The Steps of the Home Buying Process
The home buying process is an exciting but sometimes stressful experience. It is my goal to keep you informed and updated through the process. Although each experience will vary, this outline of the timeline and flow of the transaction is helpful to look over!
0.5. Are you ready to buy? Figuring out your motivation is a huge step. Deciding to buy can be spurred by many factors: starting a family, planting new roots, finding personal and financial stability, building your own equity instead of paying someone else’s mortgage… whatever your reasons are, it’s a good idea to know why you are doing this. As with anything, having that goal and intention behind your actions will help to keep you going even if things get stressful.
1. The Buyer Consult: As a first step, I love to sit down with you (via Zoom, on the phone, or ideally with a cup of coffee or glass of wine!) and talk all about you and your dreams for your home. This gives me a chance to get to know you (if I don’t already!) and what you’re looking for. This means beds/baths/garage spaces, but it also means diving into wants vs. needs. Why do you need that third bedroom – is it for a home office? Would a 2 bedroom with a loft or den work just as well? Is the garage for storage or for parking – and if it’s the former, would a shed or other covered space work instead? What part of town do you want to be in and why?
(I love to talk about Denver’s sweet spots and unique neighborhoods – if you want to dive deeper, let’s set up a time to talk! You can also look at a map of Denver’s neighborhoods and read local highlights for some of my favorite parts of town.)
2. Pre-Approval: One of the main factors at play here is money – so let’s talk about it. Can you afford to buy a house? Talking to a lender – a loan officer or mortgage broker – is a crucial step in figuring out your budget. Instead of thinking in terms of the overall price, a lender can help you break it down – how much do you want to pay per month? How much do you have for a down payment? What kind of interest rate can you get? Total monthly payments can vary wildly based on down payment amount, interest rate, mortgage insurance, insurance, taxes, and HOA fees (if applicable).
A good lender will walk you through the different scenarios and make sure you understand your numbers. They’ll also provide you with pre-qualification or pre-approval documentation. I can recommend some amazing lenders if you’re not sure where to start!
3. Start your Search! Once we’ve identified your wants and needs AND your budget, let’s get down to business! I’ll set up a search on our local MLS services (MLS = multiple listing service – a database of listings entered directly by real estate professionals), REColorado (Denver Metro) or IRES (Boulder and Northern Colorado), with your parameters, and send you promising properties that pop up. This does not preclude you from doing your own searches on sites like Zillow, Redfin, or Trulia – those sites get their information from the MLS as well. Just be aware that occasionally the secondary sites may be delayed in their information, so you could see a property that’s not actually available – or not see one that is available! I also look into things that might not be on the MLS – new builds (if you’re considering them), homes for sale by owner (FSBO), off-market opportunities, and others. We want to cast a wide net to start and then filter things out as we go.
4. Showings: Showings are private tours of available homes. You and I get to walk through the property and you can imagine yourself living there. The homes we see can be in all conditions: vacant or occupied, staged or completely empty, clean or filthy, pristine and move-in ready or in need of a ton of work. We always want to be respectful of the space, especially if the home is still occupied. Check out my blog post on showings for more details!
5. Comps: Is it really worth that price? For any house you want to make an offer on, I will run comps – short for comparable sales or properties. This means that I look at similar sales (or pending sales) in the past 6 months. Ideally, we’re looking at same house style, same neighborhood, and similar stats (beds/baths/etc). We look at these properties and compare them to the one you’re offering on to determine if the list price is reasonable. Based on the comps, we may want to offer under list price (especially if it has been on the market for a while or there are some obvious issues) or over list price (especially if there’s a lot of interest). One thing to keep in mind is that a list price is simply a starting point – and the market is constantly moving. Just because a similar house sold for less 1 month ago doesn’t mean that your under-list offer will get accepted.
6. Writing an offer! Once you’ve decided you can see yourself in a home, we write up your offer! There are so many components that go into a successful offer - check out my blog post on submitting your offer for more details. Once we submit your offer, I call the seller’s agent to confirm they’ve received it and to reiterate your interest. Often, the lender will also call as a gesture of good faith and rapport-building, and to attest to your qualifications as a borrower. We often give the sellers 24 hours to respond to the offer (though this can be longer if specifically requested by the seller). The sellers can do one of three things:
Accept. Yay!
Reject. Boo.
Counter. This means the seller is proposing some change to the terms you offered – this could be price, deadlines, inclusions, some combination, or something else entirely – and if you agree to the new terms, the offer is accepted.
Want to know more about the contract? You can review a blank one here; if you have questions or want to go over it line by line, let’s connect!
7. You’re under contract! Once the seller(s) have signed your offer, you are officially under contract! I will send you a congratulations email that outlines next steps, deadlines, and things to be aware of as we move forward.
8. Earnest money and loan application: Within 3 days of your offer getting accepted, you’ll have to turn in your earnest money - which is a good faith deposit, usually 1-3% of the list price. These funds are normally held by the title company that is handling the transaction (but can be held by the listing agent’s brokerage instead) and go to your down payment at closing. If you terminate the contract in good faith and within the bounds of the contract, you get your earnest money back. If you terminate in bad faith, the seller may be entitled to keep your earnest money.
Within a few days of contract acceptance, you’ll also want to finalize your loan application, if you haven’t already. Make sure that you are in close contact with your lender and that you’ve delivered to them any documentation that they need!
9. Inspection: It’s usually a good idea to complete inspection relatively quickly, since if there is a major issue with the property, we want to know about it sooner rather than later! Inspectors will take a look at every facet and system of the home - structure, electrical, roof, plumbing, HVAC, and more. The general inspector may recommend a second opinion from a specialist. You the buyer submit an inspection objection to the seller, notifying them of the issues you are asking to be corrected. If the inspection turns up more or bigger problems than you’d anticipated, or the seller refuses to address an issue of importance to you, you can terminate and get your earnest money back. For more information about inspection and objection, check out my Glossary of Real Estate Terms!
10. Appraisal: Once we’ve reached agreement on inspection issues, your lender will have an appraiser visit the property to determine the value of the property. This is an important piece of the puzzle: your lender must ensure that the asset they’re lending on is worth what you’re offering, so if the appraisal comes in below the price you’ve offered, you may need to bring extra cash to cover the gap. This is a possibility if you’ve offered over list price. (See my Glossary about appraisal gap coverage.)
11. Final Walkthrough: Right before closing, we’ll do a final walkthrough at the property, looking to make sure the seller has completed any agreed-upon inspection issues and that there hasn’t been any major change in condition since the last time you saw it. We like to do this as close to closing as possible!
12: CLOSING DAY! From walkthrough, we head to closing – usually held at the offices of the title company that is handling the transaction. Stretch your hands and get your pen ready – at closing, you will sign documents to transfer ownership, utilities, and taxes, as well as loan documents. You’ll want to bring a government-issued ID with a photo. If you are wiring your down payment, you will have already taken care of that, usually the day before. There’s usually a little bit of waiting as funds get transferred and everything gets approved – closing can take around an hour, barring any unforeseen delays. Then, finally, you are a homeowner – congratulations!!!
12.5. Possession – Often the day of closing, but up to 60 days after closing
The BEST DAY of the process is the day you get your keys and move into your new home. Possession is often given at the time of closing, but there many situations that allow the seller a few days post-closing to move out. Also, it has become fairly common to allow the seller to ‘rent back’ the property after closing to allow them to find a replacement home.
That was a quick overview of the steps of the buying process - you can also take a look at the graphic below.