What Really Happens (in a nutshell)
Once you’ve decided on the home you want to purchase the following will occur;
We express your interest to purchase in writing and submit it to the Seller; this is called an “offer”. The document is called a “Purchase & Sale Agreement”. We will then discuss the amount you want to offer, the amount you want the seller to contribute to your closing costs (if applicable), and when you want to close.
Depending on the situation– and other details involved with the home that’s for sale; along with what the real estate market is doing, we will then determine the best possible approach in terms of how much to offer; what to ask for, and what not to ask the Seller for. This is all a part of negotiating to obtain the best possible outcome.
Along with your offer you will need proof of funds- which consists of a bank statement and/or a pre-approval letter from your lender. This shows the Seller that you’re seriously looking to purchasing a home, and are ready, willing and able to do so.
Earnest money is also expected either at the time of your offer- or once the Seller accepts your offer by signing off on the paperwork that was submitted. The earnest money is held by a 3rd party; either a Broker involved in the transaction or the Closing Attorney. The amount is credited to you at closing.
Determining the earnest money amount is usually $1,000 for every $100,000. However; it’s not uncommon for Sellers to require a certain amount. On homes over $200,000… $2,500 minimum earnest money is usually expected. A larger amount is expected for investment property.
After the Buyer and Seller agrees on a price and the terms of the transaction- your offer becomes a Binding Contract once both parties have signed the offer and received a completed copy. At this point the Buyer is in a due diligence period which usually ranges from 10-14 days. During this time; the Buyer may have any inspections deemed necessary done on the home. The Buyer chooses and pays for a qualified and licensed home inspector and arrangements are made to carry out such.
Once the inspection is completed- the Buyer will receive a report on the results of the home inspection. If there are any repairs needed; the Buyer may request that the Seller make the necessary repairs or credit the Buyer an amount off the purchase price to cover the cost for repairs. If the Buyer and Seller are unable or unwilling to come to some sort of compromise; the Buyer may choose to walk away from the transaction and find another home to purchase without penalty; as long as the Buyer is still within the inspection period.
If you proceed with the purchase- the lender will order an appraisal on the home to determine the fair market value, and to ensure that the amount they are releasing for the purchase is legitimate. NOTE- Buyer pays for the appraisal out of pocket. If the appraisal report shows that the fair market value is less than the amount of the contracted price; then we can ask the seller to honor the fair market value listed on the appraisal report. Although the seller is not obligated to sell at the appraised value; most times there is ‘a meeting of the minds’ and we proceed to closing.
Your lender will pull your credit again- before closing to ensure that your credit-worthiness is pretty much the same. NOTE- once your are under contract DO NOT make any major purchases; apply for a credit card; or sign any loans (including co-signing on a car loan etc. Doing this will lower your credit score and add additional “debt”; which may ultimately prevent you from buying a home at this time.
The Closing- on the day of closing all parties involved in the transaction will meet at the closing Attorney’s office at a predetermined time, and sign the appropriate documents that will legally transfer the home from the seller to the buyer. Congratulations!- you are now officially a home owner! NOTE:- Take two forms of ID with you to the closing. One of them must be a photo ID.
If you have additional questions about the home buying process or if you would like to know more about something that wasn’t addressed here, please feel free to call or email or submit the form below.