Anatomy of a Home Purchase
For most people, finding the right home begins with a house-hunting
strategy combining personal preferences, guidance from others (including an
agent) and a mix of neighborhood exploring and online search.
For some, the search takes a while; others find what they want right away.
In either case, your real estate agent can be a huge resource of insight and
guidance, working through issues or complications that arise along the way.
Here’s a general outline of what to expect during a home purchase, from
the buyer's perspective.
Buyers make a purchase offer.
This is it! You've found the home of your dreams, looked over disclosure
documents, reviewed comparable sales data, talked it over with your agent and
submitted an offer. The sellers may accept your first offer, but more often
will return a counteroffer. In fact, additional negotiations are common, and
your agent will help you through this generally stressful stage.
The sellers accept.
Once everyone is happy with the terms, the parties have reached what is known
as mutual acceptance and enter into a purchase and sale agreement.
Buyers put up earnest money.
To solidify your intent to buy, you'll place a deposit, or earnest money, on
the property. The amount varies, but is generally at least 1 percent of the
purchase price. You'll write the check to the escrow company, not the seller.
Note: This money counts toward your down payment later.
Escrow opens.
The earnest money deposit goes into an escrow account, where all funds will be
held until closing, when they are then distributed to the right people (lender,
mortgage broker, title insurer, real estate agents, etc.).
Buyers apply for a mortgage.
This step is streamlined if you've already been preapproved for a loan (which
is a smart thing to do). If not, you'll begin the loan application process now.
The lender inspects title history and orders a property appraisal.
The lender needs key information about the property before granting a loan.
This is when potential problems can come to light. For example, the appraisal
could show a lower value than the purchase price, or the lender could have
trouble finding comparable homes. Also, the title search could turn up liens or
other problems.
A home inspection takes place.
You'll hire an inspector – generally, your agent will suggest one, or provide
several options – to check the home and point out minor and major problems that
should be fixed before closing. At this point, you still have the option of
backing out of the deal. Through your agent, you'll submit a list of requested
work, and the sellers have the option to complete the tasks, do some of them
but not others, or reject the request. The sides will negotiate until reaching
an agreement.
Removing contingencies.
If the house passes inspection,
appraisal and title search, and everything is good to go, then all
contingencies can be removed, paving the way to a closing.
Closing time arrives.
Once contingencies are removed and financing is set, all parties sign a
seemingly endless stack of documents, and the transaction closes.
Packing begins!
When the final signatures are in place, it’s time to put down the pens, shake
hands, exchange smiles and start packing for the mo
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