Shopping for your dream home
Now that you know what loan options are available and what you might qualify for, it’s time to go house hunting. This is arguably the most fun part of the home buying process, but it’s just as complex and requires diligent planning and strong judgment.
In this chapter
- Do I need a Realtor?
- What to expect from the home inspection
- How to make an offer on a house
Hiring a Realtor
Though it’s not technically required, hiring a Realtor can help aid the process of both buying and selling a home. Not to be confused with a real estate agent, which is anyone who has a license to sell property, a Realtor is an agent or broker who is a member of the National Association of Realtors and must follow a strict code of ethics. Realtors don’t just help you find the best properties — they can also lead negotiations, stick around for inspections, and even direct you toward the best mortgage loan for your situation.
To find a Realtor, you can start with a basic online search. However, it helps to ask trusted friends and family for their recommendations. You should also feel free to ask plenty of questions, such as how long they’ve practiced and what their schedule is like, until you’ve found a person you feel comfortable working with.
Getting a home inspection
Once you’ve found the perfect property that you plan to buy, you’ll need to have it inspected. It’s common to arrange a home inspection after you make an offer, but getting it done before submitting an official offer can put you in a better negotiating position. The cost of a home inspection varies geographically, though a typical range is $300-$500, according to HUD.
The home inspection will give you a clearer idea of how much the property could cost you in terms of renovations, repairs, and ongoing maintenance. A home inspector will take a look at various areas of the house, especially spots that are prone to hidden damage, such as the roof, walls, foundation, plumbing, and electrical.
You shouldn’t expect the report to come back perfect, but you also want to be wary of expensive, surprise problems. If major repairs are needed, the seller may lower the home’s price or agree to get the repairs done themselves.
Making an offer
Now that you have your eyes on a property and an idea of how much you’re willing to pay for it, it’s time to work with your Realtor to submit an offer. Keep in mind that to make an offer on a home, you need to show proof that you have the funds available to go through with the purchase.
Typically, you’ll submit a proof of funds letter along with your offer, which can be obtained from the bank where your money is being held. If you were preapproved for a mortgage, it’s a good idea to include a preapproval letter from the lender, too.
Once you’re prepared to make your offer, this stage will potentially include a few steps:
- You submit an offer.
- The seller either accepts or rejects the offer.
- If the seller rejects it, they may submit a counter-offer.
- You then review the counter-offer and decide whether to accept or reject it. You may counter again, with both parties either choosing to walk away, or hopefully, coming to an agreement.
It’s important to submit an attractive offer that isn’t too low or too high compared to the asking price, and avoid letting emotions guide your decision making. That can be a tall order, as you likely have a lot of hope and anticipation riding on whether or not your offer is accepted. But your agent (if you choose to work with one) can help guide you through the process.
Once your offer is accepted, you sign the purchase agreement. This is a contract that outlines a number of details, including the purchase amount, a mortgage contingency agreement that lets you off the hook if you can’t secure financing within a certain period of time, and closing date. It can also list items included in the sale (such as furniture, appliances, etc.), a guarantee from the seller that the home’s title is clear, and much more.
Also included in the purchase agreement is how escrow will be handled. The escrow process is an important step that involves setting aside some money to be held by an impartial third party while the home sale is finalized.
These funds serve as a deposit equal to a small percentage of the sale price, and a promise to the seller than you will make good on your offer. If you back out of the sale in a way that violates the purchase agreement, the seller keeps that money.