An Overview of the Home Buying Process
prepared by The Grand Gables Team
Making the Commitment -- There are several steps that you must take in order to look for and find that special property you want to purchase and call home. Certainly first on that list is to formally make the decision and commitment to investing the time necessary to make that happen. Just like the fact that to be effective as a real estate professional, one must put forth a full time effort in order to be successful in finding the right house, a person looking to buy a house must be actively involved in the process so that they may become familiar with the pulse of the market.. Don´t enter into this process lightly because it will have a significant impact on your life and the lives of the others in your household. If handled properly, the process should be an orderly one in which you can set the ground rules that will have the least amount of disruption on your family life. However, no matter how much planning you put into the process, this process will involve a change to your lives during this period of time and for the foreseeable future beyond until you are firmly settled in your new home.
Selecting Your Realtor® -- Selecting a Realtor® who can best help you achieve your objectives is critical to your overall success in this endeavor. There are those Buyers who try and go this step alone without the services of a full time professional. Today, with the advances that technology and the Internet have brought to bear on the business of global marketing, many Buyers feel empowered with vast amounts of information about available properties for sale. The National Association of Realtors® web site, REALTOR.com is arguably the largest real estate web portal in the world.Buyers can view hundreds of thousands of property listings from the comfort of their home or office and without having to speak to anyone in the process. While this may have its advantages in the early stages of the education process, the steps necessary to research the markets that you are most interested in require a great deal more than amassing the information. Critical to this process is learning what all of this information means to you and how to best interpret this information in a way that will help you make the best and most informed decision when buying, or deciding not to buy.
No matter what advances technology has made, one fundamental fact with regard to real estate which will remain constant for all time is that no two parcels of land sit on the same spot on this planet, every piece of real estate is unique. It is this uniqueness that causes the prospective purchaser to perform an individual evaluation of the unique combination of qualities for a property in deciding how to value the package to suit their individual needs. Some of these qualities are more easily compared and contrasted with attributes of other properties because they are quantifiable; for example, number of bedrooms, the size of the parcel, the amount of the property taxes, etc. But there are many qualities which are intangible and hold a very personal interpretation that could be very different for each person who looks at it. Examples include the sense of privacy, orientation of the sun´s path, the sounds in the environment (crickets, animals, and traffic), the flow of the rooms, the positioning of the rooms, the smells in the home, the shape of the lot, the landscape features, etc. Trying to make sense of these intangibles and deciding whether they are acceptable to you is difficult enough, but understanding how these impact the decision making of others in an effort to determine a fair market value is something entirely different. The insight of a seasoned professional Realtor® who assists buyers for a living on a daily basis and understands how these characteristics are perceived by other buyers who have come before them in determining the price that each will pay is an invaluable resource that you cannot get anywhere on the Web. In short, understanding how to interpret the information and using that to form the basis for the right decision for you is absolutely critical. The successful Realtors® of today are knowledgeable, experienced professionals who, because of their experience in the field are best suited to help you understand and interpret the intangible qualities essential to sound decision making.
Choose a Realtor® who has:
A sterling reputation as a professional in the industry who is highly respected by both the public and his/her professional peers;
A strong connection and network within the local community;
An extensive knowledge of the local real estate market and the socio and economic issues that impact its activity;
A solid familiarity of the market´s current inventory - available, pending and sold properties;
A keen appreciation for the subtle differences that make each individual property unique;
An ability to compare and contrast and articulate the positive attributes of the properties you are considering in relationship to others in the market, both active and recently sold, helping you evaluate and value these qualities in your efforts to come to the decision that suits your needs; and
A true passion for the business - buyers and sellers want to enjoy the process and they want quality service. Enthusiasm goes a long way in selling a positive experience and making you feel good about the home you are buying, in the process!
One of the best ways to begin the process of selecting a Realtor® is to ask friends for some recommendations. It´s a good idea to interview two or three Realtors® before making your final selection. Be sure to ask each Realtor® what types of properties and buyers they have represented for sale in the marketplace; what types of properties they have sold and do they have an expertise in the types of properties you are looking for. Each Realtor® should be prepared to discuss their strategies with you. Although we tailor our marketing strategy for the needs of each individual client or customer Buyer, there are several tools we make available to our Buyers to assist in that process. Make an appointment with a member of the Grand Gables team to discuss these tools with you.
Getting Started: Typically, there are three or four documents that you and your Realtor® will need to review and execute together in your effort to find and acquire a piece of real estate. The first document is a disclosure notice that is mandatory in Massachusetts, entitled the Massachusetts Mandatory Licensee Consumer Relationship Disclosure. To learn more about this form and relationships with licensees, click the link above. This document is NOT a contract. Rather, it is a disclosure form that documents the understanding between the Realtor® and the consumer as to who the Realtor® is working FOR when the Realtor® is working WITH the consumer signing the disclosure notice. Simply put, every consumer has the right to know which person in a transaction, Seller or Buyer, is the party to whom the Realtor® has a fiduciary responsibility. The terms "client buyer" and "customer buyer" have distinct meanings. A "client buyer" is someone the Realtor® has a fiduciary responsibility towards. A Realtor® works FOR a "client buyer". However, a Realtor® working with a "customer buyer" in finding properties and helping a buyer to write up offers to purchase works FOR the Seller and has a fiduciary responsibility to the Seller, NOT the Buyer. This is an important distinction that should not be overlooked.
If you are looking for a Realtor® who will be representing you in the transaction as a "client buyer", the next document you will be dealing with is a Buyer´s Agency Agreement. In principle, this agreement is akin to a listing contract with a Seller. This is the agreement between the Buyer and the Realtor® regarding the search and procurement process of acquiring a home. This agreement is typically a preprinted form produced by the local or state association of Realtors®. The form addresses what the Realtor® is agreeing to do on behalf of the Buyer regarding the search and procurement process in exchange for the Buyer´s consent and promises to the Realtor® as the exclusive Buyer´s Agent. Some of the items covered include:
The basic terms of the contract , search criteria, price range, commission arrangement and length of the contract;
The Realtor´s® obligations to the Buyer in terms of using diligent efforts in connection with searching information sources, such as multiple listing services (MLS), newspapers, for sale by owners, networking with other real estate professionals; and
Authorizations given by the Buyer to the Realtor® defining the Realtor´s® rights to seek compensation from listing agents to cover the Buyer´s contracted compensation.
The third document is a disclosure form required by the Massachusetts Department of Public Health entitled Childhood Lead Poisoning Prevention Program (CLPPP) Property Transfer Lead Paint Notificationand often referred to as "the lead paint form". The disclosure notification outlines the obligations of the Seller and Buyer regarding the presence of lead based paint or lead based paint hazards on the property. For compliance with federal and Massachusetts lead-based paint disclosure requirements, this form is completed and signed by the Seller and the listing agent for all residential properties built before 1978, it is then to be signed by any prospective purchaser before said purchaser signs a purchase and sale agreement or a memorandum of agreement (or by a lessee prospective purchaser before signing a lease with an option to purchase). Stop by our office and pick up a copy of the Lead Paint Transfer Notification. In addition, click here to visit the Commonwealth's website for general information on the Childhood Lead Poisoning Prevention Program and a List of Licensed Lead Inspectors.
The fourth document is a Seller´s Disclosure Form, which documents the Seller´s disclosures regarding the property. This document, while not mandatory in Massachusetts, is often used as a means of providing prospective purchasers with important information regarding the property.
Massachusetts Regulation Title 5: The property you eventually choose to purchase may be served by town sewer but many south shore properties are served by septic systems or cesspools. Massachusetts Regulation Title 5, which governs the design, construction and maintenance of private onsite sewage disposal systems requires that septic system or cesspools must be inspected for compliance prior to transfer of title in most cases. The inspections must be performed by licenses inspectors. If the system fails the examination, it must be replaced at some point either prior to or shortly after you purchase the property. While there is no hard and fast rule which party is responsible for the cost of such repair, in most cases, the Sellers pay for such repairs. However, through negotiations between the parties, the Buyer may pay for the cost of the upgrade. An often misunderstood fact regarding the upgrade is that the repairs do NOT have to be made prior to closing. Generally all that is necessary, to satisfy most Buyers´ lenders is that a system designed by an engineer be submitted to and approved by the local board of health. In these instances, sufficient funds are escrowed at the time of closing from the closing proceeds and used to ensure that the repairs are performed after the closing in a timely fashion. Here is a link that will provide you with some useful information regarding Massachusetts Regulation Title 5 from the Bureau of Resource Protection .
Let the Search Begin: Once the appropriate documents referred to above have been properly discussed and executed, the Realtor® can begin showing property to a Buyer. Be sure to establish the ground rules with your Realtor® for scheduling showings for you and when you are most likely going to be available to view properties. Rely upon the expertise of your Realtor® for providing you with customary practices in the marketplace but make sure that your Realtor® is aware of your specific needs regarding your availability. Obviously, the more available you are for viewing property, the easier it will be to schedule you the necessary appointments. While it may seem like you need to be available every waking minute of the day, keep in mind, you still have a life and therefore need to maintain some form of normalcy to your life while the process is underway.
Open Houses: A common practice used by Realtors® in today´s market is the use of open houses to attract brokers and buyers to view the property. In our local market, the local Realtor® community schedules open houses for the Realtors® on Friday, generally between the hours of 10am and 1pm. This is an opportunity for Realtor® to view available properties with the hope that they may have a prospective buyer to which to show the property. Open houses for the public are typically held on Sunday afternoons between 1pm and 4pm and sometimes on Saturdays between 11am and 4pm. Although open house can be a great way to view property for sale, in many circumstances you shouldn´t wait for the open house to see a property for the first time. Discuss the pros and cons of using the open house method to view property before deciding if it´s right for you.
Negotiating an Offer: The first thing to keep in mind is the following: An Offer to Purchase Agreement, (or similar agreement) when signed by both Buyer and Seller, is a legally binding document in Massachusetts. It creates certain obligations between the parties. If you are unsure about what these binding obligations are, you should consult an attorney before signing.
An Offer to Purchase Real Estate Agreement is a contract that contains the essential components of an agreement that make it binding on the parties. These items include, among others:
A description of the property being transacted;
A date which the Offer is made and by which the Offer must be accepted in writing by the Seller in order to be binding on the Buyer;
A purchase price and schedule of amounts to be paid by the Buyer;
A list of any terms upon which the completion of this transaction is contingent (examples of contingencies include a home inspection contingency, a pest inspection contingency, a mortgage financing contingency and the contingency on the sale of another property);
A date by which the parties will negotiate and sign a Purchase and Sale Agreement;
A date by which the parties will transfer funds for and title to the property; and
Signatures by both the Buyer and Seller along with the time of acceptance of the Seller.
The process of presenting an offer may be started and completed in one step. Sometimes, the Buyer´s first offer is acceptable in its entirety by the Seller without any changes being made. In other cases, the Seller is only willing to accept a Buyer´s offer with modifications to some of the terms proposed. The negotiation process is conducted by the Realtor® with both Buyer and Seller through a series of counter proposals until agreement is reached. Although the process seems straight forward, strong negotiating skills may be necessary to the process if you hope to achieve the results you´re looking for. Again, an in-depth knowledge of the marketplace and an understanding of how to interpret the uniqueness of a property´s features are essential fundamentals to conducting an effective negotiation. As a Buyer client of Grand Gables Realty Group Inc., you will be apprised of much more information regarding how this negotiation process typically happens, how to handle contingencies in the Offer and what we do to represent your interests.
The Purchase and Sale Agreement (P&S) is a more extensive document that is generally prepared and signed within two weeks of the signing of the Offer to Purchase. Once signed, it becomes the new binding document between the parties. Generally, the Seller and Buyer engage attorneys to negotiate the terms of the P&S; in many cases, these attorneys will attach additional provisions to the agreement in Riders to the main contract.
Satisfying all Remaining Contingencies: The Buyers´ lender will need a copy of the signed Purchase and Sale Agreement in order to furnish the appraiser with the pertinent information to complete the appraisal. Depending on the time of the year and volume of work in their pipelines, the appraisers may need a week to ten days notice in order to schedule and complete a typical residential appraisal. Generally, the appraisal is the last item that the lenders are waiting for in order to package the loan and send it to their underwriting department for final loan commitment approval. There may be other contingencies in a transaction that need to be addressed and if they have been agreed to by the parties in writing, you should make sure that each of these are on track to be completed in a timely fashion so that the closing will not be delayed.
Once the loan commitment is issued, the lender will notify the closing attorney that the loan can be scheduled for closing. The closing attorney will order a title examination of the property and notify both Buyers and Sellers as to the time and date and any information that they will need to bring with them to the closing. Again, the title examiner will need some lead time to schedule and perform the title search as well as time for the attorney to review the results of the search to determine if the title is sufficiently clear, from the lenders point of view to secure the buyers´ loan against it. Generally, the closing attorney will need ten days to two weeks to schedule and prepare for the closing.
During the week before closing, the Sellers will need to arrange a time with the Buyers for their final "walk through" of the property (generally provided for in language of the Purchase and Sale Agreement) and to notify the current utility, telephone and cables service companies that the Sellers will no longer need service as of the closing date. Don´t wait until the last day before closing to notify these companies; try and make the notification at least a week in advance of the scheduled date and make sure that the Sellers have done the same with respect to their instructions to disconnect their services as of the closing date. This is especially important for gas and electric companies since these companies will often not let Buyers arrange for service commencement until the Sellers have arranged for the termination of their services.
"When do I get to move in?" Unless otherwise agreed to between Buyers and Sellers in writing, the Buyers are granted full and complete occupancy of the premises upon the transfer of title and the recording of the deed.
Although most Purchase and Sale Agreement call for the closing to take place at the applicable Registry of Deeds, in reality, it is the office of the Buyers´ Lenders´ legal counsel (the closing attorney) that is most often used. If a location other than the registry of deeds is chosen, the Buyers will have to wait until the closing process is completed AND the closing attorney records the deed, mortgage and other appropriate paperwork at the registry of deeds BEFORE the Buyers will be granted possession of the premises. Closings held in the morning generally are recorded before the end of the business day so that a Buyer would have possession of the property by the end of the business day. Depending on the timing and the proximity of the registry of deed to the place where the closing will be held, afternoon closings may not go "on record" until the following morning at which point Buyers typically won´t have access to the property until the following day.
Remember, these time frames are just guidelines. What you may experience could easily be different depending on the dynamics of your individual transaction. Engaging the right professionals in a team to help you through this process is one way of helping your transaction proceed in a smooth and orderly fashion. You have a lot riding on the success of this transaction; it´s wise to seek the advice and services of those who help people do this for a living.
Call a member of the Grand Gables team today and learn how we can help you get the results you´re looking for - you owe it to yourself!
This information is property of Grand Gables Realty Group, Inc. This information is not to be copied or used without permission from the organization.