Buying a home is a big event for most people. It can represent the single largest investment of a person’s lifetime. But it’s also a special time, when you choose a place to settle down and possibly raise a family. We thought it might be helpful to walk you through the entire process, outlining and exploring each step from a buyer and agent’s perspective. Our hope is to provide you with a clear picture of the home buying process, as well as M-Realty’s potential role in that.
Phase One – Browsing
For most people, finding a home begins with an online search and maybe going to a few open houses. So finding a user-friendly website to browse active listings can make a prospective buyer’s life much easier. M-realty Looking Glass is a neighborhood-based listing viewer that allows you to move freely around the city map from listing to listing, giving you a feel for different neighborhood characteristics, prices and features.
Phase Two – House Hunting
Once you’ve made the decision to seriously consider buying a home, the next step should be looking into your financing options.
Financing
Contact a mortgage broker or banker of your choice. Make sure you clearly understand your financing options and how they affect your potential price points. For the majority of situations, getting pre-qualified is a quick and easy process. If you are self employed and/or fall outside the main loan options, the process may take a bit more time and effort.
Once you’ve chosen your agent and are comfortable with their referrals, we would suggest at least interviewing the mortgage brokers they already have relationships with.
Working With a Buyer’s Agent
A buyer’s agent will significantly streamline the home buying process and help you navigate the sometimes cumbersome nuances of state laws and regulations. What a good agent brings to the table is not only an understanding of the problems that can arise in the home buying process but the solutions to those problems. He or she should also possess skill in negotiating and protecting the interests of their client.
A good buyer’s agent should understand and respect your unique concerns and interests and always put them in front of their commission check. In a process that can sometimes be an emotional roller coaster, it is crucial to be working with someone you trust and communicates well with. The bottom line is you should feel comfortable with your agent.
Choosing your agent is important because a great agent for one person may not necessarily be the best fit for another. At M Realty, we have several highly qualified agents from varied backgrounds and who possess different personalities. Garron’s background is in software design. He is very personable but also enjoys analyzing market patterns and trends. Alicia, with her social work background, connects deeply with people on a personal level. Her patience and thoroughness make her a great agent and a strong advocate for her clients needs. Jason went through law school and has made a long-standing hobby out of studying condo and development projects. Byron has rehabbed many homes, performed condo conversions and led new constructions. He is calm and straightforward and very thorough. All our agents are extremely qualified and helpful and, while none of us are any “better” than the other, we are very different as individuals. We suggest you take this into account as you choose who to work with. And if you prefer, we would be more than happy to match you up with the agent we feel would be the best fit for you.
View Listings Online
As a potential home buyer, you want a system that captures every home as soon as it hits the market. Looking Glass gives you that, along with the unique ability to explore new areas and neighborhoods on an easy-to-use map. Looking Glass will also set up automated searches based on you preferences. We will even send you information on the current market trends within your search area. Our goal is to give you all the resources available to help you make good choices in all stages of the home buying process.
View Homes and Explore Neighborhoods
Viewing a home online and seeing it in person can sometimes be a very different experience. What looks and sounds good on a web page might be unacceptable in person and vice versa. This is why our agents are out everyday looking at homes with clients, for their clients, and simply out of a desire to know the market better. Our Main office acts as a support system for the agents in the field by building showing routes and coordinating everyone’s schedule. We even built a specialized research vehicle loaded with technology to make viewing a large number of listings possible and economical. The M-car is definitely a tech-geek’s dream!
Target Desired Neighborhoods
Once you know which neighborhood/s best suit your needs, we recommend you take the time to really get to know those areas, from amenities and services to restaurants and shopping. All this will help to inform your search process and ensure that your final decision is the right one for you.
Once your search is complete and you have and chosen a home, the next step is to make an offer!
Finding “The One”
It may be the 1st or the 101st house we look at, but invariable we walk into a house and it is “the one” most people know it when they see it. It is one of the best parts of our job to share in the excitement of this moment then work through the details of our strategy to help the buyer get it.
Phase Three – The Offer
Making an offer is one of the big monments we can help you determine what a property is worth and what you should offer based on current market trends, the listing’s history, as well as the homes sold in that neighborhood in the recent past. At this point, you should also be working with your bank or lender to determine what kind of mortgage payment is to be expected with your offer, making sure the amount is appropriate for you.
The offer itself consists of three items delivered to the listing agent for presentation to the seller:
1. Pre Qualification Letter
2. Earnest Money deposit
3. Sale Agreement
Pre-qualification Letter – Your lender will provide you with a letter made specifically for the offer. This document proves that you are qualified to purchase the property with a specific dollar amount. The letter is usually written to the exact dollar amount of the offer.
Earnest Money Deposit – The money deposit is a check made out to the title company in the amount of 1-2% of the offer price. This is held with the real estate office until there is mutual acceptance of the offer, at which time it is delivered to the title company to be deposited.
Sale Agreement – The sale agreement is a state-approved form. The majority of sales are written on this standard form while some new construction and condos will be on forms developed by the sellers and sent to the state for approval. The purpose of the sale agreement is to clearly state an offer with all relevant terms and conditions.
Sale Agreements Components (the highlights)
Agency Agreement – The agency agreement is a defined relationship between the buyer(s), seller(s) and agents.
Price - The first big decision to make is the offer price. Your agent will help get you the information you need to make an informed decision based on the recently sold homes as well as the market conditions. What we find interesting is that buyers often are very good at nailing the market price because they are going through lots of homes looking for the one that represents the best value to them and their needs. When you look at 30 or so homes in a given price range, the fair market price of the one you want offen become clear. An experienced agent can then help to confirm or adjust that figure accordingly.
Earnest Money Deposit – As defined above, the earnest money deposit is a check written to a title company usually in the amount 1-2% of the offer price. The purpose of the earnest money is to give teeth to the contract. If the buyer fails to close on the house there are some circumstances where the earnest money may forfeit to the seller. DON’T panic…the contract has multiple contingencies allowing you to back out of the sale while retaining all earnest money. These are outlined below in “contingencies.”
Down Payment - This is the amount you will be putting down at close. A down payment typically ranges from 5-20% and will be determined by you and your mortgage broker.
Additional Provisions – This section allows us to add provisions that are not covered in the fill-in-the-blank section. Often we need to perform testing that requires the seller’s approval such as a sewer scope or siding investigation. Additional can be used to request a sellers contribution to the closing cost.
Excluded Fixtures – Sometimes the seller will remove items that are normally assumed to go with the sale of the house. The general rule of thumb is that everything attached or affixed to the house or yard is included with the house and everything not attached is considered personal property and goes with the seller. If the seller owned an antique light fixture or something else they wanted to take with them, it should be included in this section.
Personal Property – Sometimes personal property is included on the sale and may be written into the contract, such as a riding lawn mower, a pool table, etc.
Professional Home Inspection – ALWAYS have the home professionally inspected. This section of the contract gives you the right to have the home thoroughly inspected, by multiple parties if necessary, to determine the exact condition of the property. In Oregon, the sale agreement allows the buyer to unilaterally terminate the sale agreement during this period by giving written notice of “unconditional disaaproval of the properties condition” with all earnest money to be promptly returned to the buyer. The home inspection contingency period is typically ten business day from mutual acceptance of the offer.
Escrow & Title- Escrow is the collection, holding and delivery of documents and monies by a neutral third party in accordance with dated, written instructions from the principals to a transaction. In Oregon, most escrow companies are also title insurance companies. The title company issues a Preliminary Commitment for Title Insurance, which is a statement of the status of title and all exceptions to title. A title company performs title search and title underwriting, records documents, maintains contract with escrow and handles title functions county by county. The title/escrow company is usually determined by the listing agent.
Close Date – The close date is the date when the transaction goes on record with the county and the title is officially transferred. The typical close date is 30 days from the accepted offer.
Possession Date – The possession date is the date when the new owner takes possession, which usually coincided with the close date. There are cases, however, where the seller can’t close on the house they are moving into until their sale is complete. In this case, the seller often retains possession for a few days in order to move. Often the seller will pay the buyer in advance for this courtesy at the time of close.
Expiration Date of an Offer – The offer has a deadline for acceptance from the seller.
Once the offer, earnest money check and pre-qualification letter are in hand and the buyer’s agent has delivered them to the listing agent for presentation to the sellers, there are only three possible outcomes. The seller can:
a) accept the offer as is, adding their signature of acceptance, which then starts the clock ticking on the contingency periods;
b) reject the offer out right, which effectively terminates the offer; or
c) counter offer, a process where changes or modifies are made to the terms and presented back the buyer. The buyer then has the choice to accept, reject or counter the counter offer. It’s pretty common for a deal to go through multiple counter offers before all partied agree and we have mutual acceptance. Note: any change, no matter how minor, constitutes a counter offer. This is an area where agent need to be diligent to have very clean paperwork. Sloppy work in the negotiation process can lead to items being open for interpretation, which can to problems.
Phase Four – Accepted Offer to Close
The offer is mutually accepted when the buyer and sellers have agreed in writing to all terms and conditions. From that point the clock starts ticking on contingencies. The important thing to remember is that the transaction is governed by the contract.
Open Escrow – Escrow is opened usually by the listing agent. Escrow receives a copy of the sale agreement with instructions to open escrow. The earnest money check is delivered to escrow for deposit within 3 business days of mutual acceptance. The check is deposited to make sure the needed funds are available in the account.
Schedule Inspections – If possible, the professional inspection should happen within a few days of mutual acceptance. Inspectors are licensed by the state and the cost varies between $300-600 depending on the inspector and size of the house. We have worked with many inspectors and have a list of referrals for this service. We will facilitate the inspection by making the appointments and insuring access to the property.
Loan Application - A loan application for the property should be made within 3 days of mutual acceptance. The lender will need a copy of the sale agreement and we typically facilitate this for the buyer.
Review Title Report – The title company will deliver title reports to all parties. These should be reviewed. The title report includes information on liens, easements, property lines, etc.
Review Disclosure Documents - The seller has a legal obligation to disclose known defects and/or problems to the buyer. There are several forms used to disclose these issues.
Property Disclosure – the main form covering most issues.
Lead-based Paint – homes build prior to 1972 are required to provide a lead-based paint disclosure form.
Siding – due to problems with various siding products there is a specific siding disclosure form.
Inspections – This is a really important section!!!
We’ll say it again: a professional home inspection should be performed as soon as possible after reaching mutual acceptance. It can take time to evaluate the condition of the home and we may have to get bids, quotes and negotiate items with the seller. You also may need to call in specialists, depending on the situation. This typically is the most stressful time in the transaction. A good agent will assist in lining up all the parties, sifting through repair issues and negotiating on your behalf. We strongly advise you to be present at all inspections so the inspector can show you first hand all the issues that arise.
Additional Inspections
Sewer scope (if warranted) – Some parts of town are notorious for sewer line problems due to the age of homes and any trees between the house and street. The scope is done by pushing a camera and light through the main clean-out to the street. As gross as it sounds, the scope is videotaped and reviewed to determine the condition of the line.
Oil Tank Locater and Soil Test (if warranted) – Many older homes are, or were, heated with oil. Underground tanks are common and leaking can occur. If an oil tank is found on the property it is tested for soil contamination. In this case, the tank is typically decommissioned per DEQ standards and the heating system converted to gas.
Wells (if applicable) Properties with wells have a set of tests for quality and flow rate.
Septic Systems – properties with septic systems need inspection to insure proper function, often requiring the system to be pumped.
*Note: it’s common for the home inspector to find issues with systems such as electrical, plumbing or structural which are beyond the expertise and qualification and require a licensed professional.
Bids/Quotes for Needed Repairs – When all the issues are identified, the next step is to understand the costs associated with the repairs needed. This is done by coordinating the appropriate set of contractors to evaluate and prepare quotes and bids.
Negotiate Repair Issues – the last step in the inspection process is to negotiate the repair items. Based on the investigation, the buyer may discover they no longer wish to purchase the home. In this case, they have the right to terminate the transaction and receive their earnest money back in full. If they wish to proceed, a negotiation typically takes place. Again both parties must agree in writing prior to the expiration of the home inspection contingency period.
Appraisal – As your listing agent, we notify your lender as soon as negotiations on repairs are complete. The lender will then send its own appraiser to make sure the home has sufficient market value for the loan amount.
Final Settlement Statement Review – The title company will issue a settlement statement based on all the distributions to be made and the exact amount the buyer needs to close. This should always be reviewed for accuracy by all parties.
Final Walk Through – Often there are items the seller has been asked to do prior to close, so a final walk through a few day prior to close is highly recommended insure they have been completed.
Sign Papers – You always have a huge stack of papers to sign in order to close. The majority of these are loan documents, county recording documents and disclosures.
Possession – Finally you get the keys! The county records two times a day and we generally get the call by 4:00PM that you now own the house. We hand you the keys and maybe a bottle of wine or a yard gnome.
Congratulation! See, that wasn’t so bad.