Obtain a current pre-approval letter or proof-of-funds.
Before you begin actually visiting homes with a Realtor, you should be certain how much home you can afford. There is no point wasting your time looking at homes you cannot afford. If you do not have a pre-approval letter in-hand, you will realistically not be able to make an offer on a home, in which case you are not quite ready to be viewing homes in person. Speak to your lender and ask him/her for a pre-approval letter. If you don’t have a lender, contact me and I will provide you with some trusted contacts.
Shop for homes with your Buyer’s Agent.
A Realtor who is acting as your Buyer’s Agent owes his/her complete fiduciary responsibility to YOU, and therefore can provide you with information and assistance that the agent representing the seller cannot. And best of all, it doesn’t cost you a dime. If your Realtor has a good website with full MLS property search capabilities, you can browse homes initially at your leisure from the comfort of your own home. When you’re truly ready to buy, your Realtor can help you narrow down your choices, set up all of your appointments, and provide you with valuable information about the local market and area.
Find out from your Buyer’s Agent what the home is REALLY worth.
One of the most important services a Buyer’s Agent can provide is information that will help you decide the REAL value of the homes you like. A seller can ask whatever (s)he wants for a home and the Seller’s Agent is obligated to do what the seller requests. But a good Buyer’s Agent knows the market and will provide you with a detailed report showing the actual sale prices of similar properties that have recently sold. This will help you arrive at the best offer price for the home.
Make an offer and negotiate final price & terms.
Once you’ve decided on an offer price, your Realtor (Buyer’s Agent) will prepare all the paperwork, have you sign it, and submit it to the Seller’s Agent, along with a good faith deposit, which is typically $500-$1000. Usually, there is some back and forth that takes place before both parties agree to a final price and terms. Your Buyer’s Agent will assist you throughout this process until you and the seller have come to an agreement (or not). If an agreement is reached, many wheels are suddenly set in motion, as described below. If you could not come to an agreement, you take back your good faith deposit and resume house shopping with your Realtor!
Apply for a mortgage (unless paying cash).
Once your offer is accepted, and assuming you are not paying cash for the home, you should submit a completed application for your mortgage. It will take a while for the bank to collect ALL the information they need from you, and the sooner you begin this process, the better. Plus, the offer you submitted most likely has a date by which you must have applied for your mortgage. Be sure to read all dates very carefully and be sure to comply with each deadline! A good Buyer’s Agent will keep track of all this for you to ensure that you do not inadvertently lose your deposit.
Conduct your inspections.
Next, you must immediately schedule your home inspection and any other inspections you requested (such as termite, lead paint, radon, etc.) A buyer typically has about 2 weeks to complete these inspections from the acceptance of the offer. If you are happy with the results of the inspection, you continue with the process. If you are not, you typically can either back out of the deal and get your deposit back, or you can try to renegotiate with the seller to address any inspection issues that concern you. For example, if you learned the roof is at the end of its life and you had no way of knowing this prior to the inspection, you may want to negotiate a lower price to reflect the condition of the roof.
Execute a Purchase & Sale Agreement.
If you are proceeding with the sale after all inspections are complete, you will typically then sign a Purchase & Sale Agreement (aka P&S). This is a longer and more detailed contract than the initial offer form that spells out all of the terms of the sale. It is typically prepared by the seller’s attorney and you should have your own attorney review it and make any necessary changes on your behalf. Your Buyer’s Agent can assist you with selecting a reputable Cape Cod real estate attorney if you do not already have one. A buyer typically makes a second and much larger deposit at this time. This deposit is completely negotiable but is typically at least 5% of the sale price. 10% is more common. ALL deposits are typically and completely refunded if the buyer is unable to obtain a mortgage according to the terms of the P&S.
Bank conducts appraisal.
If you are applying for a mortgage, the bank will conduct an appraisal to be sure they agree with you regarding the value of the home. Since they are loaning you the money to buy it, they want to be sure it is a sound investment for them to make. This is actually very good for you, since it helps to reassure you that you are not overpaying for the home. In some cases, it might reveal that you are getting a very good deal — at least in the bank’s eyes.
Wait for final loan commitment.
It typically takes 4-6 weeks to receive your loan commitment from the moment you submit a completed application. During this time, you should stay in touch with your lender and be sure you are providing them everything they requested in the most timely manner possible. This will help you get your commitment as soon as possible. The seller will be very anxious for you to receive your commitment so that (s)he can be sure the sale is going through.
Confirm passing Title V and Smoke inspections with Seller.
While you are waiting on your mortgage commitment and planning paint colors for your new home, the Seller will be busy ensuring that the septic system passes Massachusetts Title V regulations and that the smoke and carbon monoxide detectors are up to code. Both of these are typically required in order for the home to be sold. Your Realtor can provide you with more information about each of these.
Obtain homeowner’s insurance (& flood insurance, if required/desired).
At least 2 weeks before the scheduled closing, you should contact an insurance company to obtain a homeowner’s policy for your new home. You will not be allowed to close on your mortgage without it. If the property is in a flood zone, flood insurance may also be required. Insurance on the Cape can be tricky, so I recommend you contact John Curley at Dowling and O’Neil, one of the Cape’s premier property and casualty insurance agencies. He can be reached via email at [email protected] or by phone at (508) 957-4235.
Close on your new home!
By the time your actual closing date arrives, nearly everything has already been done, except for final mortgage signatures, final payment, and transfer of the deed! The closing attorney (also called the bank’s attorney and sometimes, yet erroneously, called the buyer’s attorney) will contact you a couple of days before the closing to let you know exactly what funds you — the buyer — need to bring to the closing. The closing typically takes place either at the Barnstable Registry of Deeds or in the closing attorney’s office. But this differs from closing to closing. The buyer leaves the closing table with the keys to the home and the seller leaves with a big fat check!
And VOILA — a new Cape Cod Homeowner is born! I, for one, have never been so happy and have never looked back.
Author’s Disclaimer: This post is intended to provide a general overview of the home buying process. However every transaction can have its own special situations or circumstances and might not be covered in this post. This post is intended for educational use only. The author does not accept responsibility for any misinterpretation or misapplication of the information contained in this post. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL PROBLEMS CONSULT LEGAL COUNSEL.