Steps by Step Guide to Home Ownership
Home ownership can be one of the most significant investments you will ever make. It is more complicated than just finding a home you want to purchase. Real estate transactions can be complex, and provide ample room for disagreement between the parties. To successfully navigate these murky waters, it is best to work with a professional Realtor® like Kelly Jo. She will streamline the process, ensuring you have a full understanding each step of the way, making the overall experience more enjoyable.
Some preparation on your part can also help. Begin with a list of what you absolutely must find in a home, and which features are simply nice extras. This will help you to make objective decisions as you explore the homes on the market.
1. How Much Home Can You Afford?
An important ingredient in a successful home search is knowing how much you can afford. You don’t want to fall in love with a property only to find out it’s outside your price range.
Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, expenses, credit history and employment status, as well as the down payment you plan to make on a home. If this is your first home it may seem overwhelming, but it is actually fairly straightforward and Kelly Jo will be there to help you every step of the way. By knowing what you can afford, you can confidently shop within your price range. You can usually get a Mortgage pre-approval in a day and you will be glad that you did!
2. Mortgage Pre-Approval
In our current market, homes correctly priced sell quickly. You will find that there can be competing offers on a home which means the seller gets to decide which offer to accept. Because of this, it is essential to be pre-approved for your Mortgage before you begin your home search.
Here are some other advantages to getting this pre-approval:
- It gives you the peace-of-mind of knowing you can afford homes you view on the market, and won’t have problems completing the financing when you find what home you want to purchase.
- It’s a sign to sellers that you are a serious, prepared buyer – which gives you a competitive edge when making an offer.
You can arrange for a Mortgage pre-approval with your bank or other lender, or by working with a good mortgage broker. If you need help, Kelly Jo is well connected in the local community and can refer you a reputable lender.
3. Cash offers
Cash offers are very attractive to sellers, but only if you have the proper documentation to submit with your offer. You want to have your banker or financial advisor provide you with documentation verifying you have enough funds in your account to cover the purchase. This is something that to do before you begin your home search. If you happen to find the right home and want to make an offer, you don’t want to risk the seller accepting someone else’s offer because your waiting on the proper documentation from your financial institution.
4. Finding the Right Home
Over 80% of buyers start their research process on line through websites available to the general public. So, it seems perfectly logical to call the agent listed online to get more information and schedule a showing for the home. Doing this without a Buyer’s representation can put you at a significant disadvantage. The agent listed on the advertisement is the agent who represents the seller, not you as the buyer. The seller’s agent has a legal obligation to work on the seller’s behalf to get the highest price and best terms for the seller, not you as the buyer. Any information you disclose can be used against you as the buyer during eventual negotiations. Buying a home without a Realtor® to represent you would be like divorcing your spouse and relying on your spouses attorney to work in your best interest.
Some buyers assume that all the information they find on real estate search engines like Zillow, Trulia, and Realtor.com are accurate, but in fact the only live and fully accurate search engine is the Multiple Listing Service (MLS), and that is only accessible to Realtors®.
Working with a professional Realtor® like Kelly Jo will make your home search easy and enjoyable. She can help you find opportunities not listed on home search sites and can help you avoid out-of-date listings that might be showing up as available online but are no longer on the market. She is well connected in the local community which also gives her access to homes not listed. You wouldn’t want to miss out on what could be your dream home because your relying on outdated online information. You can depend on her knowledge and experience to skillful find homes that meet your criteria, reducing your efforts and maximizing your time.
5. Making an Offer
So you’ve fallen in love with a property that meets your needs and your wants—and it’s within your price range. It’s time to make an offer!
You don’t want to low-ball your offer, and risk losing the home to another buyer or insult the seller—but you also don’t want to pay more than is necessary. So how do you land on the ideal number? You can rely on Kelly Jo’s expertise and knowledge of the market to guide you.
Kelly Jo will draft the purchase agreement where you will specifying the offer price, proposed down payment, and any contingencies, such as a satisfactory inspection report, arranging financing, and insurance. She will thoroughly review everything with you before you sign, and submit it to the seller’s agent.
The seller may reject the offer outright, accept it as is, or respond with a counteroffer. A counteroffer accepts some or most of the offer terms, but suggests changes to others, such as a higher price or a closing date that’s sooner than the buyer proposed. Kelly Jo will be negotiating on your behalf throughout this process.
The purchase agreement becomes a legally binding contract when all parties accept a final offer. Your agreement will contain key terms of the sale, such as the agreed-upon price, contingencies, financing terms, dispute resolution, and closing date. Once the contract has been signed the initial escrow deposit is made by you, the buyer, the escrow period begins.
6. Escrow Period
Escrow is the time period between signing the purchase agreement and closing on the house. An escrow or title agent, a neutral third party, will serve as intermediary and supervise the process (preparing title reports, processing loans, removing buyer contingencies, and so on). Kelly Jo will be in communication throughout this process with you, the title company, and the sellers agent to ensure the process is moving forward.
You, the buyer, typically have a lot more to do to complete this process than the seller. By the close of escrow, you will need to remove all contingencies by finalizing financing, have the house appraised (typically required by mortgage lenders), get title insurance, and homeowners insurance, all within the timeline set in the purchase agreement. Kelly Jo will be with you every step of the way. If any issues arise that require negotiating, such as who will pay for repair problems identified in an inspection report, she will step to negotiate with the seller an acceptable agreement. If a resolution is not agreed upon within the set deadlines, you may have the right to back out of the deal.
7. Title Insurance Process
After the purchase contract is signed between you and the seller and the initial escrow deposit is made by you, the lender (if the transaction is being financed will submit a request for title for the closing. If the transaction is cash. Kelly Jo will submit the request.
- What is a title?
When you purchase a home, you are really purchasing the title to the property, which is the right to occupy and use the space. That title may be contested based upon past rights and claims asserted by others. These types of claims can cause you to lose money or even worse, lose your home.
- What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property.
- What kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions, which include, but not limited to, unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
- Are there any problems that a title search cannot reveal?
Yes. There are some “hidden hazards” that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other “hidden hazards” include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names, clerical errors in the records and many more.
These defects can arise after you’ve purchased your home and can jeopardize your right to ownership. “Title insurance” protects your right to ownership.
8. Title Insurance
There are two types of title insurance: owner’s title insurance, called an owner’s policy, and lender’s title insurance, called a loan policy. Most lenders require a loan policy when they issue you a loan. The loan policy is usually based on the dollar amount of your loan. It only protects the lender’s interests in the property should a problem with the title arise. The policy amount decreases as you pay down your loan and eventually disappears as the loan is paid off. It does not protect you as the buyer.
An owner’s policy is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts for as long as you have an interest in the property. Only an owner’s policy protects the buyer should a covered title problem arise. Possible hidden title problems can include:
- Errors or omissions in deeds
- Mistakes in examining records
- Undisclosed heirs
An Owner’s Policy provides assurance that your title insurance company will stand behind yo monetarily and with legal defense if needed if a covered title problem arises after you buy your home.
9. Contingency Removal
The standard home purchase contract lists several conditions that must be met before the closing will take place, covering issues like financing, inspections, insurance, and more. These conditions are called “contingencies.” They’re important to give you, the home buyer, an out if, for example, your financing falls through or other unforeseen events or discoveries create barriers to finalizing the deal.
You, as well as the home seller, may ask that a number of these contingencies be included in, or added to the, written purchase contract, but they are not required and, in some cases, not recommended. Kelly Jo can advise you and answer any questions about what contingencies you may want or need, or the benefits of excluding them.
If the contract is written and agreed up with contingencies, the contract will include a specific timeline to remove, essentially completing the tasks, from when the contract signing to the final “closing” of the deal. During this time period, you and the seller will be working hard to meet or remove the various contingencies. Kelly Jo will be there every step of the way and will communicate with you, the seller’s agent, and the title company to ensure the process is moving forward. If either of you fails to meet or remove a contingency, you can either call off the purchase or renegotiate around the issue.
10. The Home Appraisal Contingency
A home appraisal contingency is a condition that protects the buyer. It is used to ensure the property is valued at a minimum, specified amount. If the property does not appraise for at least the specified amount, the contract can be terminated and the earnest money, in many cases, is refunded to the buyer.
If you will be financing, a home an appraisal will be required by your lender. In this situation, the lender will choose the appraiser and you will receive a copy of this appraisal within three days of completion. Even if you do the necessary research and make a smart offer on a home, there’s a chance the mortgage appraisal will come in lower than the purchase price.
If the appraisal comes in low and the seller refuses to lower the price, if the purchase agreement was written with an appraisal contingency, then the buyer can exit the contract and reclaim any earnest money deposit that was made.
Cash buyers can also include an appraisal contingency to have the same protection.
11. Home Inspection Contingency and Repairs
The next step in the purchase process is to complete the property inspection. Inspections are optional for buyers but are highly recommended so you are aware of the condition of the home and of any issues or potential issues. These inspections must be completed by a certain date, which is called the inspection contingency date, as indicated on the contract. Kelly Jo has a list of qualified inspectors she will share with you. Because inspections are so important, the companies she uses are licensed in Florida, have National/State certifications and training, and carry general liability insurance including Errors & Omissions coverage.
As a buyer, you are responsible for paying for the inspection. The benefit of this is that they are working on your behalf to uncover any issues or potential issues that may arise. A typical inspection will check the following areas:
- Structural Components
- Indoor plumbing
- Interior electrical systems
- Heating and cooling systems
- Condition of windows
- Condition of doors and frames
- Condition of floors, walls and ceilings
- The attic and any visible insulation
- Condition and age of the roof
Additional inspections can be ordered. Some buyers order an indoor air quality inspection, mold, soil, termite, and energy evaluations. It is recommended to order these from a specialist, as additional training is required to provide the most accurate information. Kelly Jo knows several quality companies for each if a referral is needed.
Kelly Jo will meet the inspector at the home prior to the inspection and share any concerns you have to this point. She will stay with them throughout the process taking notes that she will share with you. You will also receive a complete inspection report from the inspection company, which she will go over with you to answer any questions. You are welcome to attend the inspection but are not required to so.
Based on the outcome of inspections, you may elect to ask the seller for repair work, closing cost credits, or a reduction in the sale price due to flaws that were uncovered. Kelly Jo will present and negotiate with the sellers agent for the resolution most desirable to you as the buyer. Sellers have three options: agree to all of the buyers requests, offer a modified solution back to the buyer, or decline to make any amends. In response, the buyer can continue to negotiate, accept the seller’s position, or as long as they’re within the due diligence period, end the transaction and recoup their earnest money without penalty.
Other contingencies are less the norm, and become a matter for negotiation. For example, the seller might ask that the deal be made contingent on his or her successfully buying another house. If you need to move quickly, you can reject this contingency or demand a time limit. Likewise, you can request that the deal be made contingent on your successfully selling your house; but in a slow market, where it might take you months to sell, the seller is liable to balk at this.
Home warranties are an additional item purchased to cover major appliances from failure. Typically the coverage lasts a year and the warranty can be purchased by either party.
12. Financing Contingency
A financing contingency is also a common in a purchase contract when a buyer in financing. The buyer has a specific amount of time to secure an acceptable loan or other financing to purchase the house. While it was once assumed that the buyers would get a loan, credit has tightened up in recent years, and enough loans fall through at the last minute that sellers have become nervous. As a result, sellers now tend to favor buyers who can make all-cash offers, leave out the financing contingency (perhaps knowing that, in a pinch, they could borrow from family until they succeed in getting a loan), or at least prove to the sellers’ satisfaction that they’re solid candidates to successfully receive the loan. This is why the pre-approval process is essential before making an offer.
The closing process itself usually takes place at your Realtors® office or the lenders office, where buyers sign all documents related to their loan and the transaction itself. A final cash figure for what a buyer needs to bring to the closing in the form of a cashier’s check is calculated. This is based not only on a mortgage’s closing costs but factors like property taxes and utilities paid in to date by the seller. A final walk through will often be performed the day of or before closing to verify the property is in the same condition it was when the process began.
At the closing, or settlement table, the buyer and seller sign all closing documents, and the final loan documents. The buyer pays the remaining funds in their down payment via cashier’s check. The representative from the title company or your attorney will then record the transaction and deed with the appropriate municipality.
After all documents are signed and payments exchanged, buyers generally take possession of the keys unless a separate agreement has been reached to allow the seller to stay in the property for a period after closing.
Purchasing a home can be a complicated process if you don’t have a Realtor® representing you. A long time Jupiter resident, Kelly Jo knows the local market well. Choosing her as your trusted advocate will help you find and buy your ideal home, quickly, and make the entire process go smoothly for you. The home buying process is stressful enough without worrying about who you can and cannot trust. Imagine the comfort knowing you made the right decision when she hands you the keys to your new home!
Ready to Get Started?
To begin your home search, simply contact Kelly Jo to schedule a personal consultation so that she has a full understanding of what you need and want in a home. You can contact Kelly Jo directly at 561-906-0336, email firstname.lastname@example.org, or submit the form below and she will contact you at your earliest convenience.