The home buying process is exciting and can provide you with an asset that 1. You can live in 2. Builds wealth over extended periods of time. Truth be told, there are many ways that you can go about buying a house. But I’m going to show you the home buying process in a simple way so that you avoid mistakes.
Whenever your considering picking up a new hobby, buying a car, etc you usually do a bit of research. Even as a real-estate agent, I tell people browse around and have fun with the home buying experience. There’s no rush to buy unless you are under a time crunch.
- Pick up a book or two on home buying
- Browse blogs
- Watch Youtube videos
- Have a casual conversation with a real-estate agent AND let them know you’re just browsing
- Identify your needs and wants in a house
- Talk with family members
2. Determine how much house you can actually afford
Unless you are paying for a house with cash, you need to determine how much house you can actually afford. One of the deadly sins of house searching is falling in love or touring property before you get a pre-approval!
- Find a lender in your area (DON’T use remote lenders!)
- Tell them about your situation
- Be honest about your expenses & income
- Much of this is automated and done by email so, it’s quick, simple and will get you a good idea of what you want
- Get pre-qualified. This essentially means “I’ve got a little piece of paper that proves I can afford homes in this price range”
If you don’t want to talk to a lender just yet, Discover Card has a nice home affordability calculator here.
3. Find a real-estate agent
This is an age old question “What makes a good real-estate agent?”. When buying a home, don’t look for the most spectacular, top-selling, flashy agent you can look for:
- An agent that understands your wants and need
- Is responsive
- Seems on-the-ball
Stay away from:
- Agents that don’t answer the phone or return calls
- Realtors that are full of shit and think that every house is a great house
- Don’t understand your needs
If I can give you one piece of advice, understand that it’s very easy to get a real-estate license. There are bad real-estate agents out there.
4. Go house hunting
This is pretty self-explanatory. The real-estate agent that you’ve chosen will have an electronic key on his/her phone to let you into each house.
- Don’t fall in love with kitchens and bathrooms
- Does this house fit your needs?
- Is it worth the price to you?
- How many renovations are you willing to make?
- What particular features are you drawn to?
Particular tips so that you don’t end up purchasing homes in bad areas:
- Talk to neighbors! Is there an annoying teenager that plays drums all day? Drug dealers? College kids that party all day?
- Is there hype? Have prices exploded through the roof?
- Does the home need repairs? Call a contractor or let your agent know.
- Look at 10 homes. If you can’t find a home the suits you, go back to the drawing board.
5. Submit an offer (other paper work)
This when things go from fun TO STRESSFUL.
- An offer is a legally binding contract that explains the price & terms that you plan to purchase a piece of real estate
- Make sure that you are negotiating correctly. Ask your whether it’s appropraite to offer low price
- Once a signed contract is in place the next part of the deal is.
One of the most important things to remember: All contracts come with what’s called a due diligence period. A due diligence period can be translated as
6. Get a home inspection and 2nd round negotiations
Home inspection is exactly how it sounds. You’re essentially hiring a generalist to find issues with the home. Home inspectors are like real estate agents: they’re not all created equal. Pick wisely.
- Home inspector find issues? Very common.
- Are the issues so minor that no negotiating is required?
- Are the issues so catastrophic that you walk away?
- Most people “meet in the middle”. Seller agrees to either accept repairs or credit everything towards closing.
Closing has become synonymous with many things, like closing a sale. But a real-estate closing is slang for:
- Property changes hands and you’re now the official owner according to public record
- Funds are released from escrow. In this case the down payment is made towards the buyer.
- Keys are given to you at the attorneys office and you can begin putting your stuff in.
- Overall, the summation of the sale and everybody pretty much goes on about there lives.