The Home Purchase Process


Your Home Purchase Process - One Step At A Time

 

Get professional help ~  Meet and select your real estate agent (see Buyer's Agent and The Perfect Realtor®).  Buying a home may be the largest single investment you ever make and warrants careful selection of your real estate agent.  You want a professional who is competent, ethical, honest and truly has your best interests at heart.  

 

Arrange financing ~ If you plan to finance part of the purchase of your home, you need another professional helping you.  If you do not have an established relationship with a lender you are comfortable with, I regularly work with loan officers I highly recommend because they pay close attention to my customers and their needs. 

 

You can consult a loan officer for information without any obligation.  Just as you and I do with our initial visit, you need to determine whether that person can and will work well with you.  When you have decided to proceed, then there will be a fee for a credit report.  Ordinarily, once we’ve identified the home you are purchasing, a fee will be collected to pay for the appraisal and the balance of a lender’s fees will be collected at closing.  

 

The Pacific Northwest is a very active real estate market and in today’s environment, sellers and their listing agents expect an offer from a buyer to include a copy of a letter from the buyer’s lender verifying approval for a loan amount subject to the property’s marketable title and a satisfactory appraised value.  In a competitive market, this can strengthen your offer and increase your chances of acceptance by the seller. 

 

Start shopping for your new home ~ As your real estate professional, I’ll research homes in the market based upon your criteria.  I will often preview these homes and together we’ll narrow down the number to initially inspect and make appointment(s) to visit them.  We’ll continue to search and inspect homes until we’ve found the one you know is the one you want.

 

Construct a winning purchase offer ~ Upon identifying the home you want, we privately discuss the price and terms.  Terms we'll need to specify in the purchase offer will include: the offering price, additional items you might want included in the purchase, length of time needed for an inspection, date for closing the purchase and date for moving into your new home.

 

A strategically well-planned offer is the foundation for a subsequent satisfactory agreement.  There can be many variables to consider.  They include evaluating the seller’s motivation to sell, the comparable homes available or already sold, and terms that balance each other.

 

Purchase and Sale Agreement ~ I will draw up the purchase and sale agreement offer (also known as an Earnest Money Agreement) for your signature(s) on the appropriate legal forms (samples are provided in the following pages for your advance review).  It is customary for you to write a personal check for your Earnest Money deposit at this time.  

 

Present the offer and move to a mutual purchase and sale agreement ~ I will present and deliver the offer to the seller through the listing agent.  We usually hear back from the seller and the agent within a day after the agent gets it.

 

Complete the inspection(s) ~ Once we’ve achieved mutual agreement with the seller, the next step is to complete the structural (home) inspection and if necessary, reach agreement with the seller for any corrections that may be required. 

 

Financing ~ Your lender reviews the title report and orders and reviews an appraisal to assure that the home is adequate security for your home purchase loan.  Your personal credit and financial information together with the title report and appraisal, which make up the “Loan Package” is submitted for final review and the loan documents are drawn up and sent by the lender to escrow.  

 

Review and sign closing papers ~ Once all documents are ready, you will go to the escrow office, sign the necessary paperwork and pay the balance of the funds needed for your down payment and associated closing costs.  The escrow office will also arrange for the seller to sign their portion of the closing papers (this is always arranged as separate appointments – the buyer(s) and seller(s) will not sign at the same time).

 

Final Step ~ Upon receiving instructions from the lender, escrow will distribute funds to the seller, pay any other expenses associated with the transaction and title for your new home will be recorded in the county courthouse.  At this time, you will take possession of your new home according to the terms of your agreement.  

 

Through all these steps, remember I am your professional help!  There is an average of 15 to 18 people involved throughout a typical transaction.  Unfortunately not all of these people and respective activities are within my direct control.  On occasion deadlines are not met as they should be, and as a result, delays can occur.  I will do everything within my power to ensure everything is being completed as it should, to prevent any problems from happening and to shield you from the challenges and stresses involved.  I will also be available to you throughout the entire process to answer any of your questions.


Common Questions


 

Q.  When you work as a Buyer’s Agent, how do you get paid?

 

Typically in residential real estate, the brokerage fee is paid by the seller.  A seller agrees to pay a commission at the time they list their home for sale.  A portion of that commission is paid to the broker/agent who helps the buyer purchase the seller’s home.  Almost always the commission paid by the seller is the only payment required by the buyer’s agent. 

 

Q.  When we work with you, can we only buy homes with John L Scott signs on them?

 

No.  To some people this may sound like a funny question, but it’s not.  Almost every real estate sign from every real estate broker has the word “exclusive” on it.  Many people don’t know that that merely means the seller has agreed to pay a commission to the broker who has listed it, regardless of who brings the buyer who purchases it.

 

I can show and help you buy any home listed by any real estate company.

 

Whether my John L. Scott office, another John L. Scott office, or Windermere, Coldwell-Banker, ERA or any other company is the listing broker, I can show you a home and help you purchase it.  (Likewise, when I list your home for sale or another seller’s home for sale, I welcome the agents from all the other companies to show those listed homes to their buyers and hope that they will present us with winning offers.) 

 

Q.  What is Earnest Money?

 

Earnest Money is a deposit you make to provide evidence to the seller of your good faith intent to complete the transaction.  You provide this deposit when your offer to purchase ("Purchase and Sale Agreement" - sometimes called an "Earnest Money Agreement") is prepared for presentation to the seller.

 

Q.  What is needed for Earnest Money?

 

Earnest money should ordinarily be between two and five per cent of the purchase price.  The larger your earnest money, the greater confidence the seller will have in your offer.  If your loan program is one providing for a lower down payment, a smaller earnest money deposit is sometimes acceptable.  

 

Q.  What happens to my earnest money?

 

Your earnest money check will be deposited in our broker trust account or with the Closing Agent (Escrow) and credited toward the total amount of money you will need to pay at closing for your down payment and closing costs.  It is not an additional cost for you - it is applied towards the total purchase price and closing costs of purchasing your home.

 

In the event that an inspection is part of your purchase agreement, your earnest money will not be deposited until after the structural inspection has been satisfied.

 

If your agreement is contingent on your getting financing for a home purchase loan, and through no fault on your part, you are unable to acquire a home purchase loan; generally your earnest money would be returned in full to you.

 

If a buyer elects not to purchase after waiving a satisfactory inspection (if one is part of the terms) and after being approved for a loan for the home, then the earnest money is forfeited to the seller as compensation for their loss of opportunity to sell to another buyer.

 

Q.  What is a structural (home) inspection and should we plan to have one?

 

With very few exceptions, a buyer will always want to have the home they are buying inspected by a professional inspector.  We recommend inspectors who are independent of any other contractors, fully trained and qualified to identify the condition of the structure and systems in a home.  

 

A good inspector will want the buyer present during at least part of the inspection period. I also highly reccommend the buyer attend so that the general condition and common maintenance issues and questions can be pointed out and explained by the inspector directly to the buyer.  If there are items needing correction, those will be addressed as well.  A good inspection will result in the buyer knowing much more about their next home.

 

Q.  What will an inspection cost and when do we pay it?

 

Typically an inspection will cost between $400 and $600 depending on the inspector used and the size of the home.  The fee is paid directly to the inspector at the time of the inspection.

 

Q.  How do we find and schedule an inspector?

 

As your agent, I will help you by identifying inspectors who have reliably done work for my clients in the past and I will provide you a selection of other recommended inspectors as well.

 

Together, we will arrange for the inspection appointment to fit everyone’s schedule.

 

Q.  What is Escrow?

 

The escrow closer is a neutral party who holds and disburses the parties’ funds, prepares an accounting of the transaction and prepares certain documents according to the terms of the purchase and sale agreement. 

 

The terms “escrow” and “closing” are often used interchangeably although there are differences.  An escrow officer or service, for example, is sometimes called a “closing agent.”

 

Q.  What happens at Closing, and what are the buyer's requirements?

 

Closing is the final stage in a real estate transaction, when the seller receives the purchase money, the buyer receives the deed, and the transfer of title is recorded.  The closing (escrow) agent who performs this service verifies that all contract conditions have been met; collects all funds due, disperses the funds as agreed, prepares and supervises signature of all required documents, and issues a settlement statement to both parties.

 

Usually a few days before the contracted closing date, the closing agent contacts the buyer to schedule an appointment.  At that appointment, the agent presents documents for signing, and collects funds from the buyer for the down payment and closing costs, less the amount of the earnest money deposit.

 

Q.  What are closing costs?

 

Closing costs are the expenses incurred in the transfer of real estate in addition to the purchase price of the property.  The buyer and seller share some costs, such as the fee for escrow services, and the cost of title insurance. 

 

In addition, the buyer pays the fee for appraising the property.  The buyer reimburses the seller for any prepaid taxes, prorated to the date of closing.  The buyer pays the lender for discount points, if any, and may be required to deposit reserve funds for taxes and insurance on the property.  In addition, the buyer will pay for recording the property transfer. 

 

The closing agent will provide you with a complete list of costs, prior to the signing appointment, and will notify you of the funds you’ll need to pay your portion of the costs.

 

 Q.  What is Title Insurance?

 

Title insurance is a means for the seller to provide you, the buyer, assurance that you have full ownership of the home.  In the event that another party makes a claim to the rights of the property, the title insurance company will provide legal measures to protect your rights or if necessary, provide financial compensation for rights you might lose.  This seldom happens, but the insurance does provide you with peace of mind.  When the purchase is being financed, it is not optional as your lender will require title insurance.

 

There are two policies usually involved with a purchase.  The seller provides one to you as the buyer.  You provide the second one, with a much smaller premium, to your lender to insure that the lender’s interest in your property (as security for their loan) is protected.

 

Q.  When can we move in to our new home? 

 

You get the keys to your new home on the "Date of Possession,” as specified in the Purchase and Sale Agreement.  

 

If your contract specifies "Possession on Closing,” you will be given your key at the end of the day (9pm) the transaction is recorded.  Otherwise, you may take possession on the "Date of Possession" specified in the contract.

 

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