Steps in The Home Buying Process
Secure Financing
Step One…how will you be purchasing your new home?
This is the critical first step in the home buying process! Nothing can happen without this! Speak with a lender to determine how much house you can afford. Obtain a pre-approval letter for the loan amount you require. This letter will be submitted along with your offer. We will be happy to put you in touch with our preferred lenders! If you are planning to purchase with cash, ask your financial institution to provide you with an official “Proof of Funds” letter on their company letterhead. Either way, we will need to have this information ASAP!
Hire a Realtor
Step Two… Employ a full-time Realtor (HEADED HOME GROUP!) to assist you through the entire home buying process. Use a Buyer Representation Agreement to put our employment agreement in writing.
The Home Search
Step Three… This is a process of elimination. Start by deciding which neighborhoods you want to live in and whether you want a new or existing home. Make sure these homes fit within your financial needs based on the loan amount your lender has pre-approved you for. Use our website and mobile app and drive by potential homes/neighborhoods. Then you can view the homes on your final list with your Realtor (HHG!). We will schedule all showings for you!
Make an Offer
Step Four… Once you find the right home, we will review market conditions and make our offer based on such information. We will write up and explain all paperwork necessary for our offer. The negotiation may go back and forth a few times between parties before final acceptance. We will guide you through this process!
Under Contract
Step Five… After final acceptance of the terms by both parties, we go “under contract.” At this time you’ll provide an earnest money check to the title company to open escrow and provide an option check to the seller for an option/inspection period. We have 3 business days to deliver Earnest Money and 3 calendar days to deliver Option Money. We will let you know whom to make these checks payable to and how to deliver them. Time is of the essence in this regard!
Inspections, Appraisal, etc.
Step Six… Now begins the negotiated “option period”, usually 7-10 days. Inspections are performed to ensure the property does not have any major mechanical and structural problems. Any negotiated repairs or concessions will be completed prior to closing. Once the inspection is complete, your lender will order an appraisal for the property. During this time you will also need to arrange for homeowners insurance for your new home. The Title Insurance company will provide a Commitment for Title Insurance for you to review.
Go to the Closing Table!
Step Seven… You will need to bring a certified check and picture ID to the closing at the title company. Possession of your home will occur when your lender releases funds to the seller. Typically, you will receive keys the same day, unless one party closes late in the day. In that case, you may not receive keys until the following business day. Once this is complete, the home is yours!
What Costs to Expect
Earnest Money: In DFW 1-2% of the sales price is customary but it is negotiable. It depends on the sales price. For the most part, expect this amount to be at least $1,000. In this seller’s market, I have seen it up to 4%! We need to put our best foot forward with all offers in this market!
For example: On a $200,000 property you would give the title company $2,000 to open escrow. This money is credited to you at closing as a portion of your closing costs or down payment. Earnest Money could be refundable based on provisions in the purchase contract. You should be prepared to pay at least $1,000 in earnest money. These funds will be deposited by the title/escrow company immediately.
Option Money: Depending on the price of the home this can vary but is usually at least $100 - $200 for a 7 day option period on a $200,000 property. Again, this amount can vary, especially in this current market. These funds will also be deposited immediately. The option period gives you time to have the property inspected and negotiate any requested repairs. This time period gives you the right to terminate the contract (within the prescribed # of days of the option period) if necessary and receive your earnest money back. This money will be credited to you upon a successful closing.
Inspection: During the option period you should hire an inspector to look at the property. Depending on how large the home is and the age, the price will vary. Most of the time on a home under 3000 sq. ft an inspection starts around $350. Sometimes a bit higher. You should also have a pest/termite inspection completed, usually around $75. Some inspectors are licensed to do both! I have several inspectors I can recommend!
Appraisal: An appraisal of the property typically costs between $375 and $450. You will need to pay your lender for this in advance.
Survey: The survey customarily is purchased by the buyer but is a negotiable item. A survey typically costs around $400. The seller sometimes has an existing survey we can use so that a new one won’t be necessary. This is on a case-by-case basis. We will let you know once we write the offer.
Closing Costs: These costs can be broken into 2 categories: loan items and prepaid items. Loan costs include things such as Escrow Fees, Loan Origination Fee, Prepaid Interest, Mortgage Insurance, etc. Prepaid items are put in an escrow account to build reserves for Property Taxes and Homeowner’s Insurance. Closing costs can vary from 2% to 6% of a purchase amount depending on the time of year and the loan program you are using. You should get a good faith estimate from your lender breaking down all costs involved with your purchase. These costs can be paid at closing or rolled into your financing. You will also be provided a preliminary Closing Disclosure settlement statement prior to closing. Your lender and I will make sure you are aware of these costs.
What to Expect When Viewing Homes
How many total homes should we view?
In 2019, the average buyer looks at approximately 5 to 7 homes before making an offer. With all the photos and information available online, don’t be surprised if we find the right home on our first trip. In a low inventory, seller’s market (such as we are currently in), time is of the essence! The home you looked at today and want to buy tomorrow is the home someone else looked at yesterday and will buy today! Homes in the DFW market are moving at a rapid pace and often at full asking price or above, and/or with multiple offers. If you find the home that meets your criteria, you should be prepared to make an offer ASAP! It will not be available for long!
How many homes should we view in one day?
Typically, 5-6 homes are the absolute most we should try to see in one day. More than that and you won’t remember which house was which, and confusion will set in!
Will the owner be present during our visit?
Some homes will be vacant, while others will be occupied. Either way, I will schedule all showing appointments for you. An owner or renter could be living in the home. If so, I will call ahead to give notice to the occupant and schedule the appointment so they can vacate the premise. Please notify me the day before, and I will be able to schedule the appointments for us.
What should I notice while looking at the home?
Your big focus should be on layout/floor plan, lot, neighborhood, and finish-out. Remember you will be able to have the home inspected by a professional during the option period.
What if I don’t like the home the second we walk in?
Please be honest with us and we will move on to the next home! We don’t want to waste your time with homes that do not meet your needs!
Types of Transactions
Resale – Individual Owner, Standard 30-45 day closing
New Construction – To-Be-Built or Completed, closing time varies, depending on builder/season
Foreclosure – Bank Owned, Sold As-Is, Longer response times. Typically 30-45 days, possibly longer. We are seeing less and less of these transactions in the current market in DFW.
Short Sale – “Pre-Foreclosure”, Bank must approve contract. 60-120+ days for approval. Short Sales are not for the impatient buyer! We are not seeing very many of these transactions in the current market.
For Sale By Owner – Individual Owner, selling home without using a listing agent.
Home Inspections
What is an inspection?
A basic home inspection is meant to evaluate the structural and mechanical condition of a property. It is not the same as an appraisal which evaluates the market value of a property. Persons involved in real estate transactions need unbiased information about the physical condition of property they plan to buy or sell. All inspectors should be licensed by the Texas Real Estate Commission.
Remember that every home is inspected using the most current building codes. Every home will have a laundry list of items that could use attention; the older the home, the longer the list.
The following items are our main points of concern: (“The Big 5”)
Foundation, Roof, HVAC, Major Plumbing and Electrical. The inspector is required by law to list all deficiencies in a home, but many of those items are cosmetic, minor, “Home Depot” items that the seller is not likely to repair. Remember, we are more concerned with the major mechanical issues mentioned above.
