Step 1. Hiring the Right Real Estate Agent
Finding the right real estate real estate consultant to aide you in your 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. Home buyers will often start their 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 catastrophic mistake!
In North Carolina, the agent on the sign or in the real estate magazine has already agreed to represent the Seller’s interest in the real estate transaction. 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, if the Seller’s agent agrees to also represent you as a Buyer in the same transaction, who do they really represent at that point?
The best solution is to schedule an in-office appointment with a real estate agent before ever looking at a home and discussing personal information. That way you can first establish an agency relationship with that specific real estate agent, which will protect you from a future agency conflict throughout the process. Also, you can discuss with your agent your goals for your purchase, your needs and desires, and help them find the home that you’re looking for.
A few questions you may want to ask are:
- How long have you been a licensed Realtor® in my area?
- How many home buyers are you working with currently?
- 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?
To learn more about agency and the role of a Buyer Agent, read Working with Real Estate Agents.
Step 2. The Mortgage Pre-approval Process
The mortgage pre-approval process is one of the most crucial steps in the home buying process. This is where a lender will either provide you with a an amount that they are willing to lend. To assist in your mortgage pre-approval process, a lender will review your credit, ask for information related to your income and employment status, and discuss with you various mortgage options.
Additionally, when you are at the step of negotiating an offer, the Seller will always request a copy of your pre-approval letter as proof that you are able to purchase their home.
Step 3. Searching for a Home
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 time 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.
Step 4. Making and Negotiating 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.
Here are the terms that you will be negotiating with the Seller:
This is the price you are willing to pay for the home. Don’t just guess at this number – 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.
Hey, why not just offer what Zillow says the home is worth? Read how accurate the Zestimate is for Charlotte.
Earnest Money and 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 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 of Due Diligence Money required so it can be negotiated at the time of contract.
Tip: Bank-owned, HUD, and short sales properties do not collect Due Diligence Money.
Proposed Financing Terms
Most Sellers will want to know whether you, 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.
Due Diligence Period (i.e., Inspection Period)
Once under contract, your due diligence period is your opportunity to determine whether you will purchase the home or not. During the Due Diligence Period, the Buyer can terminate the contract for any or no reason without penalty or obligation from the Seller. However, if the due diligence period expires and the Buyer is unable to close for any reason, the Buyer’s Earnest Money will become liquidated damages for the Seller. Unlike other states, North Carolina does not have a contingency for a home inspection, appraisal, or any protection if the Buyer’s financing falls through the day of closing. Learn more about the Due Diligence Period.
Included Personal Property
Items that are free-standing or otherwise not included with the home. This includes the washer, dryer, and refrigerator.
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.
The date you intend to take possession of the home.
Item or action that must be completed prior to the close date to make the sale occur.
Step 5. Contract Accepted! The Due Diligence Period Begins.
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.
The ideal situation is that your mortgage is approved and fully underwritten prior to the end of the Due Diligence period. That way, if there are issues that would prevent a closing, your Earnest Money is not in danger of becoming the Seller’s. In order to make this happen, it is crucial that you work with a lender that understands deadlines. Your real estate agent will gladly provide referrals to excellent mortgage lenders who understand the important of this step.
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. These additional inspections can often 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.
When items are found during the home inspection that are in need of repair or replacement, they can be presented to the Seller for negotiation or consideration.
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.
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.
Learn more about the Due Diligence Period.
Step 6: The Home Stretch of Contract to Close
The period between the end of the Due Diligence Period and the day of closing can be hectic. This is where the Seller will start moving their items out of the property and completing any repairs agreed upon during the Due Diligence Period. Buyers should contact the local utility companies and establish the date of closing as the day to start service in your new home. It is definitely recommended that Buyers reach out to the local utility providers at least 10 days prior to closing to ensure that the service will be transferred in time.
The day of closing, it’s typical that both the Buyer and the Seller meet at the Real Estate Attorney’s office to sign the Deed, HUD-1 settlement statement, lien waivers, and the Buyer’s loan package including the deed of trust.
UNLIKE OTHER STATES, NORTH CAROLINA REAL ESTATE DOES NOT TRANSFER UNTIL AFTER THE NEW DEED IS RECORDED IN THE COUNTY COURTHOUSE. Therefore, do not always anticipate that the home will be immediately available to move into after closing.
Tip: To improve the chances that the home will be available for the Buyer the same day as closing, it is always recommended that closings take place in the morning, Mondays through Thursdays. Learn more by reading When Do I Get My Keys!
Step 7: SOLD – The House Is Yours!
Once the deed and new mortgage (if any) are recorded at the courthouse, the property can officially change hands and is now the property of the Buyer. Most home buyers will schedule their movers for the day following closing to ensure that they have access to the home. To learn more, read When Do I Get My Keys!
Buying a home in North Carolina is really simple when you understand the process, you and your real estate agent are on the same game plan and you are working together to accomplish a common goal.