The Buying Process
Purchasing a new home can be an overwhelming process, but when you break it down into manageable steps it’s much easier to wrap your head around. Take a look at our breakdown of the home buying process and give us a call when you are ready to make your next move.
1) Talk to a Lender.
- Discuss types of loans available
- Determine the loan amount you qualify for
- Discuss how much cash you will need to bring to the closing
2) The Home Search
- Meet with us to discuss your budget and the physical criteria for your home
- Look over preliminary possibilities on paper (or on your computer screen)
- Decide on homes you would like to see. (Budget twenty-five minutes per home, more if they are very far apart.)
3) When You Find the Right One
- We will negotiate for the best possible terms. The items we negotiate include: Price, Due Diligence Fee, Due Diligence Period, Earnest Money, Closing Date, Personal Property included in the sale, Home Warranty
- During the ‘Due Diligence Period’, you will perform your examination of the home and secure your loan. Due Diligence items include (but are not limited to): Home Inspection; Radon Inspection; Termite Inspection; Survey; Insurance availability and cost; School assignments; Well & Septic; HOA restrictions and covenants, appraisal, loan status.
- Before the end of the Due Diligence Period, we will present a Repair Request to the Seller, listing the items that you would like corrected. The Seller may agree to all, some, or none. You have the option to terminate the contract until the end of the Due Diligence Period.
4) Between Contract and Closing
- Shepard your loan, making sure that your lender has the documents and info they need, and making sure they are progressing.
- Set up utility accounts for your new home; a part of the home buying process often overlooked.
- Line up your Homeowners Insurance (but do not pay for it).
- Arrange movers
- The Seller will be performing the repairs that were requested
A Note: Do not make any significant changes in your financial profile during this time without checking with your lender – e.g. no new car loan.
- Just before closing, we will do a final walk-through of the house to make sure everything is ship-shape.
- The closing itself will take about an hour and a half. Bring photo identification with you. Any funds required need to be in the form of certified checks.
You will hear several terms discussed a lot during the buying process. Here are some of the most common ones:
1) Due Diligence Fee
- Is the amount paid to the Seller when the Offer to Purchase is accepted and becomes a Contract.
- The amount is negotiable, and varies between 0 and thousands of dollars. The amount depends on the price of the house and the length of the Due Diligence Period. An average Due Diligence Fee for a $300,000 house for four weeks of Due Diligence might be $400-$500.
- It is not refundable, but is a credit towards the price of the house.
2) Due Diligence Period
- Is the length of time that the Buyer has to conduct their property investigations and pursue their financing. Until five pm on the last day of Due Diligence, the Buyer can terminate the contract for any reason or for no reason.
3) Earnest Money
- Is the money paid into an Escrow Account by the Buyer to show their seriousness and financial wherewithal to move forward to closing. The Earnest Money is a credit towards the purchase price if the contract proceeds to closing.
- It is refundable to the Buyer if the contract is terminated during the Due Diligence Period. After the Due Diligence Period, it is usually not refundable.
- “Initial Earnest Money” is paid into the Escrow Account within five days of the contract being signed.
- “(Additional) Earnest Money” is paid into the Escrow Account at some later date.
- A rule of thumb for amount of Earnest Money is approx. 1% of the purchase price, but it is negotiable and does vary.
4) Other Negotiable Terms of the Offer
- Settlement Date – When are you able to close on the property?
- Home Warranty. A Buyer can ask the Seller to pay for a year warranty at closing
- Seller Paid Closing Costs. A Buyer can ask the Seller to pay some of the Buyer’s closing costs. Examples of closing costs are – appraisal fees, inspection fees, attorney fees, loan application fee. This is a direct cost to the Seller at closing, so, for example, an offer of $225,000 with no closing costs paid would net the same to the Seller as an offer of $230,000 with $5,000 closing costs paid.
Contact Stults Advantage to make the home buying process easy and safe.