Understanding the Home Buying Process

Purchasing a home is not the most complicated thing you may ever do in your life, but I certainly think that sometimes it may feel like it is.  Because I have been active in the real estate business for many years, what I may think is perfectly clear and understandable, may not always be so clear and understandable to a first time home buyer.

The information presented here is intended to provide you with an overview of the process.  No transaction is like another, and there will be differences in the processes with every transaction you are involved in.

Certainly, the first thing a home buyer should consider is their choice of a real estate professional.  I think it is very important that all parties to the transaction feel comfortable, and I also think it is important that all parties feel that they can communicate easily with one another.  Obtaining a personal referral from someone you know and trust is ALWAYS the easiest way to find a good and competent REALTOR®.In my experience, when customers are referred to me by a previous client, it always works out to be a good and rewarding experience for all concerned.

During the interview process, every REALTOR® you speak with should present you with an information document called Information About Brokerage Services.  The Texas Real Estate Commission provides this form, and Texas law requires all real estate licensees to provide the information to prospective buyers, tenants, sellers and landlords.

The intent of the form is to give the consumer information about the duties of the broker, depending on whom the broker represents.  A broker can represent the buyer/tenant or the seller/landlord.  The broker can also act as an intermediary with full disclosure and the written consent of each party to the transaction.

After you have interviewed prospective REALTORS® and you have chosen the REALTOR® to represent you in the transaction, the REALTOR® will likely ask you to sign a Residential Buyer/Tenant Representation Agreement. The purpose of this form is, among other things, to make clear the agency relationship of the broker.  Once you and the broker have agreed to the terms and conditions of the document, and signed the agreement, the broker is working for your best interests, and you have become the ?client? of the broker.  Previously, without this signed agreement, you were the ?customer? of the broker, and the broker was not working in your best interests.

Okay!  Now that all the initial paperwork has been taken care of, it is time to get down to the fun stuff!

Most likely, before you reach this point in the process, you have met with a mortgage broker or a representative of your bank or credit union, to determine the price range of the home you might want to purchase.It is very common in today?s real estate market that you be (at the very least) pre-qualified for a mortgage, but better yet that you be pre-approved for your mortgage loan.  When the time comes to present a contract offer on a property, the sellers of the property will want to have some assurances that the terms and conditions of the contract can be met by you, the purchaser.

Statistically speaking, a home buyer will walk through about a dozen homes over a period of about six weeks before they find the perfect home, and decide to enter into a purchase contract.  The contract will include, depending on the specific property, several addenda.  Some of the addenda that will be included with the contract will include, but not be limited to, a Seller?s Disclosure of Lead-Based Paint, Information About Property Insurance for a Buyer or Seller, an Intermediary Relationship Notice, and a Seller?s Disclosure Notice.

The Texas Real Estate Commission, the Texas Association of REALTORS® and the Austin Board of REALTORS® provide forms for all types of real estate transactions.  Some other helpful forms that you may see in the home buying process are Settlement Costs and Helpful Info, For Your Protection:Get a Home Inspection, and Inspector Information.

Once you and the seller have agreed upon the terms and conditions pertaining to the purchase of the property, you will most likely begin the process of obtaining inspections and completing your due diligence during the ?option period?.  I say ?most likely? because all contract offers are different.Generally speaking, you will have an option period, for which you have paid the seller a non-refundable, negotiable option fee.

The option fee you have paid to the seller, and the option period you have negotiated with the seller, gives you the right, at any time during the option period, to terminate the contract for any or no reason at all.If you choose to terminate the contract during the option period, you will forfeit the option fee, but any earnest money you provided with the contract should be returned to you.

During the option period, you will have time to step back from the negotiation process, and take a good deep breath.  You will most likely contact a qualified Home Inspector (licensed by the Texas Real Estate Commission), and with an inspector for wood-destroying insects.

Here is some useful information about what you can expect from the home inspection process.

What is the Inspectors Job?

The Inspector?s job is to educate the Buyer about the condition of the home.  To do this, the Inspector must analyze the homes structural and mechanical features well and interpret what they find.

What should a Buyer expect from the Home Inspector?

You can expect an Inspector in Texas to be licensed by the Texas Real Estate Commission as an Apprentice (beginner), Inspector (intermediate) or Professional Inspector (qualified to train others).

Should you be present at the Inspection?

An inspector should encourage the Buyer to be involved.  A Buyer who accompanies the Inspector learns more than one who does not.It is the Inspector?s job to educate the Buyer regarding the condition of the property, so do not be afraid to ask questions during the inspection.

What if the Inspector finds defects in the property?

You can expect to find some structural and mechanical defects in every property.  Even brand new homes will have some defects.  Do not be disappointed by a detailed inspection report.  You will be more fully informed about the condition of the property and can focus your attention on what is important.

Will the Inspector give me a ?green light? to purchase the home?

Do not expect the Inspector to ?bless? the purchase of the property, or to make decisions for you.  The inspector is licensed, not ordained!

Will the Inspector check everything?

Structural and mechanical components of the property will be inspected, and structural and mechanical defects found by the Inspector will be reported

What are some examples of structural and mechanical items?

• Grade and Drainage
• Roof Covering, Roof Structure and Attic
• Walls, Ceilings, Floors, Doors and Windows
• Fireplace and Chimney
• Porches, Decks and Carports
• Electrical (Service Entrance and Panels, Electrical Branch Circuits)
• HVAC (Heating, Venting and Air Conditioning)
• Plumbing (Water Supply, Drains, Wastes and Vents, Water Heater)
• Appliances (Stove, Oven, Disposers)

When do I receive the Inspection Report?

You may receive a full or abbreviated inspection report on the day of the Inspection.  You may also have a more comprehensive Inspection report faxed or e-mailed to you, with digital photos if appropriate, on the evening of the Inspection.  You should feel free to discuss the home?s condition with the Inspection during the Inspection, and study the actual report at your convenience.  You may certainly contact the Inspector at any time for further clarifications of the Inspection.

Once you have completed your due diligence, you will have a decision to make.  The decision will be whether to go forward with the transaction or to terminate the transaction.  Generally, there are three outcomes as a result of the inspections and due diligence:

I think I have made a great decision to purchase this property, and the inspection process just reinforced my decision.

• I am glad I had the inspection, because it uncovered many hidden defects, and I would not buy this house if it was the last house in the universe.
• I expected there would be some issues with the property, and the items uncovered by the inspector have given me the comfort I needed to go forward with the transaction.  The repair items uncovered by the inspector were somewhat more substantial than I expected, however, but I will go forward with the transaction assuming the seller will make some repairs that I feel are necessary.

If the hurdle of negotiating repairs is successful, you are well on the way to home-ownership!  All that is left to do is to arrange for insurance, get the mortgage loan completed, and call the movers!

Again, the scenarios in this example have been somewhat simplified, but if you deal with a good, competent REALTOR®, you should not have any problems that will cause you too much stress.  The purchase of a home is really nothing more than a natural progression of steps; one action leads to another in the process, and it terminates when you have the keys to your new home.

No matter who you decide to work with, make sure it is someone you can communicate easily with, someone you trust to ?do the right thing when no one is looking?, and someone who is competent and familiar with the market.