For all those new home buyers out there, here is a brief overview of the main steps in finding and purchasing a home. This overview is slanted towards Arizona homebuyers. The steps in other states may be different in various aspects of the transaction.
There are many issues that may come up in the process of finding and buying a home that are not covered here. This summary assumes a relatively straight-forward transaction.
How Much Can You Afford?
Your first move should be to contact a mortgage company to find out how much of a loan you may be qualified to get. This will set the upper end of what you can afford. This can be as simple as a phone discussion for a quick pre-qualification, followed by submitting additional documentation to become fully pre-approved.
Sellers will put more weight on offers that include a pre-approval letter. In Arizona, you should be pre-qualified at a minimum and submit a Loan Pre-Qualification Form with your offer if you are using the standard Arizona Association of Realtors (AAR) contract.
Searching for a Home
Of course, I highly recommend working with a Realtor as your buyer agent. Your Realtor should discuss the type of home you want, locations that you prefer, and your budget constraints based on your lender discussion.
Your Realtor can set up automated MLS searches to find homes that meet your criteria, and set up home tours to visit the homes you think may be possibilities. You can also use search capabilities such as the one on this website to browse for homes on your own.
Negotiate Price and Terms
OK, so now you’ve found the home of your dreams (or at least one you can afford), and are ready to make an offer. Your Realtor should review similar homes in the area that have sold recently to help determine an approximate market value. You then need to decide how aggressive you want to be with your offer. Is it a hot bank owned home that may get multiple offers? Then you may need to come in at or above the asking price.
Other factors, such as seller motivation or above market pricing, may indicate you can be more aggressive with your offer price. Perhaps they would assist with closing costs. Consider other terms that may make your offer attractive to the seller, such as the amount of earnest money or closing date. Do they want a long escrow to find another home, or do they want to close quickly?
You may need to go through a few rounds of counter offers to settle on terms.
Open Escrow, Deposit Earnest Money
Once the contract is signed by you and the seller, your Realtor will open escrow with a title company and deposit the earnest money check. A copy of the contract will be sent to your lender to begin loan processing.
Begin Inspections
The AAR contract has a standard clause allowing 10 days for any inspections you want to carry out. As with any contract clause, this can be negotiated for longer or shorter durations. The inspection period begins the day after the final contract is signed by both buyer and seller. It’s based on calender days, not business days. Weekends and holidays count.
You should receive a Seller Property Disclosure Statement (SPDS, pronounced “SPUDS”) from the seller. This document is filled out by the seller to itemize any problems they are aware of with the home.
Besides the typical general inspection done by a qualified inspector, you may want to consider additional detailed inspections by other experts, especially if you want cost estimates for repairs. This could include specific inspections of a fireplace, pool, roof, plumbing and sewer, and so on.
Inspection Results
Once you are done with inspections, you will consult with your Realtor to decide which, if any, items you want to have repaired by the seller. You will submit a Buyer Inspection Notice with Seller Response (BINSR) to formally serve notice that you are either OK with the the home as is, are requesting repairs, or are canceling the contract based on specified inspection items. If requesting repairs, the seller will have five days to respond. You will then have another 5 days to respond to the seller’s response. If the seller does not agree to repair any or all of the requested items, you can either cancel the contract or move forward with whatever items the seller has agreed to repair.
Complete Close of Escrow
In parallel with the inspections, your lender will be working to complete your loan commitment and associated documents for signature at closing. Your title company representative will schedule a time for you to meet and sign the loan documents.
After the lender provides funding, the title company will record the deed of trust. At that point, the home is officially yours and your Realtor will make arrangements with you to deliver the keys.
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