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Guide to the Home Buying Process in the USA

Guide to the Home Buying Process in the USA

Whether you are buying your very first home, or you are an experienced veteran of home buying, the process is unique in every state!

This guide is meant to show you the likely steps you may have to take and the sort of questions you may wish to ask. It is not meant to be a definitive guide to buying Real Estate in the USA.

Understanding the home buying process is the key to making it a pleasant experience, and will very likely reduce the stress levels considerably!

1) Selecting a Real Estate Agent

Most states in the USA require that the Agent helping you buy or sell real estate holds a Real Estate License, but this is not true in every state. The easiest way to know that you dealing with a Licensed Professional is to look for a Realtor. A Realtor is a licensed Real Estate Agent that has joined the National Association of Realtors (NAR), which regulates their behavior and sets ethical standards for them to work too.

There are many ways to find a Realtor. Use www.Realtor.com to do a area/location search. Use a search engine such as Google or Yahoo and search for “Realtor” and the location you are moving to. While looking at properties in the area to which you wish to move, keep a note of the Realtors/Agents listing the properties for sale. Use websites such as www.ActiveRain.com or www.Localism.com to do research on your area and make a note of the Realtors/Agents who contribute useful information. If you know someone who has bought a property in the USA, ask them who they used. It doesn’t matter which state the transaction was in. If they were happy with the service they got, their Agent can research a couple quality Realtors/Agents in your required location. Most Realtors/Agents will do this because if you use one of their selected Realtors/Agents they will receive a “referral fee” from the agent at the end of your transaction with them. This is normally 25 – 35% of their commission fee.

You are not required to select a Realtor or Real Estate Agent to buy a house in the USA, However it is in your best interest to have one representing you. You may be asked to sign a Buyers Agency Agreement. This is a contractual relationship with the Agent. The Agent will be representing your interests solely, not those of the seller. If you do not you should be aware that if you have not signed a Buyers Agency Agreement with a Realtor/Agent then any agent you deal with only owes you “Truth” and “material facts/disclosures“. Any personal information you give them could be disclosed to the seller, which could lessen your negotiating position.

2) Interviewing a Realtor/Agent:

Once you have selected 2 or 3 (or more) Realtors/Agents to interview, arrange to meet them if possible or carry out interviews over the telephone. You could even email them a list of questions to answer if you do not want to speak to them directly.

The questions you ask are personal to you. It’s about getting to know someone, having a good feeling about your relationship. Some facts you may want to find out are:

  • Are they a full time agent?
  • How long have they been a Realtor/Agent?
  • How many properties have they helped clients buy in the last year?
  • How many properties have they helped clients sell in the last year?
  • Do they have a website?
  • Do they have a blog?
  • How are they going to find you the best home that meets your requirements?
  • Ask for testimonials from previous clients?

Remember, a very successful agent may have a team and not be the actual person you deal with. Although new agent will have less experience (they have an experienced Broker In Charge behind them) and will possible have more time and energy to spend on you. Websites can be an extension of personality as can blogs and therefore are another good source of information on the agent.

3) Buyers Agency Agreement

Once you have selected your Realtor/Agent you should sign a Buyers Agency Agreement (see earlier note 1c) with them. This sets out your requirements, the time limits, and the expectations in writing. Once signed this agreement ensures that the Realtor/Agent works in your best interests. They owe you Care, Confidentiality, Obedience, Accountability (looking after you money), Loyalty and Disclosure. Any decision is always yours, but listen to your Realtor/Agent. Part of their job to advise you!

Your Realtor is owed Trust, Honesty and Disclosure by you.

A Buyers Agency Agreement is an employment contact and therefore can be terminated by either party at anytime.

4) Interview/Select a Mortgage Lender

This is an important step. When it comes to buying a home, you may be ready and willing, but you must find out if you are able! You may be in for a big disappointment if you skip this step.

Get a copy of your personal credit report. This can be obtained online or locally for a nominal fee (see the Yellow Pages under Credit Report). You can skip this step and let the Lender obtain it, but having it in your hand as you interview a couple Lenders, is a real advantage – especially when it comes to sharing personal financial information with someone you are not yet sure you are going to do business with!

Think carefully before using online Lenders. While the rates/terms maybe competitive, it can be a nightmare to deal only with a toll free number if a problem occurs. Local Lenders are more easily accessible and may come to the Closing to assist in the final transactions.

Get Pre-Qualified. Choose a couple Lenders that you want to interview. Some Lenders charge a very small fee for this, but most do not – especially if you have your own credit report! Call each one and tell them…”Hi, I’m <your name>, and I am beginning the process of buying a home, and I would like to get Pre-Qualified“. Some Lenders will handle this over the phone and some will ask that you meet with them in person. In general you can expect the Lender will ask you questions about your income, your debts, and your assets. Be honest and accurate. Don’t be afraid to mention you are interviewing a few Lenders – they want to earn your business!

Pre-qualification is the step that determines;

  • How much down payment and closing cost money you will need
  • What interest rate options and loan programs are available
  • How much home you can afford
  • How much your monthly payments will be

Choose ONE Lender. After you have interviewed several Lenders, decide on one that you feel has the best to offer, and that you are most comfortable with.

5) A Few Important Details

When you use a Realtor/Agent, he or she is most likely to be working on behalf of a Broker In Charge. The Broker in Charge works for the Real Estate Company that your agent is affiliated to. Any agreement that you sign with a Realtor/Agent is an agreement with the Broker In Charge/Real Estate company.

Normally a Client is a person that has a written Buyers Agreement or Listing/Sellers Agreement with a Realtor/Agent/Broker In Charge.

Usually the seller of the home pays the commission for the sale. This is normally in the region of 6% of the sale price but can vary. The commission is typically, but also can vary widely spilt with the Buyers Agent at a 50/50 ratio. This is how the Buyer’s Agent gets paid, so to the purchaser it is a no cost option.

If you do not use a Buyers agent, then you could try and negotiate the sellers asking price down by this percentage, but you would then be acting on your own.

{mosbanner right}Trust your Realtor/Agent, and listen to your Realtor/Agents recommendations. Think about it. Just like you do with your job, your Realtor/Agent lives and breathes Real Estate day in and day out every day of the year. It’s extremely unlikely that you or your friends or relatives, know the local real estate market better than your Realtor/Agent! Use your Realtor/Agents knowledge and experience to your advantage!

There are Federal and State Laws governing the Real Estate market and contracts. These differ widely from state to state. One State’s Laws may have its roots based on Old English Law and another may have its roots based in Napoleonic law. Another good reason to use a local professional.

6) Time to Look for a Home

Make a list of your requirements. The more requirements you have the less available a potential property becomes. Prioritize your requirements into “Must Have” and “Would Like” also a list of “Do Not Want” and “Dislikes”. For example; fenced yard, near water, corner lot, cul-de-sac, amenities, etc.

Set out the price range, locations/areas you would like and the minimum and maximum numbers of bedrooms, bathrooms, sq ft and garages, etc that you require.

If you have hired a Realtor/Agent, give the requirements to them and they will do the search for you. If you want to you can also do your own search, because ultimately you know what you are looking for. Let your Realtor/Agent know if you are Pre Qualified for a mortgage and for how much.

If you are doing your search yourself there are numerous national websites and individual Real Estate company websites to search. The most up to date and accurate information will come from your Realtor/Agent.

7) Found a House you like:

From this point forward if you are not using a Realtor/Agent then the steps between here and purchasing your new home are individual choices that you will have to make. Good luck!

Your Realtor/Agent will make an appointment for you to see it and any other houses on your short list. Even if you have found your dream home, it is still worth seeing a couple of comparable properties so you know how to negotiate if you make an offer.

When you are sure that you have a property that you wish to make an offer on, then your Realtor/Agent can get the history of the house and do a Comparable Market Analysis (CMA) to give you information on what to offer. Your Realtor/Agent can advise you on offer price and offer strategies but the final decision is yours.

Once you have made an Offer in writing you must wait to see if the Offer is Accepted or a Counter-offer is made. If the Offer is Accepted then the contract is Ratified and moves on to the next stage. If the Offer is Counter-offered then the your original Offer is now Void and the Counter-offer is now the Offer being negotiated. Each Counter-offer voids the offer before it. This process can continue until agreement is reached. If the Counter-offer is Acceptable then it can be Ratified. If it is not Acceptable you can either Counteroffer again or walk way from the deal.

When the acceptable Offer/Contract is agreed upon the Buyer normal pays a deposit called Earnest Money or Escrow. This is put in a Trust account controlled by the Realtor/Agent’s Broker In Charge or an Escrow Company or a Title Company until the Closing where it is then credited back to the Buyer.

8) Once you have a Ratified Contract

Home Inspection – This is the Buyer’s opportunity to perform any and all inspections that are material to the Buyer. Be sure to discuss the Buyers Inspection Period with your Buyers Agent at the time of writing the Purchase Offer. Buyers Inspection Period begins upon contract acceptance, and expires as identified in the Purchase Contract. Typical Inspection Period is 14 days after Contract Acceptance. At a minimum, the Buyer will order and have performed a professional Home Inspection. This is usually paid for by the buyer. Any repairs needed are then negotiated between buyer and seller.

Wood Infestation (Termite) Inspection may be carried out during this time frame or a certificate provided by the Seller (this may differ between States)

Lead Based Paint – This also if necessary should be carried out in this time period. If the house was built before 1978. (This may differ between States)

Appraisal – This is carried out by the mortgage company/lender to make sure that the property is worth the amount of money that you are borrowing against it.

9) Closing the Deal

This is the process that transfers ownership of the Property and Title and the Funds from the sale to the relevant parties. This does differ between States. Your Realtor/Agent will advise the exact method and parties involved.

Congratulations! The Real Estate Transaction is behind you and it’s time to move into your new home!

Alan Langstone is a British expat who relocated to Mount Pleasant, SC in June 2007 and is ready to help you with you real estate needs.
LangstoneTeam.com
Prudential Carolina Real Estate

[email protected]
© Alan Langstone

 

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  • DrPlokta

    Where are the searches? At what point in the process do you check if there’s about to be a new highway built nearby, if there’s subsidence in the area, what the radon levels are, if the property is a flood risk, if the vendor’s title is good, and if the title is encumbered in any way?

  • Joanne Davies

    Bit late to respond to you DrPlotka but my understanding is that this is done after the offer is accepted. You have a ‘home inspection’ and a contingency in your offer that it’s subject to that. Despite the fact that on the whole, the purchasing of property is a flippin nightmare in America (as you have trumped up realtors that you have to have contracts with making every offer and negotiation a big formal written process so there’s no call from the estate agent with counter offers and discussions about furniture or repairs) the one nice thing about it is that you don’t have to instruct a solicitor and pay anything until right at the end so the worst you lose out on is your mortgage arrangement fee and inspection fee. This is way under $1000.