Should you work with a real estate agent? YES, absolutely! I assure you, I am not just saying this because I am one. This is the first time you are buying a home and it is probably the biggest purchase you have ever made. You will want an expert to have your back and walk you through the entire process. Not only will they book appointments for you, but they will be able to get as much information as possible beforehand, run a comparative market analysis for you so you don’t overpay, and negotiate to get you the best deal possible.
Who pays the commission fees? The seller pays the broker’s commission fees. The fees are typically paid at closing, the fee is subtracted from the proceeds of the home. The seller signs a listing agreement with the listing agent, typically 3% commission to the listing agent and 3% to the buyer’s agent. You, as the buyer, are not paying commission, so it only benefits you to work with an agent!
What does it mean to get "pre-approved?” To put in serious offers, you will need to get pre-approved by a lender for a mortgage loan. This process will also help you understand what you can realistically afford, and what you can expect to pay in closing costs. If you need help with closing costs, your agent can negotiate for the seller to pay a portion of or all closing costs. However, keep in mind, this can weaken your offer in a competitive market. It is better to have the cash for your down payment and closing costs upfront. Putting down 20% of the home’s purchase price is ideal (you will pay less in interest & fees and start out with more equity in your home,) but many home buyers, especially 1st time buyers, put down less than 20%. You can currently buy for as little as 3% down! Your real estate agent will be able to make recommendations on lenders to work with. You will want to shop around for the best interest rate. If you have a good, longstanding relationship with your bank, you can start there. You will want to ask them about the following:
what types of loans they offer?
what will your interest rate be?
what will your monthly payment be?
how much of a down payment you need?
is there a prepayment penalty?
what are mortgage or discount points and how do they affect my loan?
what are the closing costs and how much will they be?
Ok, now that you understand how commission fees work, you are pre-approved, and you have established your budget, it’s time for the fun part! You know the first 3 rules of real estate right?! Location, location, location. How far are you willing to commute for work? Do you want to be in the city or further out? Have you decided on single family homes only or are you open to condos and townhomes? How many bedrooms and baths will you want/need? Do you want a pool? Do you want a community with lots of amenities? Should the community be gated? You will be able to look for homes on zillow.com, realtor.com, and various other sites, but your agent will have access to the MLS (multiple service listing) in your area. Once you have established your search criteria, they can set you up for automatic emails, so you are notified immediately when new homes hit the market. They will also be able to provide you with more detailed information about the listings than you could find out on your own. They will be able to provide an expert opinion about how much the home is worth and what amount to offer on the home.
Your real estate agent will draft the offer and go over the contract with you before submitting it to the listing agent. Be sure to read the entire contract and do not hesitate to ask questions. Again, this a huge investment for you, always read and understand what you are signing. The offer will show the purchase price you are willing to pay, how much you are putting into escrow, how much money you are putting down vs how much you are financing. Also, be sure to ask about deadlines – there will be a financing contingency period and an inspection period. You and your agent will work with your lender to ensure they can have your loan approved in the amount of time listed in the agreement. You will also want to pay for a certified home inspector to inspect the home for any and all issues. This is usually a few hundred dollars and is money well spent. Your agent will know of several home inspectors and can book this for you before the inspection period time frame runs out. You will both receive the inspection report. Your agent can use this information to re-negotiate certain terms for you, whether that’s purchase price, a seller credit, or having the seller pay to fix certain issues in the home before closing. If there happens to be a major issue with the home, let’s say the roof is leaking and the house needs a $40,000 roof immediately. You could have a seller who is unwilling to help pay for the roof or replace it. Maybe the seller is willing to come down on the purchase price or offer a huge credit to you at closing. Worst-case scenario, you decide this is not the home for you and your agent can cancel the contract during the inspection period. You’re out a few hundred dollars for the inspection fee, but you will get your escrow money back and can continue to look at other homes that are a better fit for you.
Once you are under contract on a home, get past the inspection period with both parties in agreement on the contract terms, and you have the clear to close from the lender (meaning the underwriter has reviewed & approved your documents, lender is ready to close on your loan,) you will be ready for closing! You will receive a settlement statement from the title company. The settlement statement will include the price of the property along with various debits and credits, ultimately showing what amount is due from the borrower (you as the buyer) and due to the seller (seller’s net proceeds.) A good agent will review the settlement statement and make sure there aren’t any errors. As always, be sure to ask your agent questions if you do not understand something. Once all documents have been signed and the funds have been transferred, your agent will be able to hand you the keys to your new home! Congrats, you did it, you’re officially a homeowner!!
Real Estate Agent