Buying Process Explained
So what exactly happens when you buy a house? What is Engle Realty's role as your agent in the process? What functions does Engle Realty serve? What is it that Engle Realty does? What is it that you have to do? This comprehensive guide below that Engle Realty has put together for you will explain it all:
Its very important to have an agent. Your agent will work for YOU. By having an agent you are employing that agent. You can think of it as if you are the employer, or boss, and Engle Realty as your employee. You call the shots, but Engle Realty is there to advise you from Engle Realty's experience. Ultimately, you're the one to decide, but as your agent, an agent from Engle Realty will aid you in making the best decision.
So, how does this all come in to view? Well, lets take for example a first time home-buyer. Lets call him Mike. Mike hires an agent of Engle Realty as his agent. This can take the form of filling out a contract saying that Mike will work with the agent of Engle Realty, or it could be a verbal agreement. Mike will have lots of questions, and the agent of Engle Realty would field all of them.
That agent would first instruct Mike to go to a bank and see how much it is that he can afford. If Mike likes, an agent of Engle Realty can go with him to the bank. From that figure and his preferences for a house (size, area, number of rooms) Engle Realty would then start notifying him of properties that fit his need. The agent of Engle Realty usually notifies via email. When Mike sees a house he wants to look at inside, Mike will call up the agent of Engle Realty and to tell the agent. The agent would then arrange for a showing, and would accompany Mike to the property.
Mike would look at it, and if he did like it then they would proceed to draft an offer for the property. Once that is done the agent would present the offer to the listing agent (who is working as an employee of the homeowner). The listing agent would present the offer to the homeowner who would then accept, reject, or counter offer the offer Mike submitted. Mike would have the decision to do the same. And this process would go back and forth until each party decides either to agree or to not agree.
So, lets say Mike puts an offer in and gets it accepted. At this point Mike has now certain responsibilities that he must perform. In the agreement it spells out everything word for word.
Within 10 days, he will have to have hired an inspector to inspect the house. The inspector’s purpose is to point out all the flaws in a property. He doesn’t give advice on whether it is a good buy, or anything like that. He sticks to the facts. There is no pass or fail from the inspector's shows. It is up to Mike if the inspection "passes" or "fails" inspection. If Mike needed advice, his agent, could give him the advice he needed or refer him to the proper person who could… Mike doesn’t have to exercise his right to perform an inspection, but it is wise to do so. Inspectors look the house up and down, and can interpret the condition of a property that the public cannot readily distinguish. On day 2 the inspector goes to the property and inspects it. The inspection cost Mike about $300. Mike and his agent accompany the inspector as he goes through the inspection process. The inspector explains to Mike and Mike's agent that there's a plumbing problem under the bathroom sink and other helpful information. Things of that nature. So, Mike tells his agent, “I'm not a plumber. Is there anything they can do about this?”
Mike's agent would then present to the seller's agent that the inspection came up with a plumbing issue in the bathroom and that it would need to be fixed. The seller would then have the option to say yes, no, or provide an alternative resolution. Lets say the seller agrees to an alternative resolution, since he isn’t a plumber himself, and so he would like to credit Mike $250 so he can hire someone to repair the problem. Mike could either accept or reject this. If they could not come to an agreement on the inspection, then Mike can opt out of the purchase, in which case the agreement would be void.
Mike, however, agrees. So, on Day 3 he goes to the bank and meets with the loan officer who pre-qualified him for $160,000. The house is $145,000, and with proper tax papers and other various papers in hand, he meets with the bank officer to go over which type of loan would be best for Mike. Mike chooses a loan, and the loan officer begins to go through the approval process.
The bank usually takes care of the appraisal, but Mike may need to higher an appraiser himself (which might cost Mike $400 dollars or so.) In any case, the purpose of the appraisal is to verify the price of the house.
In the meantime, Mike's agent lets Mike know that he can start working on getting insurance for the property. Mike needs to arrange to get homeowner’s insurance. Mike also needs to get flood insurance, because his house sits in a flood area, which isn’t the case for every home. He submits information to the insurance company and Mike also decides on a premium to cover his house and contents of the property.
While Mike is doing these things, his agent is guiding him through it, as well as submitting the paperwork to different agencies.
Mike also must decide on a title company to use. The purpose of a title company is to verify that the property is owned by the seller, that the seller has the right to sell it, that it is free of any liens and debts, and other similar things.
Mike's agent works in tandem with the insurance companies, the bank, and the title company, the inspector and the appraiser, and make sure that the process is flowing as it should be.
Mike committed to buy the house within 30 days, and it's his responsibility to make sure he does everything he's agreed to do within that time period. So if Mike fails to go to the bank to get approved for the loan, then he could be liable to lose his deposit. A deposit is something that is telling the seller that you're serious about purchasing the property and that if you should fail to do your part then the seller could keep that deposit for liquidated damages. Mike gave a check of $1000 while he wrote up the purchase agreement, and if he doesn’t perform then he could lose that $1000 and possibly face other penalties.
It's possible for Mike to get back his deposit and opt out of the purchase under certain conditions. The inspection, as we said earlier, can be an option for Mike to opt out. Also, if Mike can not get the loan approved, then he can opt out at no penalty, because he simply doesn’t have the means to financially buy the property. If the seller cannot get a clear title then that would be another reason for Mike's deposit to be returned.
Lets say that everything goes as planned. Mike's agent has seen everything through, and also provided Mike a list of comparative properties that are similar to his house, that have sold in the past. He can use these to also reinforce the value of his house.
On day 29, Mike is set. The appraisal came in for $5000 more than what he agreed to purchase the house for. Also, Mike obtained homeowners insurance and flood insurance for the house with the same insurance company that his car is insured. Mike was also approved for an 80% loan from the bank. (Mike anticipated paying 20% upfront as a "down payment" on the house because he wanted to keep his monthly house payment low.)
On day 29, Mike and his agent take a trip to the title company that Mike chose. There they finally meet face-to-face with the seller and the listing agent to sign the paperwork. They go to the closing table, which is a private room with a table in the middle. There, the closing attorney goes over the paperwork with both the seller and the buyer. Most of the signing is the buyer signing the mortgage papers. The attorney goes over with Mike the amount it will cost him to buy the house. This cost includes the attorney’s fees, prepaid taxes and insurance premiums, and other similar fees. The attorney also goes over with Mike the documents and has him sign and date them. Mike also gives the attorney a CASHIER’S CHECK for the 20% of the house (his down payment) as well as closing fees (which amounted to $4234.55. Mike got this amount from his loan officer the day before.
After thirty minutes, all the paperwork is completed. The attorney also hands Mike the keys to his house, and Mike is a new homeowner!
To read in more detail go to the full buying process explained step-by-step.
