At PREA Signature Realty, we believe it is important that our customers have a strong and complete understanding of the home buying process. An educated and informed customer is our goal. But, you are never alone. Our professional staff stands ready to assist you and add value at each step in the process.
Here are the common steps in the home buying process:
STEP 1 - PREPARE FOR HOME OWNERSHIP
Before you start searching for homes, prepare for home ownership. Use a financial calculator to compare renting to home ownership, to calculate your monthly payment, or compare loan products. Prepare a monthly budget to determine what you can afford to pay on an on-going monthly basis. Save funds for down payment and closing costs. If you are a first-time home buyer, adjust your withholding allowances to take advantage of the Federal First-Time Homebuyer Tax Credit.
STEP 2 - RESEARCH HOMES
Identify the minimum criteria for your home search including price range, housing type, housing style, number of bedrooms, number of bathrooms, square footage of living area, home features, lot size, parking, amenities and other criteria. Tour neighborhoods to narrow your search by geographic area. Search for homes on local multiple listing service, Realtor.com, and other internet websites.
STEP 3 - SELECT BUYER'S AGENT
Interview buyer's agents. Ask about their education, experience, practice areas, neighborhood service areas, etc. Use written criteria to compare the agents. Employ buyer's agent to represent you in the transaction. Except for homes sold directly by owners ("FSBOs"), the commission or other compensation is paid directly by the seller. Some real estate brokerages charge a flat fee to the buyer in addition to the sales commission received from the seller. When reviewing a buyer's agency agreement, ask who pays the commission and inquire whether there are any commission or flat fee charges assessed to the buyer. If you are purchasing a new home in Saint Louis, Missouri, we would like the opportunity to make a presentation to you. Even if you are outside the Saint Louis area, we would be happy to provide you with a list of real estate agents who would be interested in assisting you.
STEP 4 - SELECT LENDER
Obtain referrals for lenders. We typically refer our customers to Jim Quist at New Castle Home Loanand Michael Gratz at Pulaski Bank. Why? We have worked with these lenders on past transactions and have found that they offer extensive knowledge of loan products, competitive rates and fees, and superior customer service. After obtaining referrals, interview at least three lenders using written criteria for selection. Obtain interest rate quotations and good faith estimates from the lenders. Obtain a copy of your credit report. Address any negative items on your credit report. Use a loan calculatorto determine monthly principal and interest payments at current interest rates. Submit written loan application. Secure prequalification and/or preapproval letters from lender. Select a loan product. Lock-in interest rate, if appropriate. Review other loan and assistance programssuch as local and state first-time home buyer programs, local and state down payment and closing cost assistance programs, federal first-time homebuyer tax credit and corporate housing assistance programs.
STEP 5 - TOUR HOMES
Before you tour homes, meet with your buyer's agent to review your housing criteria. Request your buyer's agent to preview the homes prior to your tour. After your buyer's agent has selected homes for a tour, review the MLS reports and view photographs and virtual tours of the selected homes. Narrow search to homes that meet your minimum criteria. Tour homes. Select a home for purchase.
STEP 6 - REVIEW THE SELLER'S DISCLOSURE STATEMENTS
Review seller's disclosure statements. Look for inconsistencies between seller's disclosure statement and observations made during your tour of the property. Request supporting documentation or written clarification of items of concern.
STEP 7 - NEGOTIATE PURCHASE OFFER
Obtain comparable sales data from your buyer's agent to determine a range for a reasonable offer based on actual market data. Sites such as Zillow.com or Eppraisal.com provide some limited guidance. Do not overly rely on these websites or on national reports. Although it is a buyer's market, local markets do not necessarily reflect national price trends. After reviewing the comparable sales dates, determine your offer price. Prepare and submit written offer for the purchase of your new home. Do not get emotionally attached to the home. It is a financial investment and should be based on considerations including price appreciation and future resale. When submitting the initial offer, attach the preapproval letter from your lender. If you are using a non-standard sales contract, submit it for attorney review. If the initial offer is rejected or a counteroffer is made, review the counteroffer with your buyer's agent and reply to the counteroffer. Docket deadlines for all contingency periods and other deadlines set forth in the sale contract.
STEP 8 - MAKE EARNEST MONEY DEPOSIT
Upon submission of the initial offer or upon acceptance of sales contract, deposit the earnest money with the listing agent's brokerage, selling agent's brokerage or the title company retained by you to close the sales transaction. If there earnest money is over $2,500 or if there is a short closing date (less than 10 days), use certified funds such as cashier's check for deposit.
STEP 9 - SELECT TITLE COMPANY AND ORDER TITLE SEARCH
Before selecting a title company, obtain price quotation from three reputable title agencies. Identify the title insurance company used by the title agencies. Review the A.M. Best ratings for each title insurance company. Select the title agency to close the sales transaction and submit a written title order. Obtain the contact information for the processor and closer at the title agency and provide this information to your lender and insurance agent for your property insurance. Also, provide the contact information for your loan officer and loan processor and the contact information for your insurance agent to the processor at the title agency.
STEP 10 - SATISFY LENDER REQUIREMENTS AND CONFIRM APPRAISAL ORDER
The underwriter for the lender may request additional information such as tax returns, proof of funds, income verification, employment verification, etc. For each requirement, promptly obtain and submit the requested information. After your loan application is submitted, do not make any changes in your financial circumstances such obtaining new lines of credit or purchase major items such as an automobile as these changes may impact the approval of your loan.
Obtain verification that lender has ordered the appraisal. After the appraisal has been received by the lender, request a copy of the appraisal report. If the lender or title company require a survey, order a survey from a licensed surveyor. For prompt, cost effective surveys, we recommend Marler Surveying. Surveys are not generally required for condominiums and lofts in the Saint Louis area. Some title insurance companies and lender permit the use of a recent survey so it doesn't hurt to ask the seller for a copy of their survey.
Upon receipt of items requested by the loan officer, survey (if required) and the appraisal report, the loan officer will submit the loan to the lender's underwriting department. Upon approval of loan, request the issuance of a written loan commitment or other documentation indicating unconditional loan approval. If the loan has not been formally approved, request an extension of the financing contingency deadline.
If the loan is denied, request a written statement from the lender setting forth the reasons for the denial. Submit a copy of the written statement to the seller with written notice terminating the sales contract or, in the alternative, request an extension of the financing contingency to submit an application with a new lender.
STEP 11 - APPROVE SELLER'S DISCLOSURES
If you submitted an offer prior to receiving the seller's disclosures and if your offer was contingent upon receipt and review of the seller's disclosures, obtain a copy of the seller's disclosure. Review the seller's disclosures requesting and request supporting documentation or written explanations for items of concern.
STEP 12 - SECURE HOMEOWNER'S INSURANCE
Contact your insurance agent and request a binder for home owner's insurance on the property. If there are prior property insurance claims associated with the property, it may be more difficult to obtain insurance so it is important to request the binder early in the process. Review your coverages with your insurance agent.
STEP 13 - SELECT BUILDING INSPECTOR, CONDUCT BUILDING INSPECTION, AND NEGOTIATE REPAIRS
Obtain referrals for building inspectors. Interview the building inspectors using set criteria. Obtain verification as to what is and is not included in inspection. If items of concern are not covered by inspection, consider using alternate building inspector or other professionals to inspect these items. Provide copy of seller's disclosure to building inspector. Attend building inspection asking questions regarding items of concern. Obtain a copy of the building inspection report. Request repairs and/or negotiate price reductions based on costs of repairs. If repairs are to be made, verify that the repairs have been made by reputable contract, secure proof of payment and/or obtain lien waivers, obtain copy of warranty for repairs and, if appropriate, request the building inspector to review the adequacy of the repairs.
STEP 14 - REVIEW TITLE COMMITMENT AND SURVEY AND REMOVE CONTINGENCIES
Review the title commitment and survey. On the survey, identify possible encroachments or access issues. For any exception, request copies of the underlying documents or the removal of the exception. If appropriate, formally remove all contingencies that have been satisfied such as attorney review, review of seller's disclosure statement, financing, building exception, etc. If contingencies have not been satisfied, request extension of deadlines or provide written notice of termination of the sales contract.
STEP 15 - PERFORM PRE-CLOSING INSPECTION
Immediately prior to closing, perform a pre-closing inspection of the property. The purpose of the inspection is to insure that there are no changes in the condition of the property from the initial building inspection through the date of closing and to verify the completion of negotiated repairs. The purpose is not to identify new issues to address.
STEP 16 - REVIEW SETTLEMENT STATEMENT
Prior to closing, obtain and review a copy of the closing and settlement statement. Review the charges to buyer under the terms of the sales contract. Compare the lender charges on the settlement statement to the good faith estimate. Determine the funds necessary to close. Obtain certified funds for the amount due at closing and deposit the funds with the title agency by cashier's check or wire transfer.
STEP 17 - ATTEND CLOSING AND SIGN LOAN DOCUMENTS
At the closing, review the closing and settlement statement then the loan documents. If the lender is using standard Fannie Mae forms, these forms cannot be written or changed-except to correct errors in the terms of the loan such as interest rate, monthly payments, escrows, prepayment penalty, etc. Sign loan and related closing documents. Obtain keys, appliance manuals and related warranties.
STEP 18 - POST CLOSING ITEMS
Change locks to the home. Order and transfer utilities. Obtain copy of recorded deed and deed of trust, signed loan documents and signed settlement statement.
The actual steps in the sales process will vary based on the nature of the sales transaction and the specific property. The purpose of this page is to provide a brief overview of the sales process. With adequate planning addressing these items, you will have a smooth, problem-free closing.
If you are in the market to purchase a new home, we would like the opportunity to represent you. For more information, contact Ryan Shaughnessy via telephone at 314.971.4381 or via e-mail to ryan@PREASignatureRealty.com to schedule a free consultation.
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GENERAL DISCLAIMERS
Review Note: The opinions and statements contained herein represent my personal opinions and observations. These blog entries are not reviewed, endorsed or approved for publication by Gilded Age, L.L.C., Gilded Age Sales, L.L.C. , Preservation Real Estate Advisors, L.L.C. or any affiliated companies.
Real Estate Licensure Note: Ryan Shaughnessy is a licensed real estate attorney and Preservation Real Estate Advisors, L.L.C. is a licensed real estate brokerage in the State of Missouri. The contact information for the brokerage is: 1802 Lafayette Avenue, Suite 200, Saint Louis, Missouri 63104, (314) 771-7233 x13 (office), (314) 771-4085 (facsimile), or ryan@PREASignatureRealty.com. The website pages and blog posts are provided for informational and discussion purposes only and shall not constitute the listing or offering of any property for sale or rent or the performance of any activity for which a license is required outside of the State of Missouri.
Legal Advice Disclaimer: The author is a licensed attorney. However, the opinions and statements contained herein are for informational and discussion purposes only and shall not constitute the provision of legal advice. Nothing contained herein shall establish an attorney-client relationship. Readers are cautioned to seek legal counsel in their state before using or relying upon any of the information contained herein.
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