Buying Real Estate Process
Step-by-Step Process for Buying a Home in Maryland
When it comes to buying a home, trying to figure out what comes next and what you need to do as a home buyer or seller is very difficult! Sue will tell you up front what you can expect. Below is an outline of the home buying process.
1. Select Your Agent Buyer's Agent
As a home buyer, you should choose a Realtor® to represent you and that Realtor® should:
- Be able to explain the different sources of homes for sale (i.e., VA and HUD homes, Multiple List Service (MLS), For Sale By Owner (FSBO) and how the buyer may be able to purchase a home from the different sources;
- Have detailed knowledge of all programs offered in your geographic area of interest (including first time home buyer and foreclosed home specific programs) that may benefit the buyer;
- Be able to compare and contrast the applicable loan programs when applied to purchasing a specific property;
- Be able to accurately estimate closing costs by hand (not by computer);
- Be a full-time real estate agent or broker.;
- Have an Internet website presence;
- Utilize a contract of sale form generating software program;.
- Have a step-by-step outline for the buyer to follow as the buyer progresses through the process of purchasing a home.
As a home buyer, you should sign an "Exclusive Buyer Agency Agreement." The agreement specifies the duties owed by your Realtor® and ensures buyer's representation throughout the home buying process. The agreement also establishes fiduciary and confidential information responsibilities of the Realtor® to the buyer and identifies the terms under which the Realtor® works for the buyer. The agreement should state that the buyer's agent accepts the fee published in the Multiple Listing as the buyer's agent fee.
The home buyer shall provide the Realtor® with an earnest money deposit (generally $500.00 or more) to be held in the broker's escrow account, to be used toward the buyer's down payment and closing costs.
The Realtor® should educate the home buyer on the varying types of mortgages, sources of homes for sale (including foreclosures and forfeitures), the steps for buying a home, down payment and earnest money requirements for the different loan programs and special programs available for first-time home buyers.
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2. Mortgage Pre-Approval
The buyer should select a lender and coordinate with the buyer's agent to obtain a pre-approval status. The lender will inform the home buyer of all the required documentation and will discuss with the home buyer the source and amount of funds necessary for closing.
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3. Select Your Home Buying Team
The home buyer should select a title company or closing attorney to conduct the settlement of the home to be purchased.
The home buyer should also select a home inspector. The home buyer will also later decide if he/she is going to purchase a home warranty which is partially based upon the home inspector’s findings. The home buyer must select a pest inspector and home/hazard insurance agent; and, if necessary, a heating oil tank inspector, well and septic testing companies if required by lender; and radon, radium, environmental or any other inspection/testing company desired by the home buyer.
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4. Begin the House Hunting Phase
The home buyer must drive by all of the homes of interest from the various sources of homes for sale (including HUD and VA). Don’t expect your Realtor® to drive you around. You will need more time than your Realtor® will be able to provide in order to check out the neighborhood, talk to the neighbors, consider commute time to work, school systems, location of the nearest hospitals and sports complexes, to name but a few.
You will select some homes of interest to visit and tour inside. Your buyer’s agent will make the appointments with the listing Realtor®, take you for a tour inside the home and provide you with any additional information about the home that you may not have seen.
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5. You have found the home of your dreams!
Following these steps will ensure a smooth transaction:
- The home buyer discusses possible financing options with his or her buyer’s agent for purchasing the chosen home and selects a financing program;
- The buyer’s agent and the buyer formulate a contract game plan as the basis of constructing an “Offer to Purchase;”
- The Realtor® discusses the different possible financing programs available to the buyer to purchase the selected home;
- The Realtor® discusses the different types of inspections that are required to be performed and those the buyer might want to consider if potentially beneficial in purchasing the selected home;
- The Realtor® estimates the closing costs for the buyer, determining total funds required for purchase;
- The Realtor® suggests contingencies for finding your home of choice, financing, the settlement date, selling your current home, home owner warranty options and seller-paid closing cost help that could be negotiated as part of the offer;
- The Realtor® drafts the “Offer to Purchase” for the home buyer’s signature;
- The Home Buyer signs the closing costs estimation worksheet and the Offer to Purchase. The Realtor® provides documentation for the home buyer’s earnest money deposit. The earnest money deposit usually ranges from $500.00 to 5% of the sale price, depending upon the source and type of home. Your Realtor® will advise you.
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6. Negotiating the Offer to Purchase
Your Realtor® delivers the Offer to Purchase to the seller’s real estate agent or the seller in the case of HUD, VA or a for sale by owner (FSBO) and coordinates the negotiation with and on behalf of the buyer.
Counter-offers made by the seller may be returned to you if your offer was not exactly what the seller wanted. Remember, the seller is probably a nice person but use your Realtor® to do your negotiating. If you are not skilled in negotiating an Offer to Purchase, you may give away money and/or concessions that you might not have had to, if only you had let your buyer’s agent do the negotiating. If you get a counter-offer, review the counter-offer and accept it, counter their counter-offer or reject it and look for another home.
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7. So, Your Offer Was Accepted - Now Put Your Home Buying Team into Action
The Realtor® will deliver copies of the ratified contract to the home buyer, the buyer's lender and title company that had been selected earlier.
The home buyer makes loan application with their selected lender, ensuring that the lender understands the financial game plan and the contingency(ies) used in the contract. The buyer pays the lender's fees for an appraisal and full mortgage credit report.
The Realtor®, if asked by the buyer, will schedule all of the appointments on the home buyer's behalf with the selected home inspector, pest inspection vendors and any other inspectors desired by buyer.
The buyer's agent will meet with the home buyer at the property to conduct the inspections.
The home buyer will coordinate with the selected insurance agent to obtain a home owner's home insurance policy for coverage required by the home buyer's lender no later than 10 days prior to closing.
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8. Preparation for Closing or Settlement Day
The Realtor® shall conduct a walk-through of the home with the buyer on the day before or the day of settlement, ensuring that the home is in the same condition as when originally contracted. Unrepaired damage in the home sustained in the moving process by the seller or from other causes can be an issue requiring further negotiation. Ensure that all the appliances are still working and that everything is in order as expected.
The home buyer will be required to obtain a check for certified funds or cashier's check for the balance of funds required for closing. A personal check for any funds owed by the home buyer at settlement will not usually be accepted by the settlement agent.
The buyer's agent, buyer, seller and seller's Realtor® shall attend settlement. This is the final step. All fees are calculated, accounts adjusted and credit/debits documented on the Housing and Urban Development Settlement Sheet also known as the "HUD-1." All invoices from the different vendors, the lender and title company are signed and officially executed. The outstanding balance of funds as "cash due from buyer" is to be paid by the home buyer at closing. The title company shall refund any monies due the home buyer, should the home nuyer provide an amount greater than that owed.
Final Thought: Always remember that the Contract of Sale is the written document that expresses the "meeting of the minds" between the home buyer and the seller. If you are not sure about any phase of the process, ask your Realtor®. Your Realtor® is your guide, source of knowledge and expertise whose sole purpose is to make your home buying experience as comfortable, knowledgeable and enriching as possible as you progress through what should be a wonderful experience in your life. GOOD LUCK!
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