1. You will begin by selecting a lender. Your lender will be able to provide you with the essentials such as: The price of the home you can afford, the down-payment amount that you can afford, your FICO scores, and a pre-qualification letter. Each of these items will be needed before you can place an offer on a home. If you do not already have a lender I can refer you to one.
2. At this point, you and your agent can begin the home search. Your agent will use your target price to search the area(s) that you are interested in. While your agent is searching through the MLS, it is highly advantageous for you to be searching as well. Websites such as zillow.com are great resources for buyers who want to have a hand in the search process. In general, buyers who are active in the search process find a home faster because their research ends up teaching them a great deal about the Real Estate market.
At first, your agent will forward you a list of homes in the area(s) that fit your description and fit your price range. You will schedule a time to view these homes with your agent. Normally, you can view several houses in one day. This process will begin to give you and your agent a detailed picture of the kind of home that is going to work for you.
Once you have found a home that you love, you will be ready to make an offer. If you do not find a home after you have combed through the area(s), it will be up to your agent to do a daily search for new properties on the market. If a new property that fits your description and price range does come up, you will schedule a time to view the property as soon as possible with your agent. If you make it to this point in the search process, you will need to remain flexible and prepared. It is horrible to find out you could have had a chance at a home that is now sold, if you only made the time to view it the previous day.
3. Once you have found the right home, you will make an offer. The offer is a purchase contract that dictates the terms of your offer such as the price, your loan type, the terms of escrow, and other details. You will sign this offer, and your agent will present the offer along with a copy of your pre-qualification letter, copy of your Proof of Funds (normally a bank or money market statement that shows you have enough funds for your down payment), and copy of your FICO scores. You will also need to write a deposit check to demonstrate the seriousness of your offer. A copy of this check will be attached to your offer. The deposit check may be different for each home. Typically, a strong deposit on a home is 3% of the list price. As a result, if you are placing an offer for a $300,000 home, you will write a deposit check for $9000. If your offer is accepted, this check will be deposited into escrow and count towards your down payment on the home.
4. Once your offer has been submitted to the seller, you will wait for a response. The response time is different depending on the type of sale. Normally, a seller has 3 days to respond to your offer before it expires. If you are offering on a home that is a Standard Sale, the response time could be within this time frame If you are offering on a Foreclosure, the response time may take longer because your offer needs to be viewed by the lender who owns the Foreclosure. If you are offering on a Short Sale, the response time could be a few weeks to several months. As a result, once you place an offer on a Short Sale, you will want to continue viewing properties and can choose to make additional offers on other properties. You can make several offers on Short Sale properties at the same time. This is because you are not locked into the purchase of a Short Sale until it has been approved by the Short Sale negotiator.
5. Eventually, you will receive a response from the seller. Either your offer will be rejected, accepted, or you will receive a counter-offer. A counter-offer is good because it demonstrates the seller is interested in your offer, but wants to negotiate. The seller may choose to counter the price of your offer or any other terms. If you are uncomfortable with the seller's counter-offer, you may choose to reject it. But you may also choose to then write a counter-offer of your own to the seller. Once the terms of the sale are agreed upon by both parties, your offer will be accepted, and escrow can be opened.
6. Once escrow is opened, many things will be set in motion simultaneously. Your deposit check will also be placed into escrow, and the signed purchase contract will be received by escrow and dictate the terms of the sale. Within a few days, you will receive escrow instructions for you to sign and send back to escrow. Once escrow receives your instructions, they will send them to your lender along with a copy of the preliminary title report of the home, as well as the estimated closing costs. Your lender will use these documents to begin working on approving your loan.
7. At this point, your agent will have scheduled an inspection of the home. A home inspection is not required, but highly important. If you choose not to have an inspection, you could be purchasing a home that has problems that you are not aware of. The inspection is normally paid by you on the day of the inspection, and can cost any where from $200 and upward depending on the size of the home. The inspector will evaluate and access every part of the home for you. If anything is wrong, the inspector will list it in a comprehensive report that will be given to you once it is completed. You and your agent will evaluate the inspection report and may choose to submit a Request for Repairs to the seller. The seller will make the repairs that you request or send you a counter stating which repairs they are willing to make. You will then negotiate until both the seller and you have reached an agreement on repairs. If the seller refuses to make any repairs, you have the right to pull your offer and not purchase the house.
8. During escrow, the seller will be required to do a termite inspection on the home. This inspection is required before the property is transferred to you. A licensed termite inspector will evaluate the property for termites and let both the seller and you know if termites have been found, the cost to treat them, and any necessary repairs. The seller will be required to pay for the termite treatment and repairs. The extent of termite repairs may also be negotiated before they are completed.
9. One of the most important parts of escrow may be the Appraisal process. Before your lender can approve your loan, they need to send a licensed Appraiser to the property to assess the value of the home. The value that the Appraiser gives the home is crucial to moving forward, and has successfully shut down many purchases in our present Real Estate Market.
If you have agreed to purchase a home for $300,000, your hope is that the appraisal will come back at $300,000 or more. If it does, your loan will be able to move forward for approval. If the appraisal comes back below $300,000, your lender may not approve your loan. At this point, the seller will need to bring down the purchase price of the home to the appraisal price. If the seller does not do this, you may choose to add additional cash-out-of-pocket to cover the difference, or you may choose to back out of the deal.
The appraisal process is precisely why it is so important that your agent do a Comparative Market Analysis on the home you are purchasing so that you have a reasonable estimate of what the home might appraise for.
10. Once the inspection, termite, and appraisal are completed, your lender will check to see that all their requirements are satisfied. Once the lender requirements are satisfied, your loan can move to approval.
Loan approval is always a joyful day for any buyer because it means that closing escrow on your new home is right around the corner. Escrow will call both the seller and you to sign your closing documents. Once they are signed, your loan will Fund. This means that the funds for the purchase of your home will be transferred from the lender to escrow, then from escrow to the seller. After the loan funds successfully, title for the home will be recorded in your name. Recording normally happens the day after funding. Once Recording is complete, the home is yours. Your agent will be free to give you the keys unless the seller has negotiated time to move out after close of escrow.