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Buying a Home: The Process

 Choose a Real Estate Agent

Traditionally all real estate agents represented the Seller. However, in many states including Arkansas, consumer awareness has grown so that Buyers can also be represented by an agent loyal to them, the Buyer's Agent. Seller's agents can help a Buyer purchase a home, show them houses, write contracts, etc., but their loyalty is ultimately with the Seller and their job is to sell the homes they have listed at the highest price possible. Your home purchase will be one of the biggest and most important financial decisions you'll ever make. You deserve representation by a Buyer's Agent to help you purchase your home at a fair price, to be informed at every stage of the process, and to be represented by a professional should problems arise. This service is generally free to you, since the company which has the home listed generally shares the seller's commission with the buyer agent.

Get pre-qualified


Visit a mortgage lender to get pre-qualified. The price level set by the bank is determined by your income and debts and will help your agent show you houses that you can afford. Your agent can also recommend lenders who can meet any special needs you may have, especially if you are purchasing commercial property or land. Being pre-qualified (or better yet, pre-approved) not only determines how much house you can afford, it also allows you to move quickly when you find the right house, especially when you aren't the only interested buyer.


Find the Right Home


This is the fun part, looking at houses to find your dream home. Once you and your agent have determined what you are looking for and you have been pre-qualified, it's time to find the right home. Your Buyer Agent will check first in the Multiple Listing Service (MLS) and inform you of all the homes that meet your needs in the areas where you want to live. Sometimes, your dream home may not be listed by a real estate agent. A Buyer Agent will also arrange with "For Sale By Owners" for you to see their homes if you haven't found what you want in the MLS. In addition, if you wish to build a home, your agent will show you new construction by various builders, including those who may not be represented by a listing agent. And if you decide a new home is for you, your Buyer Agent will act as your advocate to assure that your new home turns out the way you want it to.

Write an Offer


Everyone is concerned about paying too much for their new home or buying a house with hidden defects. It is here that your Buyer Agent can be of most use. When you have found the home you wish to buy, a Buyer Agent will help you make good, informed decisions in preparing your offer. First, your Buyer Agent will do a Comparative Market Analysis (CMA) which will tell you how much similar homes in the neighborhood have sold for in recent months. This will help establish an approximate value for the home in the current market and tell you whether the home you are interested in is overpriced. It can also help you determine a fair market price when you write your offer. However, price is not the only factor in an offer. Your Buyer Agent can also help you with such things as closing dates, earnest money amount, financing options, repair limit, seller concessions, etc.

The Offer is presented 


Your Buyer's Agent will give the offer to the Listing Agent (who will present it to the seller) or (if you are buying a For-Sale-By-Owner home) will present the offer to the seller directly. An important part of your offer may be your Earnest Money, although it is no longer automatically included with an offer in the state of Arkansas. This money shows the seller that you are serious about purchasing his home. Here in NW Arkansas the rule of thumb for homes listed by a real estate company is that the Earnest Money amount be approximately 1% of the purchase price offered. On some bank-owned properties it may be more, especially for cash offers. In cases where you are purchasing a home directly from the owner without the help of a buyer agent, give the minimum which the seller will accept.

If an offer does have Earnest Money, the Earnest Money is placed in an escrow account of the Listing Agent Firm or the Title Company until closing. At that time, the buyer is given credit for that amount, which may help in lowering closing costs. If you have a buyer's agent and are purchasing a FSBO home, the earnest money goes into an escrow account of your buyer agent's company. In neither case does the owner receive this money until the property closes. If you are purchasing a FSBO home directly from the owner, the owner gets the earnest money immediately when you pay it to him. If there are problems with the transaction, it is sometimes difficult to get this money back from the seller. This is a situation where it really pays to have a buyer's agent, since your earnest money is more protected. Real estate companies are obliged to operate according to real estate law, and if you are entitled to a refund of the earnest money in a transaction that doesn't work, you will get it back.

Mortgage Application


Once your offer has been accepted, if you have not already done so, you must make official application with your mortgage lender. Generally you will have to pay several hundred dollars to pay for the appraisal as well as for a full credit check. Mortgage approval generally takes about 4-6 weeks. If you have been pre-approved, rather than simply pre-qualified, it takes less, since only the house must be approved by the bank.

Home Inspection


In the state of Arkansas, the Buyer has 10 business days from the date of acceptance of the offer to conduct a personal inspection or to have a professional home inspector do so. Generally, this costs approximately $250-$300, but may cost more for a large home or less for a home which is less than 1000 square feet. The standard property inspection covers a home's major mechanical systems: electrical, plumbing, heating and cooling and its construction from roof to foundation, exterior to interior. It is a visual inspection, so it does not cover such things as well water quality, septic systems, or environmental hazards such as lead or radon. You may also have specialized inspections should they be necessary; these involve experts and may cost more. Once the inspection has been done, you can request that the seller repair certain items before closing, which may have been detected in the inspection. Repairs are negotiable, and can sometimes derail a deal. Your Buyer Agent can guide you in what to request. The standard in Arkansas is what's called "normal working order" for affected systems in the home. It is a good idea for the buyer to be present when the inspection is done, or at least at the end of the inspection, since the inspector can actually show what he has found. Often, too, an inspection is a good way for a Buyer to find out how his house works, e.g. where the water shut-off valve is, etc.

Title Search


In our area, we primarily use title or abstract companies to handle the closings. In other parts of the country, so-called settlements attorneys are used. The title companies generally have an attorney on staff who will solve any legal problems which may arise in the title search. The title company does a title search to insure that there are no problems with transferring ownership of the property to you. They also provide title insurance to assure that if something, such as a lien on the property from a past owner, is found in the future, you do not have to pay for it. In addition, title companies prepare documents and conduct the closing. They make sure that you have arranged to purchase hazard/homeowners insurance and that a termite inspection has been done. The seller pays for the termite inspection.

Just Before Closing


Before closing on your new home, your Buyer Agent will schedule a Final Walk-Through Inspection. Generally the seller has already moved out, and you get to see the house as it will appear when you take possession after the closing. In the Final Walk-Through, you need to check to assure that the repairs, which you requested the seller to do, have been done to your satisfaction and sign off on the house, that is, that the house is the one which you wish to buy. In addition, a few days before closing, you need to notify utility companies so that they may be placed in your name and you don't experience an interruption of service.

Closing/Settlement


Once you have signed all of the papers, you may take possession of your new home. Congratulations, you have purchased a home! Now it's time to move in. You should schedule your move to allow you time to prepare your home for your arrival. Allow yourself a couple of days for cleaning or painting or other important things that need to be complete prior to moving in.

Remember, as a Buyer Agent, I will be happy to help you through the complicated process of purchasing a home. I will protect your interests and assure that you don't pay too much. If you have further questions or you would like me to serve as your Buyer Agent, please do not hesitate to contact me.