A Guide to Buying and Selling a Home

Like finding the right house, selecting a REALTOR® you can trust and comfortably work with is paramount. Just as you wouldn't be casual in the selection of your doctor or your attorney, you shouldn't take the selection of your REALTOR® lightly. Indeed, the best way to find such a professional is through recommendations from family and friends. Of course, you should interview several REALTORS® before you choose one. If you're selling your home, you should ask the candidates how they plan to market your home, what pricing advice they can offer, and what other suggestions they can provide to further enhance the desirability of your home.

Whether you're buying or selling, ask candidates about the transaction to evaluate their knowledge. Ask for--and check--references. And, finally, ask yourself whether you will feel comfortable working closely with this individual in the months ahead.

The following is a quick guide whether you are deciding to buy or sell a house.


The Buying Process

One of the keys to making the homebuying process easier and more understandable is proper planning. In doing so, you'll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the homebuying process.  A REALTOR® can guide you through this process from selecting a home to preparing the purchase agreement and eventually closing the transaction. 

Step 1: Work with a REALTOR®

Buying real estate is a complex matter. It is in your best interest to work with a local REALTOR® who knows and services your area.  He/she can also guide you through the maze of paperwork required as well as assist you with negotiating the transaction, procuring financing, inspections and eventually closing the deal.   

Step 2: Getting loan pre-approval

"Preapproval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a preapproval letter, which shows your borrowing power. You can visit as many lenders as you like and get several preapprovals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.

Although not a final loan commitment, the preapproval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.

Real estate financing is procured from numerous sources but most commonly involves banks and mortgage companies.  Based on his or her experience, your REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.

Step 3: Looking at homes

Most of today's home buyers begin and continue their search for homes on a variety of Internet web sites because they provide all of the necessary detailed information along with multiple photos of the property.  

Each of us is different and so it's important to list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).

Next, it's important to set your priorities. If you can't get a home at your price with all the features you want, then determine which features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?

Lastly, consider what your circumstances will be in several years. For instance, if you'll be needing a larger home, maybe it is best to purchase a bigger house now rather than moving or expanding in the future.

Step 4: Choosing a home and making an offer

Once you have made your selection, a purchase agreement is prepared indicating the various terms of the transaction along with the price you are willing to pay.  Typically your REALTOR® will then present the offer to the seller and the seller's representative.  No aspect of the home buying process is more complex, personal or variable than negotiating between buyer and seller.  This is the point where the value of an experienced REALTOR® is extremely beneficial to you.  The seller may accept the offer, make a counter offer or reject it.  Because counter offers are common, it is important to keep in close contact with the REALTOR® so that any proposed changes can be quickly reviewed.  Once there is an agreement on all issues, you have purchased your new home.  The next step is financing.  

Step 5: Getting financing

To obtain a loan you must complete a written loan application and provide supporting documentation.  Your REALTOR® will provide you with a list of documents that will be needed at your loan application.  

Step 6: Inspections

How many inspections? A number of inspections are common in residential real estate transactions. They include structural inspections, checks for termites, well and septic where applicable, surveys to determine boundaries, appraisals to determine value for lenders, and title reviews.

Step 7: Getting Insurance

There are various forms of insurance associated with home ownership including these major types:

Title insurance. Purchased with a one-time fee at closing.  Title insurance protects owners in the event that title to the property is found to be invalid.

Homeowners' insurance provides fire, theft and liability coverage.

Flood insurance is only required generally in high-risk flood-prone areas.  This insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents.

Home warranties are generally provided from the builder on new homes.  For existing homes, warranties are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover the replacement cost.

Step 8: Closing the transaction

Prior to closing, buyers typically have a final opportunity to walk through the property to assure that the condition has not materially changed since the purchase agreement was signed.  The closing process, which in different parts of the country is also known as "settlement" or "escrow", has become increasingly computerized and automated. All paperwork has been prepared by closing agents, title companies, lenders and lawyers.  In some cases, buyers and sellers don't need to attend the closing as the signed paperwork is sent to the closing agent via overnight delivery.

The actual settlement is generally a brief process where all of the necessary paperwork needed to complete the transaction is signed. The closing is usually held in an office setting, sometimes with both buyer and seller at the same table or with each party completing their papers separately.  

Step 9: Welcome home!

It is generally understood that sellers will leave homes "broom clean" when moving out. This expression does not mean "vacuumed" or "spotless." Broom clean makes sense because it means the house is ready to be painted and cleaned.

Step 10:  Protecting your investment

For most people, their home is the largest single asset they hold, so it makes sense to protect that asset. Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it. 

 


The Selling Process

The home selling process has become a more complex than it used to be. New seller disclosure statements, a myriad of paperwork and forms plus a range of environmental concerns all have emerged in the past decade.  Many times, the process starts long before the property is placed on the market as it is necessary to determine what needs to be cleaned, painted, repaired and tossed out.  Ask yourself...If you were buying this home what would you want to see? The goal is to show a home which looks good, maximizes space and attracts as many buyers as possible.

Step 1: Work with a REALTOR®

Whether you're a first-time seller or someone who has sold many homes, there are several ways to find a local REALTOR®.  You can use our"REALTOR® Agent Search" feature to find individuals who actively sell in your community.  Many people get recommendations from people they know.  In some cases, sellers elect to meet only with one REALTOR® while others elect to interview several before making a decision.  

Step 2: Setting the price

Every reasonable owner wants the best possible price and terms for his or her home. Several factors including location, property and market conditions and interest rates will have an effect as to how much your home will sell for.  The ultimate goal is to get the maximum price and the best terms during the window of time when your home is being marketed.  Keep in mind that the key factors which will ultimately effect your sales price are location, condition of the property and where the real estate market stands with regards to supply and demand.  Personal circumstances such as job loss, divorce or death can also have an impact on the asking price.  

Step 3: Getting it sold

Depending upon the company you choose to market your home, selling can entail a variety of marketing strategies.  Once listed, placing the property on the local Multiple Listing Service and a variety of Internet web sites is standard operating procedure for most REALTORS®.  If you look at a typical transaction, you can see that there are five general areas where REALTORS® can have a direct impact in the home-selling process:

1. Preparation

2. Pricing

3. Marketing

4. Negotiation

5. Closing

Step 4: Negotiating an offer

What's an acceptable offer? The dream of every seller is to have a line of buyers outside the front door, each clutching higher and higher offers. And while this has been known to happen, in most markets, it is the exception rather than the norm.  A number of factors to think about while considering an offer include:

  • Is the offer at what you believe is an acceptable price given your personal circumstances?
  • Has the buyer offered a price that reflects fair market value for your home?
  • What is the alternative to accepting or negotiating this offer?
  • Do you have enough time to wait for other offers?
  • What's the plan if no other offers are received?
  • What if several offers are received? Do you choose the high offer from the purchaser with questionable finances who may not be able to close, or a somewhat lesser offer from a buyer with preapproved financing?

In each case, you should carefully review all offers with your REALTOR® to determine whether it is acceptable and/or worth making a counter-offer.

What is a counter-offer?  A counter-offer is nothing more than a new offer.  Just as the buyer had options in response to the owner's original price and terms, the seller can now choose to react in one of three ways: accept the offer, decline the offer or make a counter-offer.  Offers and counter-offers are not unusual during the sale of a home.  It's an efficient and practical process -- but also one that may contain tricky clauses and hidden costs. The REALTOR® who lists your home can explain the local bargaining process in detail and assist in the actual negotiations.  Keep in mind that while negotiating, buyers should be treated with respect and sellers should never lose sight of either their best interests or their baseline transaction requirements needed to sell their home. 

Step 5: Closing the deal

The offer has been negotiated and accepted and any agreed-to repairs to the property have been made.  Next comes closing day!  What Happens? Closing -- or "settlement" or "escrow" as it is known in some areas -- is essentially a meeting where the closing agent (the party who conducts the procedure) reviews the sales agreement to determine what payments and credits that the seller should receive and what amount is due from the buyer.  The buyers bring the required funds and the proper proceeds are paid to the seller.  The closing agent also makes sure that the purchaser's title is properly recorded in local records and that costs related to the transaction such as taxes and title searches are paid.  

Step 6: Moving out

Even the smallest home contains a lot of furniture, clothes, kitchen equipment, pictures and other items. For a short move, it may be worthwhile to transport small goods by yourself, but larger items will likely require a professional mover.  Ideally it is best to get rid of excess furniture and other goods by having a sale before you move. This will reduce the volume of goods to be moved and thus lower moving costs. Unwanted furniture which cannot be sold can often be donated to charitable groups, many of which will come to your home to pick up donations.  Keep in mind that the time to start planning your move is when you decided to sell your home.  Actually some of the activities required to sell the home can actually help with the moving process. For example, cleaning out closets, basements and attics means there will be less to do once the home is sold.

Step 7:  A word about selecting movers

There are a number of factors to consider. Money is one issue.  You'd like to spend as little as possible, but making your choice strictly on the basis of price can be a mistake. Movers must have the right equipment, training and experience to do a good job. A mover, no matter how large or small, should be able to provide recent references for homesellers with a similar volume of goods to transport. Always confirm mover credentials. Movers should be licensed and bonded as required in your state, and employees should have workman's comp insurance.

Get a checklist. Moving is a big job and checklists can make it more organized and easier. Here are some of the major items to consider:

  • Money. If you're moving more than a few miles then you should have enough cash or credit to cover travel, food, transportation and lodging.
  • Number boxes so that all items can be counted on arrival. Make a list of boxes by number and indicate their contents.
  • If moving with children, make sure that each has a favorite toy or toys, blankets, games, music and other goods.
  • Moving historic, breakable or valued items? Such goods routinely require special handling and packaging.
  • Have address books readily available in case you need help.
  • If you have a laptop computer with a modem, make it accessible during your trip to pick up business and personal e-mail.
  • Medicine. Keep medicines and related prescriptions in a place where they will be available during the move.