The Ultimate Guide to Navigating the Home Buying Process

Whether you’re thinking of purchasing your very first home or simply need a refresher on how the process works, this is the blog for you. It’s a complicated process but as an experienced Realtor I will walk you through the process from the first meeting with a realtor to closing day. By the end of reading this, you will have a strong understanding of what to expect and how a real estate agent can guide you through the process.

Prepare for the Meeting

If you’re reading this, chances are you’ve probably been scrolling on Zillow lately, dreaming of the big home purchase.

But, before you even see a house in person you need to make sure this is a sound financial move for you and that it’s a good time for you to even enter the market. An experienced real estate agent will help you make those decisions and eventually help you create a home buying strategy that makes most sense for you.

So, start the process as early as possible. If you’ve started the online home scroll, and you’ve had even just a thought of buying a home, call an agent. Maybe it’s someone who a friend or family member referred you to, or someone you researched and trust online. Either way, tell them a little bit about your goals and timeline. Then, expect them to setup a time to meet for a consultation.

Talk to a Lender

Before the meeting, the agent you’re thinking of working with will likely suggest that you get in touch with a lender if you plan on getting a mortgage. You’ll want to fill out a mortgage application to give you a good idea of just how much home you can afford. It’s ideal to get this done  before your consultation with a real estate agent, and lenders can typically get your application processed in 24-48 hours. Sometimes faster if necessary. And if you don’t get this done before the meeting, no big deal, but it really helps hone in on what kind of home you will be going after.

Good agents have a list of local lenders they trust to help their clients get to the closing table. And this list is a great place to start to get financing. Good lenders have helped me keep deals together countless times. They are a very important piece of this puzzle, especially once you find a home and we are all working together to get the deal done.

So, when you call these lenders they will ask for lots of financial documents from you, including tax returns from recent years, bank statements, proof of income. If you have a family member helping you with a downpayment they may need a gift letter from that family member.

They will use those documents and run a credit check to better understand your financial situation and just how much banks will be willing to lend you. Then, good lenders will setup a time to talk about all the associated costs, from closing costs to downpayment amounts.

How Much Will This Actually Cost?

There are many different ways to finance a home purchase, and I certainly don’t have time to go into all of them today. That’s a great question for the lender you call.

But, know that you do not need 20% down to purchase a home. Some first-time home buyers put down as little as 3% of the home purchase. The average downpayment is roughly 15% of the home price.

However, that’s just one cost.

If you are getting a mortgage, your lender will charge a fee to process and manage your loan. If your loan requires mortgage insurance because you’re putting less than 20% down, that will add to your closing costs. The title and closing company will charge for their services, ensuring you take legal possession of the home. There could be utility transfer fees, home insurance fees, HOA transfer fees and of course property taxes due at closing. And of course your real estate agent will need to be paid. More on how that works in a few minutes.

Many of these costs are negotiable with the seller. So it’s unlikely ALL of these fees will need to be paid by you. Typically, in Colorado, I see closing costs between 1 and 3 percent of the purchase price. And I recommend having 5% saved in addition to your downpayment. That will be more than enough to handle your closing costs and likely leave you with plenty of cash on hand after you get the keys to your next home.

All of that to say, ask your lender about their recommendations for closing costs as every transaction and each individual’s financial approach to home buying is a bit different.

The First Meeting

Ok, so you’ve taken some big first steps. You’ve contacted an agent. You’ve hopefully submitted your information to a lender and ideally you have a brand new mortgage pre-approval. That’s a letter from the lender your real estate agent will send to a seller when the time comes, showing that you are, indeed, financially prepared to make this purchase.

Now the exciting stuff begins.

I can’t speak for every real estate agent, but this meeting is one of the most important pieces of your home buying puzzle to me. It will save you so much time and effor on this journey.

At this meeting we will discuss all of the ways I will help you find a home. Zillow and the MLS are not the only place good real estate agents find homes, there are plenty of “off-market” properties we can help you target as well. In fact, I have an entire off-market strategy for all of my buyers that I will tell you about in our meeting.

We will spend lots of time digging into your timeline. Assuming it takes a standard 30 days from getting your offer accepted to closing, how much time do we actually have to find a home and get your offer accepted?

We will also talk about what you want in a home and WHY. Not just style, number of bedrooms and bathrooms. We will also talk about location and neighborhoods that are right for you. Realtors are experts at ensuring where you live matches your needs and lifestyle.

At this point I will get you setup on an automated home search, so that you never miss a home that matches your criteria. It’ll hit your email inbox daily.

And once we’ve clarified your timeline, location and home type, we will discuss how offers are written, strategies we may employ to help you get what you want in the deal and we will take a broad look at the market so you understand how much homes you want are going for.

Contracts and Agent Fees

Finally, we will talk paperwork. In Colorado, all contracts are approved by a state board to protect you, the consumer.

You will get a copy of the standard home purchase contract that Realtors will use to write an offer on a home. Don’t worry, we will go over this in-depth when we actually write an offer together. At this time in the meeting you will also review an agreement between you and me, your real estate agent.

This buyer-agency agreement explains what my fiduciary responsibilities will be to you during the home buying period. It also outlines how I, the realtor gets paid. Remember, real estate agents don’t get paid unless you actually close on a home.

In Colorado, a vast majority of the time, sellers will compensate the buyer agent for helping navigate the deal. In the rare case that they’re not offering to pay a buyer’s agent fee, the buyer would be responsible for paying their agent’s commission if they want to pursue that deal. It’s one of the reasons I suggest have 5% saved for closing costs and fees, just in case you run into this issue.

Once you sign an agreement with your agent, you can start seeing houses!

Touring Houses

Now you’re setup on the MLS portal, sending you ideal homes when they hit the market. Your agent has hopefully launched an off-market home finding mission too. And once you are presented with homes you want to go see, your agent will setup a tour.

You may only have 1 or 2 homes you want to see at a time. You may have more. But hopefully the work you did in the buyer consultation will have narrowed things down so much that you’re not looking at more than 10-12 houses before getting an offer accepted. Most buyers I work with for instance see 7 or 8. Some only ever see 1 or 2. It depends on you and how competitive it is to get the home you want.

But if you see more than 12 homes and you haven’t found the one, you may want to go back to the drawing board and dial in your wants and needs.

Your agent will prepare for the showings by making phone calls to listing agents and analyzing each property to get as much information as possible about the price and condition of the home.

Sometimes, I drive clients to the showings, especially if they’re from out of town. But most of my buyers will drive themselves, it’s easier for them to get themselves home or run to their next appointment or event from our showings.

Showings are typically 15 to 30 minutes. If it’s a larger or more unique property, it’ll be more like 45 minutes. Here’s what you should look for at every showing:

-Online, professional pictures are always better than in person, are the aesthetics and condition of the home what you expected and desire?

-How does the home live? We know the square footage going in, but are the rooms and layout suitable for you and your family’s needs?

-This is a big one for me. As tempting as it is to focus on the beautiful furniture staging, or getting fixated on a seller’s expansive doll collection, focus on the house itself. None of that stuff will be there if and when you move in. Try and see your personal affects and furniture in the space.

-While we’re getting a feel for the home, I will look out for potential red flags. Foundation cracking, aging furnaces, worn out roofs, failing window seals. These are items I know will come up on inspection, and if I spot them, I’ll point them out to you asap so we can address it before writing an offer.

-If you really like the home, save yourself a few minutes at the very end to sit down in the living room or kitchen. This may sound a bit hokey, but get a feel for how sitting in the home feels to you. Is this the energy you’ve been looking for. Does it excite you?

And finally, if you really think you may be writing an offer, and you don’t know the neighborhood, go explore. Have your agent take you to the local coffee shop. Drive to the closest schools. Go have lunch at a local deli. Make sure the neighborhood is right for you.

How do you you know that the home you just saw is “THE ONE?” I share with my clients the 85 percent rule. Even people who build their own custom homes don’t get 100% of what they want. And in a market with limited inventory, finding a 100% home is nearly impossible. But, given all of the parameters we set in our initial meeting, if this home checks 85% of your wants and needs, it’s a good sign to give it all you got and write a strong offer.

Writing Offers

So, you found the one. How are we going to make sure you don’t miss a chance to buy this home OR overpay for the home.

First, if you tell me you love a home, I’m immediately making phone calls and digging into the data.

Call one - is to the listing agent to learn as much as possible. How many offers does the seller have and what is the seller looking for in a deal. We need to know any information that may give us an edge, especially if we’re competing with other buyers.

Then I will research the property and comparable sales to determine if the home has been priced properly and how much would be too much to pay given the current market environment and your financial situation and goals.

Then, I’m calling your lender, if you’re getting a mortgage. I will have them give us a current pre-approval letter to share with the seller and I will also have that lender call the listing agent on your behalf, explaining that you are indeed financially capable of getting the deal closed.

Now, before I move onto the next section, know that there are MANY different ways to write an offer. Every situation, every deal, every seller and every buyer are different. Depending on the specific deal, there are a number of different tactics we can use to help you beat other offers. Or, we may find ourselves in a situation where we are asking the seller for some concessions to lower your interest rate and monthly mortgage payment.

I simply don’t have the time to go into all of these strategies in this video. But if we work together, I’ll be going over all of your options during our consultation.

Title and Earnest Money

Congratulations! After I’ve negotiated on your behalf, and potentially gone through some amendments to your original offer, the seller has signed accepted. You are UNDER CONTRACT!

This is a big hurdle but we’re far from closing. What happens next?

First, you will need to deposit earnest money to the title company that will be handling the closing and creating your title insurance policy. This earnest money is typically 1% of the purchase price in Colorado. Typically you will need to deliver this within a few days of going under contract.

If the deal falls apart and you follow the acceptable reasons and timelines to back out of the contract, you will be refunded this money. If you back out for reasons not specified in the contract, or for instance back out because of an appraisal issue after the appraisal deadline in the contract, you may not see the money again. Don’t worry, I will protect you from that as your agent, keeping close track of deadlines.

And what is title insurance? Title companies do lots of due diligence to make sure nobody besides the current owner can claim some sort of ownership stake in the home. And if there is anything that stands in the way of you taking ownership, like a lien or a mortgage, that it’s cleared up before closing. If those encumbrances aren’t caught and someone comes forward after you’ve moved in claiming they have an ownership interest, you will have a title insurance policy in place that protects you from losses.

Inspection

This is one of the most important steps in making sure you want to go through with this home purchase. In the contract with the seller, we’ve outlined some important dates that we agree to abide by including getting a home inspection and making repair requests of the seller.

Within 24 hours of going under contract, you the buyer will need to call a home inspection company to setup a professional home inspection. These inspections start at about $500 for smaller homes and increase with the size of the home. There are typically add on services that I highly recommend in most cases including having your sewer line looked at with a camera and testing for radon gasses.

On inspection day, we will typically meet with the inspector at the home. This is a great time to see the home again, maybe start taking some measurements for furniture. And most importantly, it’s a great time to hear straight from the pros, just what kind of condition your home is in.

This can be overwhelming for some buyers because home inspectors are going to point out every little item they see, generating a report that’s dozens of pages long. What we’re really listening for are big ticket, health and safety issues. Do we see foundation issues? Are there high radon levels in the basement? Is the sewer line cracking? Is the furnace on its last leg? Is the roof 50 years old and peeling away from the home?

If so, don’t freak out. Very rarely is a home in such bad shape that we cannot move forward. More often than not, a seller will agree to remedy the problem if it’s a big issue. Smaller stuff often becomes a negotiation and I’ll tell you all about how we handle those items when we get to this stage.

Just know, that it’s my goal to make sure you feel comfortable and happy with the condition of the home before moving forward.

Appraisal and Financing

The next and final hurdles are appraisal and financing. If you’re getting a mortgage and not paying cash, your lender will be an important key to getting to closing.

After going under contract they may ask you for additional paperwork. Get this to them as soon as possible. They are working hard to finalize all of your numbers and paperwork to send to an underwriter who will ultimately approve your loan. And there are deadlines in the contract that we need to meet when it comes to financing.

Your lender will also be ordering an appraisal. The bank giving you this loan wants to make sure the home is worth what you wrote the offer for. A professional appraiser will go out to the home and run some numbers. If you wrote an offer for $820,000 but the appraiser says it’s only worth $800k, we will need to come to some sort of agreement with the seller. If this was a competitive offer situation, they likely won’t come down on price, so you may have to come up with the $20,000 difference in this case or back out of the deal. Yes, in that case you would get your earnest money back.

Once the appraisal is complete and your loan has been approved, you’re ready to sign the paperwork and get your keys.

Closing Day

2 to 4 weeks ago you got your offer accepted. Today, is closing day. Finally.

Before we head to the title office to sign paperwork we want to stop by the home one more time. We will briefly go through the home to make sure any inspection requests we agreed to with the seller have been completed. We will make sure the home is otherwise in the same shape we last saw it in — and clean.

Then, we head to the title office and sign those documents. Takes 30 minutes to an hour, and then I will give you the keys to your new home!

Our Relationship

Our relationship does not end there. In fact, you’ll hear from me a few times after closing to make sure everything is going ok. And I will check in every year to give you an annual real estate review, updating you on the market and your home’s value.

Other than that, it’s time for you to do the heavy lifting of moving in!

I hope this blog gave you an overview of what the process is like. As I mentioned earlier, every buyer and every deal is different so if you have specific questions please don’t hesitate to reach out. Of course, if you’re in Colorado, I would love to work with you as your agent. So please connect so we can setup your buyer consultation.