I wanted to talk about the order and process of buying a home. I get questions about this all the time so I figured I’d email my contacts and put it all in a single helpful post.
Tampa area real estate moves FAST!
If you love a home you find and aren’t financially prepared to buy, it will likely be gone the next time you return to make an offer. I’ve seen it happen and it’s HEARTBREAKING! You finally find the perfect home, your finances aren’t together yet to actually make an offer and the home gets sold before you get your pre-approval letter from the mortgage lender.
Here’s the order in which you should start your home search:
Step 1: Find a good licensed real estate agent.
I am a licensed agent and know that agents are a dime a dozen but GOOD agents are hard to find.
Buying or selling a home is likely a major event in your life. Will you trust this task to your neighbor who moonlights as an agent on the side? Will you try to go it alone to save commissions when you are up against an opposing side who does have an expert agent working for him, fighting tooth and nail for his client to win? Are you prepared for that?
Choose wisely. It’s important to choose one agent who you can trust and who has the experience to get you from Point A to closing. He or she should work with integrity and transparency. He or she should just as easily tell you the bad news as quickly as the good news so you can make an informed decision and he or she should not be afraid to face a problem head on when problems arise. Family members and neighbors don’t always work out so well. In a business where personal views can really get in the way of progress, you should choose someone best suited for the job and not someone you know just because you know them. Things can get crazy when buying or selling a home. Do you want your personal relationship strained if things don’t go well?
These are all things to consider when choosing an agent so talk to a few but choose one good one. It’s an important decision and it’s important to just work with one Realtor.
Most Realtors will ask “Are you working with another Realtor?” as one of their first questions to you. You may be contractually obligated to work with a certain Realtor if you signed a contract with him or her already. If you did, he or she will be the one that shows you homes when you are ready to start looking.
You can start checking out some great homes right now by playing with our search tool here:
Step 2: Find a mortgage lender unless you are buying the home outright in cash.
A seller in today’s market wants to know the buyer I bring to them is qualified to close on a home if they make an offer.
A strong offer includes a strong ability to make it to closing successfully. As a home seller, I’d want to know the offer you bring me can close and that you are financially prepared to buy my home. As a seller, I have a lot of expense associated with selling my home – marketing, open houses, man hours, inconvenience, etc. I really don’t want to change the status of my listing from the MLS to “pending” after you made me an offer without being able to close the sale. I’d prefer you not make me an offer at all if you can’t close so I can continue to entertain showings and offers that can close. As a home seller, if you want me to take your offer seriously, include your pre-approval letter with the offer. I will likely not even consider your offer without it.
So what do you do as home buyer?
As a buyer, you need to speak with a mortgage lender and get your financial affairs in order. DO NOT go out and buy a new car or miss a credit card payment or anything of the sort for 6 months BEFORE you even decide to buy. Try to prepare as far in advance as you can and get your credit in order before anything. The better your credit, the better deal you’ll get on your mortgage. Really work to get the best credit you can in the months before starting the buying process. If you need to speak with a credit repair company to help guide you, do so 6-12 months BEFORE thinking about buying a new home. The more time you allow to repair your credit, the better.
You will need a pre-approval letter that shows the seller you are ready and qualified to buy. If you are going to pay for the house in all cash, you will likely need to submit a bank statement (in most cases), showing that you have the cash funds in your bank (or IRA or stock account – somewhere – proof you have relatively liquid cash to close) in the amount needed to close on the sale. Seller’s agents want the pre-approval or bank statement submitted as proof you can close, along with the offer contract submitted together.
As a listing agent (representing the seller), I need to protect my client’s interest so when we receive offers for a home from you, my client will likely pick the strongest offer. Strong offers are those which offer the seller the highest price (in most cases) AND those that have furnished proof they can close – or some combination or variation thereof and a promise of a solid Earnest Money Deposit. Without that proof in hand, not many sellers will take your offer seriously and you’ll lose the house to someone else.
Example: You are selling your home for $200,000. You get two offers. The first is for $195,000 cash with a bank statement showing the buyer has $450,000 cash in his bank account and he wants to close in 3 weeks and will put $10,000 down in escrow. The second is an offer for $196,500 and the buyer will put $500 cash down and has submitted a pre-approval for $196,500 and wants to close in 10 weeks. Which offer would YOU take if you were the seller?
Sometimes the highest price doesn’t make the best offer. A strong offer takes many things into consideration.
Speaking to a lender is the first step of the process and the step most people want to avoid until the very last minute.
Let’s face it, it’s fun to dream of that new home and get decorating ideas while visiting open houses and scheduling showings, but unless you prepared financially, you are really just wasting time – your time, your Realtor’s time, the homeowner’s time – everyone’s time – with a few exceptions.
The owner of the home you schedule a showing to go see the home is excited to show his home thinking he may have a buyer. The house gets cleaned, the owner packs up his family and leaves the home for you to go see it undisturbed. There’s a lot that goes on. The owner is hoping to get his house sold so he deals with the inconvenience of having potential buyers walk through his home at different hours and sometimes with short notice. It’s stressful. If you haven’t discussed how to pay for a home with a lender, you really aren’t a potential buyer yet and should probably wait to schedule those showings until after you have that pre-approval letter in hand.
Once you are prepared to buy and have a pre-approval, searching for that new home becomes so much more fun because now you know you can actually buy a home if you find one you love! It becomes very real and so much fun!
Who likes speaking with a lender about finances? This part is usually not the most fun – at least not as fun as going to look at houses. It is necessary however. Today’s lenders have really streamlined the process. A lot of the process can be done online and the lender is there to help you along the way. A good lender will make this part easy. We have lenders we work with all the time who are great at what they do. If you need help with this, just ask and I’ll send you some referrals.
How much will I need?
The great thing about a good lender is that they can tell you how much house you CAN actually afford and also tell you how much you CANNOT afford. It’s good to know.
You don’t want to over-leverage yourself and get into a huge mortgage that is over your head and putting stress on you and your family. A good lender will provide you a realistic expectation of how much home you can afford. Sometimes the numbers will surprise you in a positive way!
Once you’ve gone through this process, looking for a home becomes easier. You’ll now know what you might be getting yourself into with regard to monthly payments and cash needed to close on a home.
What about escrow cash? (Also called a good faith deposit or Earnest Money Deposit)
When you do finally find a house and want to make an offer, the strength of that offer will be contingent upon how much cash you can put down, your pre-approval letter and the price you are offering compared to other offers the seller may have received.
Your offer will compete directly with others, if others exist, and the strongest offer usually wins. In the Tampa area, on a home priced between $300,000 and $400,000, a $5,000 or $6,000 escrow deposit is not uncommon and that is typically broken up into two payments. On a $900,000 – $1,200,000 home, escrow of $25,000 cash is pretty typical in today’s market for a seller to take you seriously.
I provided these numbers as real world examples from my own experience but your Earnest Money Deposit can be almost any amount. The seller will consider the amount you put in escrow during his or her analysis of how strong your offer is. The more you put down initially lets the seller know you are serious about making it to closing and buying the home. Submitting an offer with very little down tells the seller you likely don’t have cash to close or are not very committed to actually closing the deal or trying to just “save” the home to buy some additional time but you have no real intent on closing any time soon.
How does this work?
Example: You find a home in Tampa listed for $315,000. You love it and speak with me about making an offer on the home for $300,000 (I will help you with the offer and provide my expert opinion as well as comparable home sales so we have a basis to justify the cost). Included with the offer is your pre-approval letter from a mortgage lender that says you qualify to purchase a home up to $325,000. You discuss with me including an Earnest Money Deposit of $6,000 to be written into the offer contract.
The first $2,500 of that $6,000 will be due 3 days after your offer is accepted (if it is accepted) and the other $3,500 will be due a week or two later, after the property has been inspected by a home inspector and checks out ok. If your offer is accepted, you will overnight or wire the first escrow deposit to the title agent before the first 3-day deadline is up then wire or overnight the second escrow deposit after the home inspection report comes back and you decide to move forward with the purchase.
Once both escrow payments have been made, it may be difficult to get your escrow money back without legal action, depending on how the offer contract is written up and what deadline dates are written into the contract.
All of these dates and deadlines will be written into your offer contract but typically once the inspection period runs out, you are then committed to purchasing the home, barring any contingencies and other contingent deadlines, like an appraisal. Again, there are exceptions and I am not a contracts attorney but most of the provisions and deadlines are clearly outlined in the contract.
Regardless, there is usually a “point of no return” in the contract – a point at which you either give up your escrow deposit or face legal action against you for backing out of the contract you signed. In other words, signing an offer contract is a serious matter so don’t sign a contract unless you read it and if you prefer, run it by a lawyer for interpretation.
The offer contract is legally binding once executed (signed) by all parties. Both you and the seller will have contracted obligations and deadlines to meet until closing once the contract is executed.
Above is a pretty vague, yet real-world description of the process. There are a million variations to purchasing a home and a lot of it depends on how the contracts are written up and what kind of leverage you have to get a deal done. I provided the example above as a reference – a typical deal we might see in the Tampa area using numbers I’ve seen in actual deals. A good chunk of the deal has to do with cooperation. When the buyers and sellers and listing agents and buying agents all work together to achieve a common goal (buying the home), the deal tends to go very smoothly. Having a great agent on your side helps a lot.
Next – let’s go look at some homes!!!
We jumped ahead of ourselves by talking about escrow and offer contracts before you even found a home but it’s an important part of the process. You usually do need some actual cash money to buy a home these days.
The Auto-Email Direct From the MLS
You chose an agent and you have your pre-approval in hand and now it’s time for the fun part – home shopping!
By now, as your agent, I have probably put you on an automated MLS email where you get emailed currently active listings direct from the MLS (Multiple Listing Service – the system we Realtors use to find you homes) that match your criteria. I will usually start this process before you even get qualified for a mortgage because it will take a little time for you to refine your search.
As you start looking at homes, you will get a feel for the local market and get a better feel for the features you love about certain homes and those features you do not want as well. This part is like shopping for a home but from the comfort of your own home and through email.
You can sift through thousands of homes or only a few. It’s up to you. The auto-email is nice because I can really dial in the criteria for you.
- Here are just some of the things I can include or exclude from your search:
- Location – a radius around a neighborhood, a zip code, a city, a subdivision, a street, a school zone
- Number of Bedrooms
- Number of Bathrooms
- Does it have a pool? If so, private pool in backyard or community pool?
- Square footage of home
- Year it was built
- Price range (minimum, maximum or exact price)
- Single Family Home, Condo, Townhouse or Mobile home
- New construction or not
- Garage space
- Number of floors
The search capabilities of my system are truly nearly endless. The point is, I can really dial in a search for you and you can’t do that on any other web site. This is data that comes direct from the MLS.
We can keep it broad so you get to see more homes as you decide on features you’d like or we can fine-tune it right from the start so only the homes that match perfectly are sent to you.
Either way, this email is free, takes me 5 minutes to set up for you and is really valuable. It’s a great place to start.
Next, start refining your search.
At first you might feel overwhelmed with the decision. There are SO MANY homes to choose from!! This is why we start the auto-email early on in the process. It will give you time to understand the market and start narrowing your search. Don’t worry, you WILL narrow your search as you check out these properties. It gets easier as you go along and eventually you will know exactly what you want.
I’ve found some homes, can we go look at them now?
When you find a home you love, text your Realtor (me) the address or the MLS number shown in the listing.
The MLS number looks something like this: T2938676 or T3107498.
With that number, I can find any home listed in the MLS. We would then schedule a showing and go see the home at your convenience.
What do I do at a showing?
Show up!! (please) on time. Please do show up on time for the showing you scheduled. The seller has likely made accommodations to show you their home and left the home empty to allow you to see the home without them there.
I know for a fact, some people take their pets for a long ride while a scheduled showing occurs, waiting for a text from me when the showing is done so they can return home. Others make accommodations for pets and other sellers might just take a long walk. It’s not easy on them so please show up on time so the seller can get back to his normal life as quickly as possible.
Once at the showing, I will let you in to look at the home. I will usually give you some space to allow you to look freely without me hovering over you but I will be in the home with you to answer questions as they come up. If I don’t know an answer to a question, I will jot it down and ask the listing (seller’s) agent when we get done with the showing then text or email or call you after the showing with the new information.
Be objective but not too critical – paint and wallpaper can really sway your decision but try not to let it. Try to see beyond some of the superficial stuff like decor and make sure the home is right for your family with regard to more permanent issues, like structure, size, neighborhood, etc.
Many clients at this stage can choose a home once they’ve seen between 8 and 12 different homes.
Some clients need to see more. Some need to see less. There is no pressure to hurry up and buy whatsoever. You need to choose what’s right for you and your family. Take your time.
Clients often say things like “the house spoke to me” or “if it’s meant to be” or “I felt a great vibe” from a particular home. However you choose, choose carefully and try not to let a preconceived notion sway you. Logic and reason works best here but a good vibe helps too. :-)
I hope you’ve found this piece interesting and informative. If you have questions about anything real estate related, feel free to shoot me a text or email or call.
I’d love to work with you and help you with this process.
I look forward to working with you!
Phil Bernie, Realtor
Cell / Text: 813-420-8488
Dalton Wade Real Estate
Tampa Home Searcher Bernie Group