GUIDE FOR BUYERS
1. Know What You Can Afford
Make an appointment with a mortgage originator either at a bank or a mortgage company. The service is free. A pre-qualification is a discussion, and does not include a credit report. It is better to be pre-approved, and to get a pre-approval letter from a banker. This is usually free, but some still charge for the credit report. The banker will tell you what paperwork and account numbers you will need before you meet. A pre-approval letter will help you get your offer accepted, since the seller will want to know that you qualify for a mortgage. Local banks and mortgage companies give better service, and are usually less expensive in closing fees than those from outside of the area. If you are pre-approved by one bank, you will almost always be approved at another. Later you may decide on a different bank after considering different rates and services. A bank may be willing to give you a mortgage greater than what you may wish to carry. You need to decide what is comfortable for you. In general, you should stretch a little and get the home that you really want, since you will be happier in the long run, and it is hard to coordinate a subsequent move, if you will have to sell in order to buy.
2. Meet with a Realtor
Choose your realtor carefully. You will want one who is not only experienced and attentive, but with whom you will feel comfortable. Looking for a home is a very personal process, and you will want someone who will counsel and help you make the right choice. Buying a home is a major decision and stressful. Note that if you do not have a referral to a realtor, and you simply call an agency, then you will get the realtor who is on what is called "phone duty" as your agent. In a typical company this agent may be new and inexperienced.
At the first meeting, the realtor will discuss agency relationships, since this is a State requirement. For the most part realtors work with buyers as Buyer Agents, representing the buyer's interests. There is an Agency Disclosure form that will be explained, and you will be asked to sign. It does not commit you to working with that agent. Some agents require that you commit to them, and want you to sign a contract; however, most do not require this in our area.
Discuss what you need and would like in a home. It is a process of learning and compromising. It takes time to know the market, and to know what you really want. Often buyers end up in a home in a location or of a style very different from what they originally had in mind. In the end location is the most important feature, but at first it is hard to know what the best location might be for you.
Your realtor will tell you what is available through MLS (Multiple Listing Service), and is already on the market. Homes from this list will be chosen to view.
The realtor can connect you with various web sites through which you can see what is in MLS. He or she can also enter you into what is called MLS Property Finder, a free service. Every day you will be given any new listings meeting your parameters by email.
3. Viewing Homes
Get to know the market. Before you can make an offer on a home you need to have a sense of market value by seeing homes and comparing prices. This process takes time. Your realtor will set up appointments to see homes. An agent can show you any home that is listed in MLS. Every home in MLS is available for any realtor to sell. Most sellers require overnight notice. Sometimes the listing agent will be present, and usually the seller is not at home. All of this takes time to arrange. If you see an ad or a sign, or hear about a home that you would like to see, call you agent. If you go to an open house, tell the hosting agent that you are working with another agent, and your relationship will be honored. Loyalty to your agent is important. If he or she feels that you are not loyal, they will give attention to those who are. You need one agent caring enough to help you. They are all busy, and only get paid after a closing.
4. Making an Offer
Note that you do not have to pay the realtor for his or her services other than from what is already arranged from the listing commission. A commission is divided into 4 parts. The listing agency, the listing agent, the buyer's agency, and the buyer's agent all get a share. Some buyer's agents, who have an exclusive contract with you, may require you to pay them an extra commission, if the arranged split is not sufficient.
An offer must be in writing. You will either meet with your agent or arrange to do it by fax. In an offer the basic terms are stated: the price offered, the closing date, the deposit amount, the terms of the inspection, the date for signing a Purchase and Sale Agreement (P&S), a financing deadline, a list of what is included, and the date for acceptance. The offer is legally binding on both parties once it is accepted. The P&S will be drawn up by the attorneys, and is much more detailed. It will replace the offer as the prevailing legal contract.
$500 is given as the deposit amount, usually called "earnest money." Sometimes it is $1,000. It is given as a personal check made out to the listing agency. The balance of 5% is given upon signing the P&S, and will become part of your down payment, once it is released from escrow at the closing.
After you make an offer, you wait for the seller to respond. Usually there is a 2 day deadline. If the offer is not accepted, then the seller will either simply reject it, or reject it but give you a counter-offer with a price and terms that are acceptable. The process of giving counter-offers and subsequent offers is usually done verbally. When the terms have been agreed upon, then the offer is signed and initialed. Note that until the offer is signed (and not just verbally accepted), the seller is free to accept another offer.
5. After Your Offer is Accepted
The Inspections. The inspection period is normally 14 days or 10 business days. During this time you arrange to have the home inspected. It is not required, but you should do it. It is best to hire a licensed inspector, who will carefully go through the home for a few hours, and give you a written report. If there is anything about the structure that is unsatisfactory to you during this period, you can, without penalty, withdraw your offer or renegotiate the price. You are free, at your own expense, to have any aspect inspected or tested. Other tests might include: the water supply, radon, mold, and lead. The seller has the septic system inspected for Title V at his or her expense. Sometimes the seller pays for and has the home inspected for wood boring insects, but usually the buyer does this. (Most banks will require this to be done.)
Retain an Attorney. Your attorney will review the Purchase and Sale Agreement, and make alterations with the seller's attorney. He or she will have a title search done, and do the actual closing. In Massachusetts you have to have an attorney do the closing. The attorney is actually representing the bank, but also works as your attorney. The attorney will charge you for his or her services, but will also charge you for Title Insurance, which guarantees good title. Banks require this.
Apply for a Mortgage. Choose a bank or mortgage company, and apply for a mortgage. The banker will tell you what to bring with you to the meeting. An application fee will be required, and will include the cost of appraising the property. It is important to meet the required financing deadline as stated in the offer. If it will not be met, ask for an extension, which needs to be signed by the seller.
6. Once the Closing Date is Set
a. Make a date with a moving company. You will not be able to move in before you close. Make the appointment as soon as possible, especially if you want move at the end or beginning of a month.
b. Buy home owner's insurance. The bank will require a receipt and a description of your insurance (a "binder") at closing.
c. Call utility companies to set up new service. Your agent can give you telephone numbers. These may include the following companies: electric, gas, telephone, cable, propane, oil, trash removal and snow plowing. In general, you do not also have to contact the town for public water and sewer. This is done by the realtor or attorneys before the closing.
d. Review closing expenses with you attorney just before closing. He or she will give you the amount of money that you will need to bring to the closing, separate from the mortgaged amount. Note that this money must be in the form of a bank check. Your attorney will tell you how it should be addressed.
e. Make an appointment for a walk-through of the home. This is done the day before the closing or the day of the closing. The seller has until the closing to move out. The property must be left at least "broom clean", including in the basement and garage, in any outbuildings and on the grounds, unless previously agreed to by the buyer. If the home has been damaged since the inspection, the seller has a responsibility to remediate. Sometimes an escrow account is established to protect the interest of the buyer, so that the closing can proceed as scheduled.
f. Arrange for the place and time of the closing with your attorney. Usually it is in the office of the buyer's attorney. It takes about an hour to an hour and a half. Then your attorney will go to the local registry of deeds and record the sale. The home is officially yours only after it is recorded.
We look forward to assisting you in the purchase of your new home. Our experienced realtors at Delap Real Estate will make buying a home as enjoyable and stress free as possible.