Property Virgins!

Buying your first home should be a very exciting and rewarding experience. After all, you are buying a place that you can finally call and make your own. While everyone dreams of the results after closing, rarely does anyone relish the experience of purchasing their first time. It can be a very confusing and frustrating experience if you’re going at it alone or working with someone who doesn’t have your best interests at heart.

We have compiled this first time home buyers section to provide you with information on the home buying process and resources to assist you along the way.

Steps in the Home Buying Process

Buying a home involves more than just a buyer and seller. Involved in every transaction is a small army of people comprised of real estate agents, mortgage bankers, attorneys, appraisers, surveyors and inspectors. Below is a flow chart of a normal real estate transaction.

Hiring the Right Real Estate Agent

Finding the right real estate real estate consultant to aide you in the purchase is absolutely critical to ensuring that you, not only get the home that you want, but one on terms that are acceptable to you.

Often times, home buyers will start their home search looking for a home, contact the agent on the sign or in a real estate magazine and start the home search process there. That could be a huge mistake!

Why?

The agent on the sign or in the real estate magazine has already agreed to represent the sellers interest in the real estate transaction. By law, they are obligated to share any information that you have shared with them with the seller, regardless of confidentiality.

In North and South Carolina, the agent that represents the seller (or anyone in their firm since it’s the firm that represents the clients not the individual agent) may also agree to represent the buyer in a situation called dual agency. However stop for a second.

If the seller’s agent agrees to also represent you as a buyer in the same transaction, who do they represent at that point?

The best solution is to schedule an in-office appointment with a real estate consultant before ever looking at a home and discussing personal information. That way, they can share information about the home buying process with you (specific to your type of transaction).

A few questions you may want to ask are:

• How long have you been in a Realtor® in my area?
• How many first time home buyers have worked with recently?
• What is your niche?
• What tools do you have available to aide in the home search?
• How many [the type of property you're looking for] have you sold?

We do not charge buyers any up-front fees to employ our services. Our fees are paid for from the Seller’s proceeds at closing.

Let the House Hunt Begin!

With Realtor® and mortgage pre-approval in hand, it’s time to begin the hunt for your home. During your buyer consultation, your agent should have asked you a series of interview questions to get to know your needs, wants, and desires. Sometimes this can be tedious however we have found it very useful in getting to know our clients. After all, chances are at the start, we’re not lifelong friends but hopefully we are at the end.

Your agent has access to thousands of real estate listings via the Charlotte Multiple Listing Service (the MLS). They have the ability to insert a series of criteria into the system and allow it to generate results every a new property that matches your specs is listed.

The MLS contains bank-owned homes (foreclosures), short sales (pre-foreclosures), HUD homes, relocation homes, estates, and more. Sites like Trulia, AOL, Yahoo, Google, and Realtor.com all gather their home sales data from local MLS sites from across the nation.

Our website has a section for buyers to search for that next home on their very own. If a home is listed with a real estate agent between Great Falls SC and Statesville NC, it’s on our site. The interactive mapping feature makes it easy to spot a home in a particular geographic area or neighborhood. Signing up is simple and once registered, you can set up a search that will email you when a home matching your criteria is available on the market.

When a home you like is found, simply make contact with your agent for an appointment.

Making An Offer

Once you’ve found the perfect house for you, the next step is to make an offer. At this time, if you have not been asked to sign an agency agreement with your real estate agent, this is when you will be asked to do so. This enables your real estate agent to negotiate on your behalf and at your specific direction and guidance.

While each contract is different, here are the basics of what every contract will have:

Purchase Price:
This is the price you are willing to pay for the home. Don’t just guess at this number as if you offer too much the home will not appraise and if you offer too little, you’ll run the risk of insulting the seller. Your real estate agent should provide you with comparable properties as well as trends to where the market is headed. From that, you can determine what to offer on the house.

Earnest Money or Due Diligence Money

Earnest Money and Due Diligence Money are funds deposited at the time of contract and are either applied to the sales price at closing or released to either the seller upon termination of the contract. Due Diligence Money is very different from Earnest Money.

Earnest Money is deposited with either your real estate broker or closing attorney at the time of contract. Depending on circumstances, earnest money can be refunded to the buyer if the closing does not occur and it is no fault of the buyer.

Due Diligence Money is paid directly to the seller at the time of contract and is non-refundable. As a buyer, you have the right to cancel the contract during the due diligence period without fault or future obligation. Essentially you’re buying time.There’s not a set amount required at the time of contract so it can be negotiated at the time of contract. In our experience, since Earnest Money is viewed as “good faith” money by the seller, an offer with a larger Earnest Money deposit is taken more seriously than smaller amounts.

Tip: Bank owned, HUD, and short sales do not collect Due Diligence Money.

Proposed Financing Terms:

Most sellers will want to know whether you, as the buyer, are qualified to purchase their home before deciding on your contract. Therefore, included with your offer will be an approval letter from a reputable lender. During that approval process, the lender will state the terms proposed for the financing you have been approved for.

Inspection Period

Once under contract, you will be requesting time from the seller to complete a series of home inspections. This is on your dime and needs to be figured into the closing costs / cash on hand needed to close. You should estimate that a basic home inspection will run around $400 – $500. If you choose to have radon and mold testing performed, the inspection costs can double.The inspector is paid up front and the inspection fees are non-refundable if the sale of the home falls through.

Included Personal Property:

Items that are free-standing or otherwise not included with the home. This includes the washer, dryer, and refrigerator.

Excluded Fixtures:

Items attached to the home in an “permanent manner” that are ordinarily included with the sale but are not. This includes curtain rods, plasma tv mounts (but not the tv), in-wall speakers, light fixtures, blinds, etc.

Closing Date:

The date you intend to take possession on the home.

Other Contingencies:

Item or action that must be completed prior to the close date to make the sale occur.

The Due Diligence Period

Once we have an agreement between buyer and seller, the home is officially under contract. At this point, the “Due Diligence” period begins which allows the buyer a set time period (negotiated in the contract) to perform any inspections, appraisals, research anything that might prevent them from ultimately purchasing the house. If, as a Buyer, your feelings about the house change during the Due Diligence period, you can terminate the contract without recourse from the Seller. Once the Due Diligence period has lapsed, the Buyer risks losing their Earnest Money Deposit.

During the Due Diligence Period, you should:

Meet with your Mortgage Lender

Typically within 3 days after the home is under contract, you will want to meet with your lender and provide them the documentation that they need to complete your loan application. This also means that you will need to pay for any up-front charges such as a credit report, appraisal, or any other application fees. Some lenders are moving this process up ahead of the contract, making a satisfactory appraisal the only contingency outstanding after a home is under contract.

At this time, your lender should also provide you with a Good Faith Estimate (GFE), which details the charges and other fees associated with your home purchase. Keep this document because if the fees at closing increase too much from the GFE, your closing will be delayed.

Home Inspection

Within the first week of the contract period, you will hire a licensed home inspector to inspect the home for items that are in need of repair. Every home is in need of repair and generally speaking, most contracts have limits on what the seller is obligated to repair. A termite or pest inspection is typically not included in your standard home inspection and some lenders do not require this inspection as well. However it is a very good idea to spend the additional money required for a termite inspection as termite and pest damage is extremely costly.

Other items you can test for are mold, water, septic, and radon. Often times, these additional inspections can add up to more than a basic inspection. If you need a recommendation of a licensed home inspector, your real estate agent can provide one for you.

Survey

A survey is an optional assessment that will detail if there are any encroachments on the property that you are looking to purchase. Homes with fences, sheds, detached garages, barns, etc generally have encroachments so it may be worth the extra money to have a survey performed. Also, if you’re planning to add any of those items or expand the footprint of the home, you will want to have one completed to ensure that you can do as you’re intending.

Appraisal

The appraisal protects the bank from over-lending on a property. Once you have paid your pre-paid fees to the bank, the bank will send an appraiser out to evaluate the property value in relation to your purchase price.

Tip: Appraisers have full knowledge of the contract terms before completing their analysis and most guidelines state they are only to appraise up to the contract price. Therefore, don’t be surprised that the excellent deal you negotiated isn’t reflected in the appraisal.