Yay! You’ve decided to buy your first home! How very exciting! We will do our very best to make this a fun, stress free experience. As Exclusive Buyer’s Agents, your best interest is our focus 100% of the time.
We wanted to give you an idea of how this process works and also explain some common terms used in the real estate transaction.
First, if you’ve not met with a Mortgage Lender, do so now! We will need their guidance and information to get started. They can tell you what you qualify to buy, how much of a down payment you will need, estimate what the closing cost will be, as well as what price range we should look to keep your payment where you need it to be. We can recommend a few if you don’t already have one. You can usually start the pre-qualification process over the phone. We will need your interest rate, type of loan and your LTV (loan to value) in order to write a contract. We don’t recommend an online lender as their fees normally are higher than our local lenders and they are not as familiar with our tax base or flood insurance requirements.
Now, on to house hunting. We encourage you to look on your own at the various online sites and will also send you a link to our MLS (Multiple Listing Service) so that you can have the same information we do. Note, as you’re searching, if a listing is Active Contingent, it means that an offer has already been accepted with a contingency (term explained later). As such, it may or not be available. A quick inquiry by me will let us know. We will also put your criteria into our system and it will notify me whenever a matching listing comes up. This way we both are looking!
When we have identified a few houses that we want to see, We will make appointments and we’ll go check them out together. This is very useful to us as we can watch your reaction to certain things and, over time, recognize what your likes and dislikes are. You’ll discover that the house hunting process is more a process of elimination than of selection. It won’t take long to narrow down your criteria so that we are only looking at houses that truly match it.
Once we find the ONE, the fun begins. It is my job to research sold comps (term explained later) to determine a fair price for the house. We will make our offer based on that information along with other factors such as, do we need the seller to pay some of the closing costs?, how soon can we close?, if it is new construction, are there any builder incentives that we can ask for?
This is the point that we take a “if it’s meant to be it will be” attitude. Some sellers may not be willing to negotiate to a point that will be acceptable to us. We need to go into it knowing that we will do the best we can and be willing to walk away if we can’t agree on terms.
When we make our offer, we will need to provide earnest money (see terms and definitions). There is not set amount, just something that shows the seller we are serious in making our offer.
When we’ve come to an agreement with the seller and all parties have signed the Purchase and Sale agreement, we have a binding agreement date. EVERYTHING works from this date, so it is important that we all know it and what is required to meet our obligation per the contract.
We will have a due diligence time period in which to have the house inspected. During this time period, we can cancel the contract without penalty if we find something that would make us want to walk away. This is also the time that we can go back to the seller for repairs or improvements that the inspectors find necessary. Understand the seller does not have to make the repairs, but we also don’t have to buy the house if he chooses not to.
At the same time, you should begin your mortgage application process. Be prepared to provide your lender with pay stubs, bank statements, possibly tax returns and anything else they may ask for. Don’t take their inquiries personally, they ask the same from buyers purchasing a million-dollar home as they do someone buying a fifty-thousand-dollar home.
This process typically takes somewhere between 30-45 days. You will need to secure hazard insurance and flood (if required) during this time. You will not pay these until the closing, but your lender will need to know which company you are using.
Once your lender approves your mortgage, we are ready to close. Unless other arrangements have been made prior to closing, you will receive any keys and garage door openers at closing and the house is officially yours!
We know this seems like a lot, and it is! This is one of the biggest decisions you’ll make, and we fully understand and appreciate that. We will be with you every step of the way. Again, our job is to make this fun and stress free! There are no dumb questions. If you don’t understand something, please ask me. W want you to be comfortable and confident that you are make informed decisions.
Common Real Estate Terms and their Definitions:
Exclusive Buyer Brokerage Agreement: Per Georgia Real Estate law, agents and their clients must have a formal written agreement outlining the terms of their relationship. Our agency agreement does not allow for any monetary compensation from you to us. The only requirement is that you work with us and only us. If you choose to work with someone else, notifying us in writing cancels this agreement.
Contract Binding Agreement Date: this is the date that all parties agree that we have a deal. It controls the contract as far as time periods are concerned.
Ernest Money: this is money that is given at the time of contract presentation to the seller. It is held in an escrow account (usually with our company) until closing. At that time, it will be returned to you in the form of a credit on the Settlement statement. It’s kind of like a security deposit.
Contingency: A contingency is any condition that must be met before the contract is legally binding. Common contingencies are inspection and financing.
Due Diligence Period: Our offer is contingent upon inspections and we have a certain time frame in which to complete them. During this period we will have the home inspection done, the termite inspection done and also check rates for flood insurance, if applicable. Prior to the expiration of this period, we will have the opportunity to request repairs from the seller if any of the inspections find things that need to be addressed. Sometimes, the seller will make the requested repairs and sometimes you will receive a reduction in the price to offset the repairs. We will have time to make a decision based on the terms when that time comes. Once we’ve accepted the seller’s offer, our due diligence ends, and we will continue toward closing. Note: Home inspectors are paid at the time of the inspection. The termite inspection will be paid at closing.
Closing Date: This is an agreed upon date when the house become yours! We will meet at an attorney’s office with the seller and their representative. You will sign all of the necessary documents to become homeowners! Prior to the closing, we will have had an opportunity to review the settlement statement so that we will know exactly what funds, if any you will need to have a closing.
Down Payment: Depending upon the type of loan, you will be required to have a down payment. Typically between 3.5% to 20% of the purchase price. Of course, the more you put down, the lower your payment will be. This is something to discuss with your lender to find the best program for you.
Closing costs: These are fees associated with the mortgage loan. They include origination fees, appraisal fees, tax service fees, attorney’s fees etc. Lenders will typically allow the seller to pay a portion, if not all of the closing costs. Again, we will need guidance from your lender with regard to this. These fees are paid at closing and will be represented on the settlement statement.
Escrow account/Pre paids: Most mortgages today require that you have an escrow account for your taxes and insurance. It’s basically a savings account that you fund each month when you make your mortgage payment. The bills for your taxes and insurance will go to the mortgage holder and will be paid out of this account. At closing you are required to fund this account with a full year’s insurance payment + a few months of taxes and insurance. These will be indicated on the fee sheet (see below).
Hazard Insurance/Homeowner’s insurance: this is insurance required by the lender to protect the property in the event of destruction. It also protects you and your investment.
Private Mortgage insurance: On any loan with less than 20% down, the bank will require private mortgage insurance. This protects the lender in the event of a default. It is prorated on a monthly basis and is included in the mortgage payment.
Comps/Comparables: These are like homes that have sold in the last few months that we will use to establish a fair value of our property prior to making an offer. It is important to use sold comps so that we can get a true idea of the market.
Inspections/Home & Termite: During our due diligence period, we will have the house inspected by a licensed inspector. Their job is to identify any material defects with the property. They will check the roof and crawlspace, if applicable, check the heat and air conditioning and any other systems to insure that they are functioning properly. We encourage you to be present for this as it is very good introduction to your new home and they will provide tips and suggestions for regular maintenance. You will be emailed a written report with pictures within a few days of the inspection. We will also have the house inspected for termites and other wood destroying organism. This can be a problem in our area, so we want to make sure the house is free of these. Again, we will have the opportunity to ask the seller to correct any damage caused by termites, if any is found.
Fee Sheet/Good Faith Estimate: Your lender will give you one of these when you make loan application. It is an estimate of how much it will cost to close this loan. It will include your closing costs and well as your pre-paid items. This is very helpful when make an offer, especially if we are asking the seller to pay some or all of these. We will need an actual dollar amount that we are asking for.
We’re sure there are other terms that we’ve left out, but these are the most common ones. We hope this is helpful and remember, I’m with you through this entire process. You don’t need to memorize these, there will not be a test!!
