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Understanding the Process of Buying a Home

By Mark Karten on December 20, 2009

I hope that everyone who is part of the Northeast blizzard this weekend is warm, safe and sound. It looks like it's going to be an extreme winter. Las Vegas is having the opposite weather, with temperatures in the mid 60s - certainly not the norm, but we're not complaining.

It seems that most parents have read the book, "What to expect when you're expecting," which is a detailed guide to the process of pregnancy and birth. Today I thought I'd give you the equivalent when purchasing a property, particularly in Las Vegas.

Some folks think a Realtor's job is to send out listings and gain access to homes. I hope this helps shed some light on the value we provide. Caution: Results may vary based on the Realtor you choose for representation.

Understanding the Process of Buying a Home

1 - The first step is to determine whether you'll be paying cash or obtaining financing from a lender. For cash, you'll need to provide a statement from a financial institution showing your available funds with your name on the statement. If you're getting a loan, we have lenders you can pre-qualify with and ultimately be fully loan approved.

2 - The timeline is important to understand as well. Without complications, cash transactions can close in as little as 21 days. For loans, the norm is somewhere between 30-45 days.

3 - Next, we'll set up a search based on the criteria you're seeking in a home. Time is of the essence and when a new listing appears, it's very important that both you and your agent are available to see these homes quickly. We're available 7 days a week to show you homes of interest.

4 - Because most of the listings are bank-owned, you are buying the property as-is. If you go into a home with the mindset that you'll have to re-carpet and paint and buy some appliances, then you can better focus on the home's potential based on its floorplan and amenities in the community.

5 - Once you see a home that you're interested in, we will send you a list of recently sold comps (homes in the same neighborhood or very close by) and suggest the best price to offer based on these statistics. Although you may ask us to guess at what a good offering price is, we always use the actual sold comps to justify our suggestions.

6 - The homes are priced based on their current condition. Banks are now experts at pricing homes to elicit many offers. We advise that you submit your very best offer initially. Although many banks give us a second chance to offer our "highest and best" terms, it's not guaranteed.

7 - Although we give the bank a deadline to respond to our offer, most listing agents and banks disregard our request. In fact, the banks can take up to 30 days or longer to respond to an offer. Patience is key.

8 - When we write your offer, we'll request a close of escrow date. In a perfect world, we will close on or before this date. Unfortunately, when complications arise, the date will pass and we'll have to extend the date to close. It's important to be flexible and we'll guide you every step of the way to manage your expectations as to when the home will close and record.

9 - Getting an offer accepted is a game of hurry up and wait. Some banks accept the first offer they receive. Most, however, will wait 5-7 days for multiple offers. If the home is owned by Fannie Mae or HUD, they will only accepted owner-occupied offers for the first 15 days a home is listed.

10 - You can expect that the bank will tell us there are multiple offers and want us to submit our highest and best offer. They will usually give us until 5pm to respond. This can be quite stressful and you may be unreachable during this time period. Forms must be signed and acknowledged to keep your offer "in play," which is why we use DocuSign (an electronic signing service) to quickly comply with the bank's request.

11 - With inventory low and demand high, cash offers have the best chance for acceptance. The average home currently has an accepted offer within 5 days of listing. There are other things you can do to increase your chances of a winning offer. The bank is only looking at the bottom line of what they'll "net" from your offer. If you ask for the bank to pay for closing costs or a home warranty, this decreases your offer. Our goal is to submit the "cleanest offer" which includes a price in line with current sold comps and the least amount of concessions.

12 - It may still take a few weeks to find out if we have the winning offer. If we do, the listing agent will either give us a verbal counter offer with the bank's terms or send a counter in writing. Either way, we have 24 hours to accept. Sometimes the terms are not reasonable and we'll advise you on what's normal and it will be up to you to decide whether to accept the counter offer.

13 - Once we've agreed to terms, you'll have 24 hours to open escrow. The fastest way is to have the money wired from your bank account and we'll provide you with all the necessary documentation.

14 - Now the due diligence period begins. We normally have 7 days to perform a home inspection. This will cost anywhere from $219 for a condo to $300 for an average size home (pool and spa inspections are additional). I cannot stress how important this step of the process is. Doing a visual inspection of the home yourself is insufficient and a recipe for disaster. The home inspector checks the structural integrity, plumbing, electrical, hot water heater, roof, A/C and attic. They are trained to notice old damage, especially that relating to potential mold concerns. Most importantly, they know current building codes and guildlines to make you aware of any potential issues. We try to schedule the home inspection within 24 hours of acceptance of the offer. Remember, you're buying the home as-is. The report you receive is to inform you of what should be addressed within the home. If the home is in major disrepair or has items you are not willing to pay for yourself, you can cancel the transaction without jeopardizing your earnest money. Unless the repairs include items that prevent your lender from approving the loan (A/C or heat inoperable, no plumbing, etc.), the seller may not repair those issues.

15 - Most homes are part of a homeowners association (HOA). You will be provided an HOA resale package for your review of the rules, regulations and restrictions you'll be expeced to comply with in the community. You have 5 days to review the package. If there is something you can't live with, we can cancel the transaction and you'll receive your earnest money back. By law, the seller must pay for the package and provide it to you. However, this isn't always the case and you may be asked to pay for the package upfront ($150-$250.) You will be reimbursed this money at close of escrow. If you decide not to continue the purchase, you may not receive this money back. We will do everything in our power to get your money refunded.

16 - OK, we've made it through the first hurdles. The inspection looks good and you can live with not painting your house purple (without the HOA's permission.) Now we need to deal with your lender, the appraiser and the title company.

17 - The rules of mortgage lending have changed dramatically and the criteria for loan approval keeps getting harder and harder. If you're in the loan process, do not buy anything on credit. This includes furniture, cars, putting a deposit down for carpet, etc. Don't open any new lines of credit either. A small change in your credit could ruin your ability for full loan approval.

18 - The bank will send an appraiser to complete a report on the value of the home (not for cash buyers.) If the home does not appraise for value (you agreed to pay $200,000 but the appraiser says it's only worth $175,000), one of two things will happen. The bank will either reduce the price of the home or ask you to pay the difference. If you don't agree, you can cancel the sale without losing your earnest money deposit. In our experience, the bank reduces the price of the home every time.

19 - Here comes the hardest part of the transaction - getting clear title. When a home is bank-owned, there are lots of loose ends to tie up. The HOA fees are most likely delinquent and title must receive demands from the HOA and any unpaid utilities so that the seller can pay these in full before closing. Obtaining the demands are time-consuming and can be very frustrating. It takes anywhere from 2 weeks to a month to get all the demands in. In some cases, the deed to the home is not in the seller's name. The delay can be substantial and unfortunately this does happen, although infrequently. We have had cases where the closing is delayed two months due to deed issues. The good news is that we usually know if this is a problem right at the beginning of the transaction and you can decide whether to continue with the sale or not.

20 - Now we're ready to close. Your loan is approved and the lender sends the paperwork (known as "docs") to title. Title figures the file by computing the costs to close the home based on prorating the taxes due and all other settlement costs. This usually takes a day and we will receive a estimated HUD statement. We will review this for accuracy and send you a copy also. We schedule a time for you to go to title to sign everything and we will be with you to answer any questions along the way. If you are paying cash, you can sign all paperwork by fax and not be present for the closing.

21 - Due to recent changes in the law, you will have to wire transfer the remaining balance due to the title company. Based on the time the money is received from you and the lender, the home will either record the same day or the following day (weekends and holidays not included.)

22 - Until the home records, we cannot release the keys to your new home. For this reason, we suggest you do not schedule any deliveries until we have confirmation of recording.

23 - CONGRATULATIONS, you are a now a new homeowner! Your first step is to change the utilities into your name immediately. We will provide you with all the necessary contact numbers. It is also very important to change the locks in the home right away. Many people have had access to the keys and you want peace of mind as to your security.

24 - Let us help you. The Karten Group offers our free concierge service and we'll coordinate everything for you to help with your move. From the locksmith to painters, handymen, appliance deliveries, carpet installation and cleaning, we'll be there to let everyone in and oversee the process for you.

I hope this helps to understand what goes into buying a home and how you benefit from our support and services.

Have a great week and if you have any specific questions I can answer for you, please don't hesitate to contact me directly!

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