I’ve had a lot of first time buyer’s lately. They are always so much fun to work with. Most of them are coming from an apartment, so they get really excited over things like having a garage, or being able to let their dog out in a fenced backyard rather than having to take it on a walk.
I always try to tell them what we are doing before we do it, and explain things as they happen.
One of my new clients mentioned he was thinking about taking a class for first time buyers. Then I realized I should probably do a quick explanation of the entire process up front, and then go into details as we reach each stage.
So, below is an email I sent him:
We will go out and view any houses that interest you. I’ll offer my thoughts on the good and bad points of each house. I will probably sound very critical of the houses. That is because I want you to know everything I have learned from my experience so that you will be able to make the wisest choice possible.Once you find one you like enough to make an offer on, I will see what has sold in the area and determine what the house is worth. We will want to know this so we can base an offer on the value of the house rather than the list price. The average “List to sale ratio” for this area is about 98% of the list price. If we find a really good house and it is priced right, it could very well go for the full asking price. I am hoping we will see fewer multiple offers in 2019 than we did last year.
To make an offer, you sign a contract and all the supporting documents. We can do that online using an electronic signature program all realtors use.
Often the buyer and seller counter back and forth at least one. The seller may want a little more money, or ask for a different closing date than we put on the offer. Once we all come to an agreement and everybody signs it, the offer becomes a contract.
Once we have a contract, I will get what is called earnest money, or good faith money. It will likely be $1000 but I can try for $500 if possible. This money gets deposited in my escrow account. It is your money. I am only holding it. The only way the seller can get this money is if you default on the terms of the contract. Think of it like a security deposit on an apartment. Should you not be able to get your loan, you would get this money back. I’ll go into the inspection later, but should we not be able to reach an agreement with the seller on a repair list, you would get your money back as long as we submitted the list within the allotted time frame.
You will have a specified time frame to do a home inspection. I usually write 15 days from the time of the last signature on the contract. I have a couple of good inspectors I can recommend, but you are free to use anybody. A good home inspector will probably charge $350-425. You pay them the day of the inspection. At the end of the inspection, we both meet the inspector to review their findings and so you can ask any questions.
A typical house will have 15-20 minor to medium sized issues after a home inspection. An older house will have more. The best house I have ever had inspected only had 3 problems. Keep in mind that the inspector is comparing your house to a perfect house.
From there, we write a repair list. The list is for things that were not disclosed to you. We can’t technically ask for anything cosmetic, or something that was not code when the house was built. A common example of this is GFCI outlets. Those are the ones in bathrooms and kitchens that have the test/reset button. They are usually absent in an older house because the house was built before they became required by code.
Assuming we reach an agreement, we move forward with the sale. The seller does the repairs. We have a chance at what is called a “Final Walk Thru” to see receipts and the work they did. Sometimes we can’t access where a repair was made, so having a receipt or statement is good.
At some point, the appraiser will come out to make sure the value of the house is okay. We don’t need to be there for that.
You have the option to do a termite inspection. I think it is always a good idea. Those are usually about $45. I have somebody I use, but you are free to use anybody you want. We don’t have to attend that inspection. They only take about 20 minutes. You typically pay for this at the closing. The way our contracts are written, the seller has to pay for a termite treatment if any are found. If there is any damage from termites, the seller has to pay up to 1% of the sale price automatically. If there is more damage than that, we would negotiate. If we cannot reach an agreement, either party could walk away from the sale. You would get your earnest money back. Houses often have termites. I occasionally see a little termite damage. I have never had a deal fall apart due to termite damage.
While all this is happening, your lender is asking you for all sorts of documents. Much of what they want will seem silly. I once had a lender ask about a $1000 check I received many years prior to that. It is just part of the process. Also, be sure to get them anything they need as quickly as possible because we can’t close until your loan is done.
The typical time period from contract acceptance to closing is 30-45 days. We will write a target closing date on the offer. Most of the time you do end up closing on that exact date. I’ll probably make it a Friday so that way you will have the weekend to move in.
Most of the time you get to move into the house right after the closing. We call that “Possession with deed.” Sometimes a seller will ask if they can stay in the house for a few days after the closing. I never like that, but sometimes if there are multiple offers, it is done to prevent you from losing the house.
I hope this helps. I love working with first time buyers. I’m here for you, so don’t hesitate to call/text/email with anything you need.