Are you ready to buy a house? REALLY?
Every day I am contacted by a Buyer who thinks he/she is ready to look at houses for sale in the greater San Antonio area and it’s 7 contiguous counties. They have certainly heard the phrase…. you must be pre-approved or pre-qualified for the loan. The truth is they don’t know what it means. AND, most of them have done nothing to REALLY be ready to buy a house.
This post will serve as a service to my clients who are just beginning the process.
Buying a house is like playing a very serious game. I will set forth some of the rules of the game below. If you follow the rules, you will find the game to be sort of fun and exciting. If you choose not to follow the rules of the game, then you must not be that serious about finding a house. If that is the case, I will help you find another agent. I will tell you now, I like to work with Buyers who are serious about purchasing a home.
Here we go:
Step 1. Get pre-approved by a lender.
Unless you are paying cash, you will need to obtain financing (mortgage). If you do not have a lender, feel free to contact me and give me some basic information about yourself. Most experienced Buyers agents will pair you up with a lender who specializes in the type of loan the agent thinks you are looking for. For instance, if you are a first time home buyer and are self employed, that will take a different lender than a second or third time home buyer who has been employed by the same employer for several years. You, as the Buyer, don’t know that there are hundreds, if not thousands, of types of loans available. The experienced agent will know which type of lender has the best service for your needs in our local area. Keep in mind that the agent and the loan officer do not control the interest rate you receive. The interest rates are dependent upon many variables, including your credit score, your debt to income ratios, and many other factors. You are advised to know that if a lender tells you something which “sounds too good to be true”, then it generally IS too good to be true.
You will need to meet with the lender and provide them with all of the items they request. Be prepared to give them everything they ask for. Cash is King…. what this means, is that the man who has the cash, is the King. In this case, the King is the lender. If you are unwilling to meet with the lender, you will find that you will end up working with a newer agent who doesn’t have my experience, because … I like to work with Buyers who are serious about purchasing a home.
The lender will either discuss with me the top of your budget, or they will provide you with a letter which delineates the type of loan you want (FHA, VA, conventional, etc), the amount (the percentage) of the down payment, as well as any special conditions which both you and I need to be aware of before we start the home search. It is best that you find out what you can afford BEFORE you fall in love with a house which you can’t afford.
Please note that there are vigorous regulations which prohibit lenders and agents from obtaining “referral fees”. Neither the loan officer or the real estate agent are willing to lose their license for this sort of illegal activity.
Step 2. Meet with the Buyer’s Agent.
This is a meeting to get to know each other. You will discuss with the agent the findings of the lender. For instance, do you need to wait three more months in order to get a better interest rate? Or, will your car be paid off in six months and you won’t be able to get approved for a loan until the car note has been paid? It is at this meeting that you see if your schedule meshes with that of the Buyer’s Agent. Most Buyers are not aware that looking at houses is the tip of the iceberg of what a REALTOR or real estate agent does. Most busy agents have schedule and a personal life.
Discuss communications. Do you like to communicate by text? email? phone call? I operate during normal business hours, even on Saturdays and Sundays. Off hours are reserved for negotiations and family time. Real estate negotiations tend to happen when all parties are off work.
Buying a home is an emotional process. You will experience many ups and downs during the process. Make sure that you LIKE the agent and that you get along. Not everyone is a good fit. I am happy to refer you to another agent who is exactly what you want … for instance if you want a single male, who is between the ages of 25 and 35, who has been in real estate for more than 5 years, who is bi-lingual, with a first name of Wesley, etc. I can find him for you, and he will be another experienced and qualified agent who fits your specific criteria. There are 10,000 real estate agents in San Antonio…. there is one out there for you.
At this meeting you will sign a document entitled Information About Brokerage Services. This document is required by TREC (Texas Real Estate Commission). It explains how real estate representation is viewed and I will explain further in person. This document does not commit you to anything. TREC requires that my broker have this on file.
Step 3. The pre-search period.
Once you have selected your Buyer’s Agent, you will be requested to sign a Buyer’s Representation Agreement. This agreement is your commitment to work with the Buyer’s Agent who you selected. Your Buyer’s Agent is not really your agent unless you have signed this document. This agreement binds the two parties together. Your agent is then able to negotiate on your behalf. This is also your commitment to your agent that you will be working exclusively with them.
The agent will set up an automatic search in MLS to begin sending you homes which meet your criteria. Such as:
- 4 bedrooms
- 4.5 bathrooms
- 3 car garage
- price range $1,000,000 to $1,300,000
- near Cambridge Elementary
- single story preferred
- built after 2005
- ADA compliant
It is quite easy to drill down and send you specific properties. Keep in mind that I am familiar with most of the properties which are currently for sale in the San Antnnio area. List of criteria of what you are looking for in a home in order that I may send you homes which meet your criteria which is automated from SABOR (San Antonio Board of Realtors).
We will get some homework done early just in case we are operating in a competitive transaction. Some of these things are:
- Identify an inspector. Call and get rates ahead of time.
- Identify an electrician. As a back up.
- Identify a structural engineer. As a back up.
- Identify a home warranty company. The seller will generally pay for this. However, you must identify/select a company in advance so that I know the amount to negotiate.
- Identify a insurance agent for home insurance coverage.
- Have blank checks on hand in order to write Option and Earnest Money checks.
Step 4 . FINALLY, the search begins.
Long gone are the days when a buyer has to look at twenty homes. With over 90% of the homes being viewed online, it has helped the buyers rule out certain houses ahead of time. Prior to the internet, a personal visit was required to view the home. Currently, you can view the home and see the measurement of the rooms online. For instance, if someone in your family is in a wheelchair, you will need bathrooms with a turning radius of 5 feet (ideally). You can now determine that online.
Most buyers will select their favorite homes from online and will visit an average of 3 to 7 homes. However, again due to the internet, some buyers select the first property they see in person. It happens all of the time. The reason is that after they have viewed the fifth house, the buyer gets weary and they already really know what they want. The most desirable homes generally go under contract early.
You should know:
- the perfect property rarely exists. SIGH.
- you might fall in the love with the property and your significant other may hate it.
- sometimes, as mentioned above, you will circle back to the first house. It IS the one.
Step 5. Make an offer.
As your Buyer’s Agent, there is paperwork which I must prepare in order to make an offer. I will also need to prepare an analysis to see if the house is priced correctly. However, you, the buyer is in charge. I will prepare an offer and present it to the listing agent.
Included in the offer will be the following two items where you will need to pay some money:
- Option funds. This is the amount of money you are willing to pay to have the home inspected. This is usually a fee of $10 to $100 per day (based upon the value of the home). Most option periods are for ten days to allow adequate time for inspections…. you see now why I had you select your home inspector ahead of time? You already are more prepared than 99% of the other buyers (who are really your competition.
- Earnest Money. This is usually 1% of the amount of your offer in our market, but can reach as high as 5% if you are in a multiple offer situation. For the 1% scenario, if your offer is $1,000,000, then a Earnest Money check in the amount of $10,000 would be written to the title company. The title company will cash the check and hold the funds in escrow. Here is a great explanation of Earnest Money.
I hope that this helps you prepare for the search process.
The purchase process has an entirely different set of steps which will be outlined in another post.
If you want to buy a house, please do your homework ahead of time. This will allow you to have an advantage over most buyers. And, please get pre-approved by a reputable lender.