Real Estate
Most Americans consider the task of buying and selling real property to be daunting in nature. After all, purchasing a new home involves a major financial investment, while selling a piece of real estate often consumes much time and energy. Timing and preparation are critical when choosing to buy or sell a home. Before searching for a new home or putting a home up for sale, consumers should familiarize themselves with the basic steps involved in these transactions. What follows is a checklist that will provide guidance on the real estate purchase and sale process:
The procedure for home buying generally consists of the following steps:
1. Determining Needs And Setting A Budget
Home seekers should first ask themselves (1) what type of home they are interested in purchasing and (2) how much they are willing and able to pay in monthly installments.
2. Organizing Finances
Consumers should see to it that all their bills are paid timely and in full, for at least the one-year period preceding the contemplated home purchase. They should also request a copy of their credit reports to ascertain the accuracy of the recorded financial history therein. These reports play a pivotal role in obtaining mortgage approval and in determining the loan terms and interest rate that a creditor would offer.
3. Hiring A Real Estate Agent
Prospective home buyers can either work with a realtor or deal directly with listing agents. A real estate agent represents sellers, buyers, or both parties. Before hiring a realtor, one should verify that the individual is registered with the state's real estate licensing entity, and that no complaints have been filed against him or her. Real estate agents can furnish information on real estate trends, the real estate market, and different financing plans. By signing a buyer's broker agreement, a client authorizes the agent to search homes for sale by owner, foreclosures as well as the Multiple Listing Service list.
4. Choosing A Mortgage Lender And Obtaining Pre-Approval
Selecting the right lender and home mortgage loan is imperative for successful home-buying. A mortgage lender will assist borrowers in examining their loan options and finding the program that best corresponds to their financial situation and needs. Borrowers should then obtain pre-approval for the mortgage loan. This occurs once the creditor has reviewed the applicant's financial and credit statement and concluded that he or she is eligible for a specific home loan amount through one or more mortgage programs.
5. Obtaining The Funds
Borrowers will then submit their mortgage application and make a down payment. Mortgages with a 5 percent down payment are becoming commonplace. Two real estate trends that have emerged in recent years have been 1) no-money-down programs and 2) programs underwriting closing costs. Upon submission of the application fee, the mortgage company must provide its client with an estimate of the closing costs, which include such items as title insurance, home inspection, appraisal fee and attorney's fees). It will also arrange for a home appraisal, which will determine the real estate's market value and may affect whether the loan funds are granted.
6. Drafting The Contract
The buyer will then write up a contract, with or without the assistance of his agent or attorney. The real estate agent will submit the offer to the owner or his or her representative, who in turn may choose to accept the offer, repudiate it, or present a counter-offer. The buyer's contract should contain contingencies, such as (1) completion of an inspection and any necessary repairs, (2) the acquisition of good title by the seller, (3) the lack of patent or latent defects, (4) approval of the mortgage, and/or (5) compliance with local zoning laws. The closing date, also negotiable, must be set forth in the contract.
7. Closing
At the closing, both the buyer and seller sign the requisite papers to complete the transaction and transfer title of the home to the purchaser. At this time, the buyer also obtains home insurance. The seller is paid, and the buyer receives the keys to the home.
To sell real estate, homeowners should follow the following standard steps:
I. Evaluate The Real Estate Market And Their Reasons To Sell
II. Determine The Property's Fair Market Value
Real estate agents will typically help their clients assess their house's worth. Homeowners can go a step beyond by ordering an appraisal.
III. Estimate Selling Costs
The following selling costs should be calculated by prospective sellers: · Closing agent, attorney and other professional fees · Real estate commission · Advertising costs · Inspection and survey fees · Excise tax
IV. Perform The Needed Repairs
To improve resale value, sellers should check that repairs to the following items and structures have been made: · Lighting fixtures · Flooring · Ventilation and heating systems · Plumbing fixtures · Indoor and outdoor paint · Drainage systems · Windows and doors · Roof · Watering system · Walkway and driveway
V. Prepare The Home For Display
Before showing their home to potential buyers, sellers should spruce up the property by making any necessary aesthetic improvements.
VI. Price The Home
Sellers should fix a realistic price for the property. Before settling on a price, they should 1) find out the sales prices of similar homes, 2) obtain a home appraisal and 3) determine whether it's a seller's or buyer's market.
VII. Market The Home
Next, sellers should obtain the purchase contract forms and set forth their contractual terms and contingencies. They can advertise their property via print or online listings and "for sale" signs. They may provide a walk-through of their home or open houses.
VIII. Negotiate An Offer
It is advisable that sellers only sign the contract after their attorney reviews it. They will then sign the purchase contract with the buyer.
IX. Closing
To close the sale, sellers will have to perform a number of actions, including the following:
- Select an attorney or escrow company or lawyer to carry out the closing
- Transmit the disclosure documents to the purchaser.
- Complete requisite inspections.
- Obtain a loan commitment letter from the purchaser.
- Receive the title report.
- Satisfy all legal duties and contingencies.
- Sign escrow directions.
- Prepare to repay the existing mortgage(s).
- Pay all closing fees.