An Overview of Terms + Steps
Are you looking to buy a home for the first time? The real estate market is heating up, and it is a great time to start searching! Are you wondering where to begin? What to expect with the process? This is where we can help! We’ll start by providing an overview of the homebuying process.
First, it’s important to begin with a few key terms that will help the steps make more sense:
PURCHASE AGREEMENT – When submitting an offer, this is the document that is used. Once terms are agreed upon between a buyer and seller, the signed offer (which may include counter offers) is referred to as the purchase agreement. Terms that are included in the purchase agreement are price, earnest money amount, closing date, clauses for financing and inspections, and any other provisions that are agreed upon between a buyer and seller. It is a legally binding contract.
EARNEST MONEY – When making an offer on a property, it is expected that the buyer will provide earnest money demonstrating that the buyer is serious and there is good faith in the transaction. The earnest check is made payable to the listing company’s trust account, where it is deposited and held until closing. It is typically about 1% of the purchase price of the property. If the buyer cancels the purchase agreement unrelated to any contingencies, the earnest money may be forfeited to the seller; otherwise, the earnest money comes back to the buyer on the closing statement.
CONTINGENCY – This may also be referred to as an escape clause, which is a clause stating the term that is expected to be met by a certain deadline. If it is not met, the purchase agreement may become voidable. The two standard contingencies found in a purchase agreement are the financing and inspection contingencies.
APPRAISAL – An estimate of a property’s current market value, used by lenders in determining the mortgage amount.
CLOSING/CLOSING DATE – The real estate transaction’s completion, when the parties involved agree that all legal and financial obligations have been met, and the deed to the property is transferred from the seller to the buyer. In other words, the day the buyer can move in!
Now that we have some definitions out of the way, we can dive into the actual homebuying process. We want to make it as simple as possible, so we have broken it down into a list of steps:
- Explore financing options & determine budget
- Obtain mortgage pre-approval letter
- Work with a REALTOR® to:
- Discuss needs + wants
- Search for a home
- Make + negotiate an offer
- Reach an agreement with seller (accepted offer!)
- Deliver earnest money to your REALTOR®
- Conduct professional home inspections
- Submit final loan application + paperwork to lender
- Order appraisal (done by lender)
- Receive final loan approval
- Obtain clear title to the property
- Complete a final walkthrough
- Sign closing paperwork on closing day
That’s it! After these things happen, you own a home! There is a lot involved (and more than this simple checklist states), but that is why we are here. We are here to make the homebuying process as seamless as possible (and fun, of course)! We are your greatest resource and advocate, and we will guide you through every step along the way. Our goal is to make the process as easy as this list, to carry the weight for our clients.
Purchasing a home is a huge investment (perhaps the biggest of your life), and we take it very seriously and personally – we treat each and every client with great care and attention. We prefer to meet with all our buyers before even starting to look at homes, that way we can get to know that buyer, what they are looking for in a home, and educate them about what to expect with the process and market. If you’d like to schedule a meeting with us, we’d love to get to know you!