closing)
Your mersal realty agent will work closely with you, your lender, your attorney, and the seller’s agent to make sure everything is in place for a smooth and efficient closing.
Typically, a day or two prior to the closing, your lender will forward all loan documentation to the title company and let you know the amount required to close. You will be responsible for bringing the balance of your down payment and closing costs (such as lender fees, title company fees, and state and city taxes) to the closing in the form of a cashier’s check. At the closing, your attorney will guide you through the many documents you need to sign, including the bill of sale, the deed and the affidavit of title.
Mersal Realtys’ goal is to provide you with the information you need to feel confident at your closing. If you have questions about your closing, contact your agent at any time.
The Buying Process (after you buy)
While your transaction is complete, our work is not. In fact, mersal realty maintains relationships with our clients long after closing. We are always glad to help you find a variety of service providers and tradesmen to perform work on your home or make life a little easier.
As you’re getting settled into your new home, here are a few situations you may encounter in the coming months and years that are important to think about.
Rebuilding Your Savings & Maintaining Financial Discipline — Buyers should definitely take the time to review and evaluate their finances after a home purchase. One important step to consider is setting up an automatic electronic payment with your mortgage lender, which lets you avoid costly penalties associated with late payments.
Also, make a plan for gradually rebuilding your savings account, which many buyers deplete in order to make their down payment and pay for moving costs. As a homeowner, it’s more important than ever to have a cash reserve set aside for unanticipated maintenance that your home may require. In fact, a general rule of thumb is that homeowners should expect to spend about 1 to 3 percent of the cost of their home per year on maintenance and repairs.
Refinancing — Keep an eye on interest rates even after you purchase your home. If rates go down, you may be able to save money by refinancing, which simply means you take out a new mortgage at a lower interest rate to replace your original loan. Another common situation that calls for refinancing is the expiration of the initial, fixed-rate period on an Adjustable Rate Mortgage (ARM). If prevailing fixed rates are substantially lower than the rate your ARM will carry once it adjusts, then it might make sense to refinance into a fixed-rate loan.
Today, many lenders offer no-cost refinancing, which basically means they take the costs and fees associated with refinancing and roll them into the interest rate. It’s a way for homeowners to lower their monthly payment with little or no money out of pocket.
While refinancing a mortgage has gotten much easier in recent years, it is still a major financial transaction with important implications. So be just as diligent in a refinance as you were in securing your original mortgage. Your mersal realty agent will happily refer you to a mortgage professional to help you determine the right time to refinance.
Home Improvement — Whether it’s a fresh coat of paint, new hardwood floors or a major kitchen remodel, most new homeowners have at least a few projects they want to undertake once they move in. Your mersal realty agent can help you find a variety of service providers and tradesmen to perform work on your home.