The RIGHT WAY to BUY a HOME

By Dave Wildman, ABR / REALTOR 

Buying a home in the right way starts by educating yourself about the complex process of purchasing a single family residence.

While your Realtor is professionally prepared to guide you through the transaction, being familiar with every step of the process in advance will make things go smoother and lessen any anxiety you might have along the way.  Most of these steps a good Realtor will do without prompting, but by referring to this article as you go, you will know what your Realtor is supposed to do for you and what knowledge they possess that you can tap into.

You will be in a position to save significant TIME and potentially THOUSANDS of DOLLARS! 

STEP 1. Create a strong working relationship with ONE agent and have that agent represent you throughout the home purchase transaction.

Note: Consumer advocacy groups recommend that if you’re a prospective homebuyer, you should look for a Buyer’s Agent – someone who represents strictly YOUR interests, not those of the Homeseller - or the Builder in the case of new construction.

STEP 2. If you’re not already working with a lender you trust, ask your Realtor to recommend a highly-reputable LENDER / MORTGAGE LOAN OFFICER.

Note 1: Contacting a lender first or very early in the process is important for at least four reasons:

·   To clear up any credit issues that can affect qualification for a loan

·   To determine the best type of loan to fit your unique circumstances

·   To determine how much home you can afford (comfortable-to-maximum price range)

·   To significantly strengthen your eventual Offer to purchase by attaching a Pre-Approval Letter from your Lender.

Note 2: Better still, if you complete the formal application process before searching for a home, and are approved for a loan, this eliminates the typical built-in contingency that the Buyer will only purchase the home if financing can be approved, which in turn eliminates this obstacle in the minds of the Seller(s).

STEP 3. Ask your Realtor to perform a COMPREHENSIVE HOMEBUYER ASSESSMENT of your family’s needs and wants in a home.

Note: There’s a lot more to consider in finding an appropriate home match than just Location(s), Price Range, Number of Bedrooms and Bathrooms.

HOME / LOT:

·   preferences in home style (Traditional vs. Contemporary; European, Georgian Federal, Colonial, etc.)

·   exterior / interior construction and finishing materials

·   unique home features

·   basement or not / finished or unfinished

·   lot size / wooded or not / level or sloping / fenced or not

Other considerations beyond the home and property itself:

·   Ideal TIMEFRAME

·   lifestyle preferences

·   rural versus suburbs vs. city living

·   subdivision amenities

·   commuting distance to work

·   proximity to family and/or friends

·   public and private school preferences

·   job prospects in the area or within an acceptable commute

·   the state of the local economy

·   demographic and climatic information on the area

·   relative rates of appreciation within the area

·   available shopping

·   recreation

·   cultural activity

·   entertainment, etc.

Step 4. Have your Realtor create a specific “search filter” based on all of your stated CRITERIA and use it to thoroughly scan the GEORGIA MULTIPLE LISTING SERVICE (GA MLS), the FIRST MLS (FMLS) and all other pending listings to which he / she has knowledge.

Note: The uninformed Buyer may conduct a home search by driving through neighborhoods and calling the agents listed on the yard signs.  Caution!  These agents – while they must treat you fairly - are required by law to represent only the Seller's interests!

There are hundreds of subdivisions with scores to hundreds of homes each (not to mention homes outside subdivisions) in each county under consideration. Homes come on and off the market every day, making it impossible to keep up on your own!

At best, it’s a terribly inefficient method - better properties to suit one's needs may be overlooked.  At worst, one can potentially lose thousands of dollars if price negotiations are entered without representation.

Realtors not only know the local real estate market well, but can do searches not possible within a public version of the MLS.  Two examples: 1) Realtors can search on key words – such as “bank owned” or “motivated seller”, and 2) can do a distance search from a specific point, such as your workplace.

Step 5. Review resulting HOME LISTINGS with your Realtor.  He / she will assist you to narrow home selections to the BEST POTENTIAL MATCHES.

Step 6. Ask to sign an EXCLUSIVE BUYER’S AGENCY AGREEMENT.

Note: Per Georgia real estate law, a real estate agent cannot represent a Client without a written agreement, whether the Client is a Seller or a Buyer.

Reviewing and signing this agreement could be one of your first steps, but I list it as Step 6 because I believe it’s better for the homebuyer and the Realtor to get to know each other before either commits to the other.

The agreement protects both the Buyer-Client and the Buyer's Agent. The Client is guaranteed exclusive representation of his or her interests by a professional in all matters pertaining to the purchase of a home. The Buyer’s Agent is assured that he /she is not wasting time with an uncommitted Buyer.

Specifically, under this Agreement, the agent MUST provide to his clients:

·        100% loyalty

·        Confidentiality

·        Full disclosure of any known, material facts pertaining to properties under consideration that could affect a client's buying decision or negotiating position.

Step 7. Ask your Realtor to set up APPOINTMENTS with the Listing Agent and/or homeowner to TOUR ALL SELECTED HOMES.

Note: Your Realtor can gain entrance to any listed home by using a Realtor’s Supra Display Key.  Hours: (9 A.M. – 9 P.M./ 10 P.M. in summer).

Step 8. Ask your Realtor to give you his / her professional assessment of the PROS AND CONS of each subdivision and home.

Note: Combine this knowledge with your own personal preferences, and narrow your list of candidate homes further.

Step 9. Once you find a home you’re strongly interested in purchasing, ask your Realtor to prepare a COMPARATIVE MARKETING ANALYSIS (CMA) and a SALES HISTORY to learn the relative worth of the selected home and the history of sales in the subdivision or in the area. 

Note: Review them with your Realtor to determine the home’s Fair Market Value.

Don’t rely strictly on the List Price (“Asking” Price) as your starting point.  Before you start negotiating, you MUST have determined a narrow range for the Fair Market Value of the home.  Some homes are over-priced, some under-priced and some are right at FMV.  Knowing this number in advance of negotiations is critical.

Step 10. Review the SELLER’S PROPERTY DISCLOSURE STATEMENT (supplied by the Listing Agent or Homeowner) with your Realtor.

Note: Take particular note of the age of the roof, HVAC systems, hot water heater, and any other items that will require inspection or repair.  Note which fixtures, appliances, curtain treatments, playground equipment, hot tub, workshop benches, etc. will stay or go.

Request the results of any PREVIOUS INSPECTION and/or problem remediation that may have been performed.  (These could include previous HVAC and electrical system inspections / service, code inspections due to property improvements, inspection and/or remediation for termite / other wood-destroying organisms / rodent infestation, radon, lead paint, etc.)

Step 11. Ask your Realtor to perform DUE DILIGENCE RESEARCH for the home / property under consideration. 

Note: Have him / her share tax records, survey maps, flood plain information, presence of electrical power lines, adverse development plans, proximity of a registered sex offender, and any other factor which might impact your buying decision or negotiating position.

Step 12. Have your Realtor prepare a PURCHASE AND SALE AGREEMENT (also known as the “Offer” prior to acceptance, the “Contract” once it is) with the appropriate exhibits, amendments, legal clauses, contingencies and special stipulations to advance and legally protect your interests.

Step 13. Have the Realtor submit the Offer together with a copy of your EARNEST MONEY CHECK and your PRE-APPROVAL LETTER to the Homeseller via their Listing Agent.

Step 14. Consult with your Realtor on all NEGOTIATIONS conducted on your behalf with the Listing Agent and Homeowners (or with the Builder in the case of new construction).

Note: Negotiation is often difficult, sometimes lengthy, and usually requires specific real estate negotiating skills and various strategies to achieve a win-win result.

Although PRICE is the main negotiating point, there are also other important considerations:

·        length of time to apply for / acquire a loan

·        the amount of Closing Costs to be paid by each party

·        whether a Homeowner's Warranty will be offered by the Seller

·        home inspection deadline

·        repairs deadline

·        Closing date

·        physical occupancy date

·        items to be included in sale not expressly stated in the Disclosure Statement,

·        etc.

Step 15. Consult with your Realtor as he / she prepares any written COUNTER OFFER(S) as many times as necessary during the negotiation process.

Step 16. Check to see if your Realtor has submitted a NOTIFICATION of BINDING DATE to the Listing Agent / Seller.

Step 17. Ask your Realtor to provide the brochures of recommended HOME INSPECTORS. 

NOTE: Coordinate the inspection with the homeowner(s) through your Realtor.  The expense of a home inspection is the responsibility of the homebuyer.

Step 18. Ask your Realtor to transfer any items from the HOME INSPECTION REPORT that you would require the homeowner to repair to an “AMENDMENT TO REMOVE INSPECTION CONTINGENCY.” 

Step 19. In consultation with your Realtor, NEGOTIATE for all items to be replaced or repaired.

Note: This negotiation also has the potential to be difficult. The homeowner is not necessarily required to repair anything nor is the Buyer required to purchase the home if dissatisfied with the results of the negotiation.  As with price negotiation, your Buyer’s Agent must possess solid negotiating skills to lead all parties to a meeting of the minds.

Step 20. Consult with your Realtor and Lender to determine which ATTORNEY will be used to conduct the CLOSING, and what items you must bring to Closing.

Note: Have your Realtor coordinate the date / time and place with all parties in the transaction – Closing Attorney (and support staff), Buyer, Seller, Listing Agent, Buyer Agent’s Broker, and your Lender.  Ask for directions.

Note: You will be asked to bring your driver’s license and certified funds for any expenses / closing costs you owe at Closing.  Review with your lender.

Step 21. Have your Realtor provide INSTRUCTIONS TO THE CLOSING ATTORNEY in writing as it pertains to the correct distribution of commissions and the handling of the Buyer’s Earnest Money.

Note: Ask your lender and Realtor to review your HUD-1 Settlement Statement for accuracy.  Have your Realtor ensure that all agreements are settled, and the termite letter, Certificate of Occupancy, house keys and garage door openers are received. 

Step 22. Ask your Realtor for recommendations of INDUSTRY-ASSOCIATED CONTRACTORS (i.e. pest control, home inspection, home repair, home warranty, etc.)

Copyright 2006 David M. Wildman