Buy Your Home

It’s important to understand that we provide real estate consultation and do not try to sell you something you don’t want. When you see a home you like, you’ll know it. Our job is to walk you through the process and make sure that your best interests are covered in negotiating the transaction and ensure the home you choose is inspected and in good condition. Home buying is a process, the better you understand the process, the more successful you will be in the transaction. We provide you information on the process and match you with top-quality professionals to assist with inspections, mortgage and closing services as you request.

In the initial stages of your home search we can point you in the right direction to areas of the city that best fit your lifestyle and commuting requirements. We can discuss the home that will best suit you and then network with area realtors to see what homes they have coming to the market so you can be first in the door. If you are an out of state buyer we can preview homes that might interest you and give you our feedback based on your home preferences. We will also make sure that you have spoken with a respected mortgage professional and are comfortable and pre-approved for price range you are looking at.

Once you start looking at homes and find the one that best meets your needs, we will complete the required paperwork and present and negotiate your offer. We will make sure your future home is inspected and will be a quality home for you today and a good home to sell down the road. We will discuss how not to jeopardize your financing during the time between pre-approval and closing. Finally, we will make sure you understand what to expect for closing costs, the closing process and help you find movers, cleaners and contractors you may require. For a detailed review of the buyer process, see below.

Home Buying – Step One, Choose a Realtor

A quick note on this series about home buying. The series contains information that is specific to Minnesota and may not apply to other states. Especially as it discusses forms and contingencies.

You may have seen this advice repeatedly, but in today’s market of low inventory and multiple offers choosing the right Realtor could mean the difference of your offer being accepted or not. If you’re waiting until you find the right home to contact an agent, you don’t have a chance in this market. Home buyers are being notified of new listings by their agents as soon as they become available on MLS. This notification could be hours or days before the same home gets listed on the large national sites. And by then it could already be sold. So really, if you want to see and have a shot at the best homes coming on the market you need to develop a team of professionals that can help you. Otherwise you are just going to be viewing the leftovers. Step one, pick a Realtor who can guide you through the process and use their knowledge and negotiating skills to give you the best odds in getting the home you want.

So how do you choose a Realtor. Below would be the questions I’d ask based on my 20 years’ experience.

• How many buyers are you currently working with? (do you have time for us?)
• If it’s a real estate team, make sure you are talking to the person who will be showing you houses. What are their credentials? Is that the same person who will be writing up the offer? Negotiating the offer? Handling the paperwork? Make sure you are comfortable with all the team members qualifications and understand their process.
• How many buyers have you represented and what can you do for us if we are unable to find a home on the market? The Realtor should have a network of agents to reach out to for pre-listings. Mailing to an area has also been successful.
• What sort of lead time do you need for us to set up a showing? Understand that Realtors have lives too and you need to get to the home to see it asap but also work with everyone’s schedule.
• If you are unable to show us the home, do you have someone you work with who can get us in. You don’t want to miss out on a home if the Realtor is traveling or busy.
• Ask for references and contact those references.
• What are their affiliations? Make sure they are a licensed, are a Realtor, and are a member of the local MLS. If there are other credentials have them explain the significance of those.
• Can you refer us to Closing Agents, Inspectors, Mortgage Brokers who you have good experience with? These people play a big part in the transaction and can make or break it. Get a list of names, check them out.
• Based on our wants, what do you see as the hurdles and how can you help us overcome them? If you interview a few agents, you will learn a lot about their experience with this question.
• And finally, make sure you understand Buyer Representation and what is expected from the Realtor in representing you, as well as, what is expected of you during the transaction.
• If you decide to go with a specific agent, make sure you have a performance guarantee or can cancel with them should you decide you’re not happy.

As a buyer, there should be no commission fee but there may be other fees working with different brokerages so just ask what specific fees are involved in purchasing a home with this agent and their brokerage. If you decide to go with the agent there should be a representation contract that puts these fees in writing.

Home Buying – Step 2, Get your Finances in Order

You’ve done your interviews and picked out a Realtor you trust. The next step is to pick out a mortgage broker/banker that you can also trust. It’s this lender who will work with the underwriters to ensure the financing of your new home gets done in time for closing. So make sure it’s someone you’ve worked with before, someone referred to you by a person you trust, or someone your Realtor has an existing relationship with. If you need a few recommendations feel free to contact me.

When you find your next home and put in the offer to purchase it, the seller of that home is going to ask their Realtor “how solid are these buyers?” “Can they get this deal done?” That’s why meeting with the mortgage representative prior to looking at homes is so important. You want to make sure you know what you can afford, that you’re comfortable with those payments, that you understand the costs involved in getting the loan and that you have given the mortgage broker all the preliminary paperwork they have requested (bank statements, w2’s, tax returns, etc.) so they can give you a pre-approval letter. Once you have this knowledge and the pre-approval both you and your future seller will be comfortable that you can perform on your purchase.

Prior to meeting with the mortgage representative take the time to run a free credit report offered by Experian, Equifax and TransUnion. You’ll want to review this report prior to the meeting to ensure there is no erroneous information. If there is, you’ll want to have the information corrected to get the best rates on your mortgage and insurance. For more information on ordering and correcting your credit reports click here.

Meeting with multiple mortgage representatives in a short period of time should not affect your credit score. Typically these are treated as a single inquiry. If you are meeting with multiple lenders to get quotes let them know that and verify that their pulling your credit won’t adversely affect your credit score.

When you first meet with the mortgage representative you’ll want to make sure you walk away understanding the following:

• How much home can I afford?
• What will my payments be?
• What do those payments include?
  
  • Payments may include – Principle, Interest, Property Taxes, Insurance, Mortgage Insurance.
• What types of loans do you offer and what type of loan are you using for my quotes?
  
  • This is a good time to also ask who they represent. Do they represent one specific bank’s products or can they get their loans from a variety of banks and financial institutions.
• Why do you think this is the best loan for my situation?
• What would the down payment requirements be for this loan?
• What must I have to qualify for this loan?
  
  • ie. Cash reserves, income requirements, credit rating, etc.
• Are there ways to reduce my payments?
  
  • You may be able to buy down the interest rate, or use seller paid funds to do so.
• What interest rate is this payment based on?
• Is the rate Fixed or an ARM, what’s the term (15 or 30 year loan)?
  
  • If the loan is an ARM, make sure you understand when rate adjustments occur and what is the very top rate that you could be charged.
• Can I lock that interest rate? If so when, for how long and at what cost?
  
  • Make sure you get the lock in writing
• Do you work with any down payment assistance programs and do I qualify for any?
• What other costs are involved with the loan?
  
  • Some costs may include origination, points, appraisal, credit report and closing costs. Find out which fees will be included in the loan and which will be due at closing. After you submit an application the lender is required to give you a Loan Estimate which includes all these costs at a certain loan amount and interest rate. By comparing this estimate to the other lenders you are meeting with you will know which is giving you the best possible pricing.
• Is there a Pre-Payment Penalty?
• Do your underwriters work “in-house?”
  
  • Here you are trying to find out how easy it is for the lender to resolve issues if underwriting needs clarification on something. Will it take a matter of hours or days to clear the issue. This time-frame is important if something pops up right before closing.
• How much time do you need to fund my loan?
  
  • Normally you will close on a house 30-45 days after submitting an offer. Many offers now guarantee that underwriting will be done within a certain time frame. Can this lender be responsive if you need to move up these dates?
• Do you offer any guarantees that we will close on time?
  
  • Many lenders now offer an on-time closing guarantee that buyers can give to the sellers to help strengthen their offer.
• What documents will I have to provide?
  
  • Do you have an app that let’s me provide them electronically? Some lenders allow you to take pictures of these documents with your phone through an app. Find out how this lender needs to receive the documents and what systems they have to make the process easy and quick.
• How long will it take to get an answer on my application?
  
  • Do you see anything that might hold it up?

Finally get to know the lending representative’s business. Ask how long they’ve been in the industry. How long with this specific company. What is the experience of their support team? What’s the best way to communicate with them and when should you expect a call back if you have to leave a message? Just like your real estate agent, the lender is someone you will be working closely with. It should be someone you communicate well with and feel you can trust.

Home Buying – Step 3, Determine your Needs and Wants

Now that you’ve met with your Mortgage Lender you know how much house you can afford. But maybe the first part of your needs and wants analysis when it comes to purchasing your next house is – how much of a payment are you comfortable with? Many of the home buyers I work with will establish this parameter first and then depending on what they can find in available houses for sale at that price range will adjust accordingly.

Remember you are moving for a reason. That reason should be your main “need.” Is it just to stop paying rent? Is your family growing and you need more yard space and an extra bedroom? Or maybe you are having problems with the stairs and need single-level living. Whatever the reason, these “needs” are what your next home needs to provide. So establish them first.

Everybody has things they want in their next house. Stainless steel appliances and granite counter tops seems to be a common want. Home on a cul-de-sac, finished basement, three-car garage, master suite are some others. Remember that all your wants may not be available at your price range so it’s a good idea to rank them in importance.

It is very rare that homes available for sale will fill every want. Remember the reason you are moving and fill that need first. Invariably there will have to be compromise and trade-offs. Do you get the master suite, or the school district you want? Does the home allow you enough room in your budget for remodeling? Talk to your Realtor and get their ideas on how to best balance your needs and wants with your budget. They can also offer important insights on which market locations will offer homes that most closely match.

Home Buying – Step 4, Search for Homes

You’ve spoken to your Realtor about what you want and need in your new home. You’ve researched different areas and found a few that interest you. You’ve looked through MLS listings of homes for sale and chosen some you’d like to see, now it’s time to look at those homes. When you want to see homes your Realtor must set up the showings with the seller’s. Most sellers will try to accommodate the showings but it’s always best to give them as much notice as possible. Discuss with your Realtor ahead of time when they would like to receive your list. Your agent may also have homes they believe you should see based on your conversations. Don’t discount these homes as your agent can see past bad pictures and descriptions to pick out some good choices.

• When you go out to look at homes with your Realtor there’s a couple things to keep in mind and plan for.
  
  • First, bring a pen and paper to keep notes. If you are seeing a lot of homes, they may start to blur together. Your Realtor may ask after each home how that one ranks, and which are your top 3 so far. They are doing that exercise both for your sake and their’s by seeing what you like and dislike in the properties.
  • Wear slip on shoes. You’ll need to remove your shoes in almost every home you see. Wearing slip on shoes will speed up the process and avoid the congestion when leaving.
  • If you will be following your Realtor in a separate car, make sure you know the order of the homes you will be seeing and have a GPS available should you get separated.
  • Plan your bathroom breaks. You shouldn’t use the bathrooms in the homes you are viewing so let your Realtor know if you need to stop between showings.
  • If you plan on videoing or taking pictures of the homes you see let your Realtor know in advance. Most often they will need to get seller’s the approval.
  • And finally, if you are taking children along for the showings make sure they are well supervised.
• In each home there are things you will want to look for and at.
  
  • The main question is – “does the layout, location and amenities meet our needs.”
  • If so, what is the condition of the home? Will we need to incur costs right away to improve that condition?
  • What is the condition and age of the mechanicals, appliances, roof, siding and windows? Is there any serious cracking or separation in the foundation, concrete or driveway? These are all high expense items and should be noted in choosing between homes.
  • Consider the neighborhood. Is it close to schools, parks, or other amenities that you want in your next home? Are the homes around it well kept? Is it on a quiet street?
  • Remember when you are at the home the sellers should have a Property Disclosure available for you to review that will answer some of your questions about condition. If it is not available your Realtor should be able to get you a copy from the listing agent.

Your Realtor will have knowledge of the different areas where they are showing you homes. But remember that they are not allowed to answer all questions due to Fair Housing Laws because they may be discriminatory based on race, color, creed, religion, national origin, sex, marital status, disability, public assistance, sexual orientation, or familial status. That being said, there are plenty of resources available if your Realtor can’t answer your questions.

• Neighborhood Profile: Check census data online.
• Crime data: Many cities will have this data available online, otherwise you can go into the city office or call to receive.
• Quality of Schools: This factor plays a significant role in the resale value of homes within the district and this information can also be found online.
• Your Realtor may not be able to answer a specific question but that will be able to point you to the resources that can.

Now with all that practical information in place, it is very likely you will walk into a home and decide that’s the one just because it “feels right.” Use the above information to help you decide that it is still a good home for you to purchase.

Not all homes you see will be with your Realtor. You may drive by an open house and decide to stop in. That’s not a problem. Let the agent holding the open know you’re working with a Realtor and share with them your agent’s name and/or business card. It is important not to divulge too much information about your situation as it may hurt your negotiating power should you end up moving forward with an offer on that property.

Finally, enjoy the process and be realistic about what your money can get you. Purchasing a home may be a little scary for some but it should also be fun. Good luck with your home search.

Home Buying – Step 5, Negotiate an Offer

You’ve found a home that’s a good fit for you, so what’s involved in making an offer to purchase that property? Depending on the type of market you are in, you may have to act quickly or you may have time to negotiate.

Know the Market

Before you write up the offer you will want to know what similar homes have been selling for. Your Realtor will run a quick Comparative Market Analysis (CMA) that will let you know how this home is priced in comparison to similar homes that have recently sold. In today’s market of multiple offers, it can also tell you how much over list price these similar homes have sold for. This information can guide you in determining the price you offer for the home.

In addition to price, the type of market will further guide your decision. If you are competing for the home with other buyers you want to present the strongest and cleanest offer possible. By that I mean you want to go in with your best price and want to minimize contingencies, or speed them up if possible. If the home has been on the market for awhile or if you are in a buyer’s market, then you may have time to negotiate to see if you can get a reduced price, seller paid closing costs, etc.

Know the Home

As part of your offer to purchase the home you will need to acknowledge receipt of the Seller’s Property Disclosures. These documents are a declaration from the sellers of all material facts that may affect your future use and enjoyment of the property. There may also be city inspections that have been performed as part of the sale which will state if there are any items that need to be addressed by the seller prior to closing. Depending on the property, well, septic system, and condominium/townhome disclosures may also be involved.

Make your Offer

The following are key items included in the Purchase Agreement that you and your Realtor should discuss in making the strongest offer possible.

• Earnest Money
  
  • The amount of money you will put down with the offer that will be held in a trust account until closing. It will then go against your down payment for the home. The amount that you put down can show your strength as a buyer and your confidence of closing on the home.
• Personal Property
  
  • Are you asking for the standard items included in the purchase or over and above?
• Purchase Price
• How will you pay for the Property?
  
  • Are you an all cash buyer or will you be financing the purchase? If you are financing what is the total amount you will pay for in cash and how much will be financed?
• Closing Date
  
  • Do you have to close on a certain date or can you be flexible and work with the sellers time frame?
• Financing
  
  • If you are financing what type of financing will you be using? The different types of financing can show strength of a buyer. Also different types of financing like FHA and VA loans may cost the seller more in closing fees and may have more stringent appraisals. Consider offering the seller a date when all your appraisals and underwriting will be completed.
• Seller paid Closing Costs
  
  • Are you asking the seller to pay part of your closing costs?
• Inspections
  
  • Are you having an inspection and how long will you need to have it inspected? What different types of inspections will you need?
• Do you have a property to sell or close on before you can complete this purchase?
• How will property taxes be prorated?
• Who will pay for any special assessments that are outstanding, pending or levied before closing?
• When will you take possession of the home after closing?
• Will you be purchasing a home warranty and who will pay for it?

Obviously any of these points can be favorable for the buyer or for the seller. That is all part of working with your Realtor in producing an offer that is appropriate for the situation and negotiating with the seller to produce an offer that everyone is happy with.

In some cases the seller will neither accept or counter your offer. They may decide to reject the offer altogether. This is their right as sellers and usually occurs in multiple-offer situations or where the buyer has put forth a low-ball offer that offends the seller. It may also occur if the seller believes the buyer will be unable to perform.

Can I Withdraw my Offer and Get Back my Earnest Money

• You can withdraw your offer right up to the point of acceptance by the sellers. Your Realtor should notify the listing agent in writing that you are withdrawing the offer. After the offer has been signed and accepted by the sellers you are under a binding, legal contract and can only get out of the contract based on the contingencies that you have included.
  
  • The inspection contingency allows you to cancel the purchase agreement within the specified time frame stated in the purchase agreement.
  • The Financing contingency offers some protection in allowing you to cancel the purchase agreement should you be unable to obtain financing.
  • The Common Interest Community Addendum (condos and townhomes) allows you ten days after receipt of all documents to cancel the purchase agreement.
  • Other contingencies like the sale of your current home, or well and septic inspections.

To receive a cancellation and refund of your earnest money after the sellers acceptance requires the agreement and signatures of all parties or a court order. In some cases one party or another may not be willing to sign a cancellation for whatever reason. Should a cancellation not be received neither party can move forward until one is.

Other Considerations

• Always include a Pre-Approval from your lender with your offer.
• If you are a cash buyer you will need to present a statement with Proof of Funds to the seller or a letter from your banker stating you have the funds available to complete the sale.
• Some buyers include a letter about themselves with the offer. I have seen this help both in multiple offer situations and in situations where price was a factor.
• Do you want your offer reviewed by your lawyer before submitting to the seller?

You have an accepted offer

That was a lot of work. You’re getting close but you’re not there yet. You still have to get through inspections, appraisals, and underwriting. Remember your Realtor is there to guide you through this process and make it easier for you. Concentrate on making good decisions based on the information you are receiving and let your Realtor take care of the details, that’s why you pick one you could trust.

Home Buying – Step 6, From Contract to Closing

Once all parties have agreed and signed off on the purchase agreement, there is usually about 30-60 days until closing. Although this may seem like it should be a quiet period of preparing for the move, there is still a lot to accomplish.

Clearing Contingencies from Purchase Agreement:

• The most common contingency on the purchase agreement is the Inspection Contingency. This contingency must be cleared and negotiated within a certain number of days as set forth in the purchase agreement.
• The other common contingency has to do with financing. This contingency may also have a deadline on it so make sure you are working with your lender and getting them the information they require. As part of your financing you will also have an appraisal done on the property during this period. The appraisal is coordinated by the bank and is a process of determining the home’s market value. The home must appraise at or above the sales price in order for your financing to go through. Once the appraisal is completed and you have all the remaining documents your lender has asked for, your application will go to underwriting for final approval. Don’t be surprised if underwriting asks for additional information, it just seems to always happen no matter how strong a buyer might be. Also during this time you will need to decide on locking in your interest rate if you haven’t already done so.
• Other contingencies that may need to be addressed during this time include the sale of your present home, well, septic, or reviewing homeowner’s association documents.

Title Work:

• While you’ve been working on negotiating and clearing the contingencies, the Title company who will be closing your sale has been given all the relative sales documents and has probably contacted you by mail for additional information they need from you. Within a few weeks they will forward to you the Title Insurance Commitment for your review. Pay attention to what exemptions may be included in that commitment.

Other activities prior to closing include:

• Obtaining property insurance.
• Reviewing the cash you will need for closing and wiring those funds to the Title Company (be aware of wire fraud and check and double check instructions with the closing company).
• Contact utility companies to discontinue service at your present address and transfer service to your name at your new home.
• Notify banks, credit card companies, department of motor vehicles, friends, etc. of your new address.
• Determine how you will coordinate your move.
• If you have children you will need to contact the school to register them and possibly find daycare.
• Right before closing you will do a Final Walk-through of the property to ensure it is in the same condition as when you saw it originally and any repairs that have been negotiated have been completed.

Now you are ready to close on your new home.

Home Buying – Step 7, Closing

You’ve made it to closing day! If you’re renting you may have given yourself a couple weeks to move out of the old place and into your new home. If not, you’ve been packing and loading trucks all night and now all your possessions sit in a truck or storage locker waiting for you to move them to the new place. You may have also had to close on your old place prior to this closing. So don’t worry about showing up to closing in sweats with a big mug of coffee, we understand.

You don’t need to bring much to closing but prior to closing make sure you have received confirmation that your wire arrived for the funds you need to close, make sure your mortgage company has received your proof of insurance, and make sure you bring with you your ID.

So now that you are here, what is closing? Closing is where the legal transfer of ownership occurs. It is also where you will sign your new mortgage documents. In most cases you will sit across the table from the sellers while they sign away their rights away to the property and you sign the documents allowing you to take ownership. You as the buyer, and with the mortgage will have the vast majority of forms to sign.

Once you are done signing all the necessary forms the closing agents will leave the room for a while to make copies and cut the checks for the sellers, any refund you may have coming to you as buyers, and the commission checks to the Realtors. Once they return, the closing agents will give you all your copies for your files and tax purposes and discuss how to Homestead the property with the county. Homesteading gives you certain tax breaks if your purchase will be your primary residence.

At closing you may also receive paid receipts from the sellers for any work they had done that was asked for as part of the inspection negotiations. It is also a great chance to talk to the sellers to learn more about the house, the neighbors, the neighborhood and get any codes for things like the garage door. And of course, the sellers will give you the keys and garage door openers for the property.

Once you receive your copies you are free to go get that truck and start moving into your new home. Congratulations!