Buying Procedure and Steps
(These are generally practiced steps, exact details in binding purchase contract signed later).
1) Select an Agent
2) Get Preapproved – does not mean you get a lender, just means you have a letter to submit with your offer later. Important for closely bided properties.
3) Screen properties on MLS via updates that agent will send you.
4) Work with Agent to see units. When a unit is selected, make an offer. If offer not accepted, repeat step 3) and step 4). Offer contains all terms and requests.
5) If offer accepted, submit earnest deposit (3%) in 3 biz days to Escrow company.
6) Within 1-17 days (depending on contract), apply for a loan, arrange for home inspection, view HOA documents, arrange for pest inspection, thus completing due diligence. If due diligence fails, we go back to step 3) and 4).
7) After due diligence, any cancellation will mean loss of deposit.
8) As per days stated for closing (typically 14 – 60 days), work with loan underwriter to get the loan approved.
9) Conduct a final walkthrough inspection when escrow is about to close ie. about 5 days before close.
10) Sign loan documents at Escrow Company, final cash down payment, collect keys.
a)You need to have funds seasoned for 60 days in your bank account prior to purchase.
b)During escrow, NEVER buy any big item on credit that can affect your credit report.
c)Shop around for rates, wholesale rates are lower than retail. Contact us and we can help you get competitive rates.
Frequently Asked Questions
What does the buying agent do? Why do we need representation?
The agent is here to help you with a complicated process that includes:-
Preparing the initial offer (there are 32 signatures required on that paperwork alone) along with proof of funds and a preapproval letter.
In this market it is not uncommon to go through three of four counters before getting to the final deal.
Once the offer is accepted the agent would:
Recommend great inspectors for the home (general, sewer, chimney, roof).
Coordinate timing for all inspections.
Negotiate the escrow company fees on your behalf.
Negotiate the repair request.
Review your title and get any unresolved issues answered prior to contingencies being released.
Negotiate with your lender to give you a promissory note before you release your loan contingency.
Make sure the seller has given you all disclosures and that you understand the potential issues with the home
Please note that the buying agent service is FREE.
I am a 1st time home buyer, what should I do?
Once you've settled on a couple of preferred neighborhoods for your home search, it's time to pick out a few homes to view. Having a house features “wish list” keeps you focused on which features are most important to you.
When narrowing down your home search, consider the following:
-know what types of home you want to buy
-determine what age and condition of the house you want to buy
-consider resale potential
-use a features wish list to keep focused
-use a home search comparison chart to keep organized
-act decisively when you find the right home
What types of homes are out there?
There are several forms of home ownership: single-family homes, multiple-family homes, condominiums
Single-family homes: One home per lot.
Multiple-family homes: Some buyers, particularly first-timers, start with multiple-family dwellings, so they'll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.
Condominiums: With a condo, you own "from the plaster in." You also own a certain percentage of the "common elements" - staircases, sidewalks, roofs, etc. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowner’s association administers the development.
Co-ops: In some cities, cooperative apartments are common. With co-ops, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own unit. A board of directors, comprised of owners and elected by owners, supervises the building management. Monthly charges include your share of an overall mortgage on the building.
Should I buy new?
Weigh your needs, budget and personal tastes in deciding whether you want to buy a newly constructed home, an older home or a "fixer-upper" that requires some work.
Should I worry about resale?
As you look at homes, you may want to keep in mind these resale considerations.
One-bedroom condos are more difficult to resell than two-bedroom condos.
Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore have less appreciation potential.
Homes with "curb appeal," i.e., well-maintained, attractive and with a charming appearance from the street, are the easiest to resell.
The most expensive houses on the street, or ones with anything unusual or unique are not suited for resale. The best investment potential is traditionally found in a less expensive, more moderately sized home.
Use a Features Wish List to Keep Your Search Focused
Make a features wish list to clarify which features are most and least important to you when looking for a home. Using this features wish list will keep your house hunt focused and effective.
Use a Home Comparison Chart to Keep Your Observations Organized
While house hunting, it's a good idea to make notes about what you see because viewing several houses at a time can be confusing. Use a home comparison chart to help you keep track of your search, organize your thoughts and record your impressions.
Should we take our time?
Before you begin the home buying process, resolve to act promptly when you do find the right house. Every REALTOR® has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then said, "We always promised my Dad we'd sleep on it, so we'll make an offer tomorrow." Many times the story had a sad ending - someone else came in that evening with an offer that was accepted.
Resolve that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or underpriced.
Should we list out property ourselves or have an agent help us sell it?
Obviously the bottomline is cost. Although you have have some upfront commission cost savings if you try to sell your property yourself, you may not be getting the best price through maximum exposure. Why have an agent? The agent is able to market your property better on the MLS and in doing so, may justify the price you are asking for easily by finding the right buyer.
What is the selling process?
First engage an agent and then the agent will advise on pricing and staging the property for the correct buyer.
Choosing the right escrow company is important as well. Here at Stanford Raffles Realty, we offer an in house escrow which means you save time, money and hassle. At the end of escrow, we can help you do a 1091 exchange if you are buying a new property or assist you with the paperwork required for a smooth transaction.
What is the Escrow process?
New homebuyers may be confused by the concept of escrow in part because the term can refer to (at least) two different elements of a real estate transaction.
Typically, an escrow account refers to funds held by a neutral party to be distributed when certain conditions are met. Involving a third party means that the person in charge of the money has nothing to lose if the transaction goes one way or another, and thus insures everything is handled fairly.
However, it adds an extra layer of complexity to a real estate transaction; which may well leave first-time homebuyers a little lost. If you’re not sure how that comes into play in your home hunt, that’s okay. We’ll break down exactly what escrow is and what it means for your home purchase.
Putting earnest money in an escrow account when buying a home
The first time you’re likely to run into the concept of escrow is when you make an offer on a home. You’ll be asked to put down a certain amount of earnest money (think of it as a deposit) to tell the seller you’re serious about buying.
This money is typically held in an escrow account by the title company or real estate broker, though who holds it varies depending on state law (it will, however, always be in the hands of a third party).
The money remains in escrow while the purchase is negotiated to completion, and closes when certain conditions have been met. Additionally, the earnest money the buyer deposits can also go towards the down payment or other closing costs.
The conditions involved in escrow can vary depending on what both the buyer and seller want. These conditions can be as simple as closing when the title is transferred to the buyer, but may also include things like:
The house passing an inspection.
The seller making specified repairs.
The seller being able to stay in the house for a certain period of time (perhaps after closing).
When the conditions are met, your escrow closes. You should expect to have a specific appointment with your escrow officer where both buyer and seller will have to sign paperwork (again, the specific requirements vary from state to state).
At this point, the title is transferred to the buyer and the sale price of the home is transferred to the seller.
If the conditions are not met, and the deal falls through, the money goes back to the buyer—usually minus a small cancellation fee.
Funding an escrow account with your mortgage payments
Once the buyer and seller have come to an agreement on the purchase of the home, you’ll probably hear your mortgage lender talking about escrow—which is similar, but different, from the escrow account you opened while negotiating the purchase.
In this case, you make escrow payments as part of your mortgage payment (though you may need to put a large initial payment towards escrow immediately after your purchase).
This extra money goes into an escrow account in order to pay property taxes and homeowner’s insurance. This kind of escrow is often required by your financial institution to be sure the property they’re lending you money for is taken care of.
Having escrow bundled into your mortgage makes it easy to budget for taxes and insurance, because you’re paying a bit every month. How much you pay depends on the cost of taxes and insurance, and it can vary from month to month, and year to year, as costs go up or down. However, your mortgage payment might fluctuate over time as a result of these external expense adjustments—especially if your costs rise unexpectedly (for example, if your home appraisal has gone up significantly).
While escrow definitely makes it more convenient to pay for taxes and insurance, it’s not always the smartest financial move. Money you’ve put in escrow is out of your reach and doesn’t earn any interest. Your lender will probably maintain a cushion of extra cash in order to ensure there’s always enough to meet expenses, so you could certainly be doing more with your money.
If you’d rather opt out of an escrow account, you’ll have to negotiate it with your lender. You may be required to put down a larger down payment, or meet other conditions. Most lenders will want at least 20% down (80% LTV), and will additionally charge a 0.25% Loan-Level Price Adjustment (LLPA) to waive escrows.