Experience has taught us that the buying process involves common stages for all home buyers. To help you understand that process, and make the most of every day and dollar you spend, Long & Foster® has prepared this Home Buyers Guide to provide an overview from the planning table to the closing table. After all, helping you fulfill your homeownership dream is our business.
House hunting begins at home—with planning. The first step toward buying a house is to sit down. Before you grab the road maps and hit the streets, you need to do a little planning. We call it “pre-qualifying”. Simply, it’s determining how much house you can afford to buy. Knowing your affordable price range will bring your house-hunting into focus. Many lenders, for a small “up-front” fee, will send out all required verification and pre-approve you for a mortgage, allowing you the opportunity to negotiate as a cash buyer.
How much house you can afford to buy depends on two things: how much you can afford for the monthly housing payment, and how much you can invest in the down payment. Monthly payments include principal and interest on the mortgage loan, and property taxes and insurance against fire and other hazards. These four costs are often abbreviated “P.I.T.I.”. For some buyers and lenders, monthly housing costs may also include homeowners association dues, condominium fees, and mortgage insurance.
Choosing a place to live can be one of the most exhilarating experiences of a lifetime. We’ve learned through the thousands of home seekers we have helped that the best approach is to be prepared. Literally, to do some homework. Our observation is simple. Your move can be an improvement if you duplicate what you like in your present community and avoid what you dislike.
You've found it — your "dream house"! You want to buy it. Now what? You make an offer by submitting a signed real estate offer to purchase with the type of financing you desire.
This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand every detail. Ask questions. Verbal agreements should be written into the contract. If you plan to have a lawyer represent or advise you, retain one as early as possible. This is where your Long & Foster Sales Associate and an attorney can give you the assistance you need.
You have the option of shopping around for the best terms you can obtain. Generally, a mortgage acceptance requires 15-30 days for conventional, 30-45 days for VA and FHA from application to approval. In some cases, loans may be approved more quickly. Long & Foster has an affiliated mortgage company — Prosperity Mortgage® Company.
Most lenders require a home buyer to provide at settlement a one-year paid receipt for a fire and hazard insurance policy, often called homeowner’s insurance. These policies are available from several leading insurance companies through Long & Foster's Insurance Agency, Inc., or the insurance company of your choice. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.
Tonight you can pop open the champagne, but today there will be a lot of paper signing and a poignant passing of the keys (don’t forget the garage keys and electric door opener, too).
At the settlement will be an attorney or title company representative (chosen by the buyers), all buyers, listing and selling brokers, and all owners. The home seller should bring all warranties on equipment and any instructions on equipment maintenance or operation.
The attorney will have searched the title, provided title insurance, and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.
With the buyer, the attorney explains the deed of trust or mortgage; the deed of trust note or mortgage note; VA, FHA, or lender forms; and settlement sheets. Buyer signs all these and pays the balance of the down payment and buyer’s closing costs with cashier or certified check.
The attorney will have searched the title, provided title insurance, and obtained old and new lender instructions . First, all unresolved walk-through deficiencies are resolved.
When it comes to paying for a home, buyers today have an almost unlimited number of financing options from which to choose.
Here’s a run-down on the main types of financing every home buyer should know today. Interest rates are intended for illustration only; ask your Long & Foster Sales Associate or loan officer from Prosperity Mortgage Company, a Long & Foster affiliated company, for current market rates.
Below is a handy guide of terms that buyers need to know. Agent A person acting on behalf of another, called the principal. Agreement of Sale Known by various names, such as “contract of purchase”, “purchase agreement”, “sales agreement”, or “binder”, according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties. Annual Percentage Rate (APR) Includes quoted interest rate on the loan plus all additional service and finance charges associated with the loan. Includes all costs of financing; those paid at the time of closing and those paid over the term of the loan. The APR is usually slightly higher than the note rate. Appraisal An expert judgment or estimate of the quality or value of real estate as of a given date. Assessed Value The valuation placed upon property by a public tax assessor as the basis for taxes. Bill of Sale An instrument which transfers title to personal property (chattels); a “Deed” transfers real property. Certificate of Title A document signed by a title examiner or attorney, stating that the seller has a good marketable and insurable title. Closing Statement (Settlement) The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the real estate and seller’s net proceeds. Also, “settlement sheets”, “HUD-1”. Commission Payment to a real estate broker for services performed. Convey To deed or transfer title of property from one person to another. Deed A formal written instrument by which title to real property is transferred from one owner to another. Also, “conveyance”. Deed of Trust Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender (or beneficiary). Earnest Money The money given to the seller by the potential buyer (usually held in escrow) upon the signing of the agreement of sale to show that buyer is serious about buying the house. Also, “deposit”. Equity The interest or value which owner has in real estate over and above the debts against it. (Sales Price – Mortgage Balance = Equity.) Escrow Funds, property, or other things of value left in trust to a third party. The escrow may be released upon the fulfillment of certain conditions or by agreement of the parties. Fixture What was formerly personal property which is now permanently attached to real property and goes with the property when it is sold. Hazard Insurance Protects against damages caused to property by fire, windstorms, and other common hazards. Listing Contract Between a homeowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also, “listing agreement”. Market Value The highest price which a buyer, ready, willing and able but not compelled to buy, would pay, and the lowest price a seller, ready, willing and able but not compelled to sell, would accept. Basis for “listing price”, or “asking price”. Market Price The actual amount for which a piece of property is sold. Also, “sales price”, “purchase price”. Mortgage A lien or claim against real property given by the buyer to the lender as security for money borrowed. Mortgage Note A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. Also, “deed of trust note”. P.l.T.I. Principal, interest, taxes, and insurance. Most residential mortgage payments include the above and are therefore referred to as P.I.T.I. Also, “carrying charges”. Points Sometimes called “discount points”, a point is one percent of the amount of the mortgage loan. Prepayment Penalty Penalty for the payment of a mortgage note or deed of trust note before it actually becomes due. Principal This word has several meanings: (A) to denote the most important; (B) a capital sum lent on interest; (C) one who appoints an agent to act on their behalf; (D) either party to a contract. Property Management The operation of real property, including the leasing of space, collection of rents, selection of tenants, and the repair and renovation of the buildings and grounds. Prorate To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, or condominium fee. Sales Associate A person with a real estate license and associated with a specific real estate broker. Survey A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description. Title As generally used, a document that indicates rights of ownership and possession of a particular property. Title Abstract A summary of the public records relating to the title to a particular piece of land. An attorney or title company reviews an abstract or title to determine whether there are any title defects. Title Insurance Protects lenders and homeowners against loss of their interest in property due to legal defects in title. Title Search or Examination A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims. Transfer Tax State tax, local tax (where applicable), and tax stamps (in some areas) required by law when title passes from one owner to another. Ask your Long & Foster Sales Associate for a copy of the “Understanding the Role of the Real Estate Agent” (LF1192, for use in the state of Maryland only);”A REALTORS® ROLE” (LF1193, for use in the state of Virginia only); or “The Agency Disclosure Brochure” (LF1195, for use in the District of Columbia only).
The first step toward putting your house up for sale is to meet with a real estate Sales Associate at your home. This is what we call the “listing appointment”.
Today, the home that stands out among similarly-priced houses is the home that sells. Why? Because it makes a good first impression that lasts right to the settlement table.
You may not be able to improve the market value of your house (finish basement, remodel kitchen, etc.), but you can improve its marketability. And usually this can be done with more elbow grease than hard cash. The key is to put yourself in the buyer’s shoes. In fact, if you drop by some open houses (you may soon be a buyer yourself), you’ll pick up some pointers. Then practice making your house as appealing and uncluttered as the home you wish to buy.
While the home seller is actively getting the house ready to show, the listing broker is actively spreading the word that the property is available. Generally speaking, the listing is promoted to two groups: the real estate community and the buying public.
Many home sellers are surprised to learn that approximately 56% of all buyers come from referrals between brokers and their vast network of contacts. Approximately 17% of buyers come from inquiries stimulated by “for sale” signs in yards. The remaining 27% of buyers come from a combination of the real estate company’s reputation and image, open houses, and advertising or other promotional efforts. Obviously, the most productive source of buyers is working closely with other brokers, and this is where your listing broker begins.
A buyer makes an offer by submitting a written and signed offer to purchase, which will become the sales contract when ratified by everyone’s signature. Once the seller and buyer sign the paper, they are bound by the contract conditions.
The “presentation of a contract” begins when the selling broker registers the offer with the broker’s own office and notifies the listing broker of the offer. The listing broker then arranges a presentation appointment with the home seller, and with the selling broker in some areas. (The buyer doesn’t attend the presentation.)
Either the selling broker or the listing broker presents the terms of the offer, depending on local customs. The listing broker acts as the home seller’s advisor. Part of the presentation is determining that the buyer is qualified financially to make the purchase. (Should either the seller or buyer be out of town, the contract is presented via telephone and confirmed later by FAX.)
The listing or selling broker (depending on local custom) oversees a contract through to closing and helps to place the financing, process the case, arrange various inspections and review financing and “points”.
At this stage, all contingencies will be satisfied and removed. The buyer will select a settlement and/or a title company, and the listing or selling broker will notify those firms and provide the vital information.
A number of professionals come into the home selling process during this period, including a home inspector (if requested by the buyer), well and septic inspectors, termite inspector, appraiser and attorneys. A mortgage approval can be made at application in many cases subject to verification of the information provided. However, on the chance that the financing falls through, the seller should keep the property in showable condition.
The purpose of the walk-through inspection prior to settlement is to determine if conditions in the contract are satisfied. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiation and prior to signing the sales agreement. Repair or replacement items should be noted in the contract. Most resale homes are sold in “as is” condition, however, mechanical, electrical, and plumbing items should be in working condition.
It is up to the buyer to perform the inspection, not the seller who may or may not be present. The buyer should be accompanied by the selling broker and/or the listing broker. The home seller should be sure utilities are on so that equipment can be operated.
The big day is here! Tonight you can pop open the champagne, but today there will be a lot of paper signing and a poignant passing of the keys (don’t forget the garage keys, and the electric garage opener, too).
At the settlement will be an attorney or title company representative, the buyer, listing and selling brokers, and all owners. The home seller should bring all warranties on equipment (or leave them in the house) and any instructions on equipment maintenance or operation.
The attorney will have searched the title, and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.
With the buyer, the attorney explains the deed of trust, deed of trust note, and settlement sheets. The buyer signs all three, and pays the balance of the down payment and buyer’s closing costs.
With the seller, the attorney explains the deed and settlement sheets and gets the home seller’s signature on them. The seller pays appropriate closing costs.
When it comes to paying for a home, buyers today have an almost unlimited number of financing options.
Here’s a run-down on the main types of financing. Interest rates are intended for illustration only. Ask your Long & Foster Sales Associate or loan officer from Prosperity Mortgage Company, a Long & Foster affiliated company, for current market rates.