Finding the right home to buy can be a challenging prospect, but knowing what to expect can make the process easier. You can (1) buy through agents representing the seller and/or use a buyer’s broker, (2) buy directly from an owner, or (3) shop the auctions and foreclosure sales. Once you find the house you want, you must make an offer, check for clear title to the property, and arrange for a home inspection. And after the closing, you can finally move into your new home. You can read Buying a Home – Part 2 here.
What to do once you find the right house
Once you find the house you want, it’s time to make an offer. Have your attorney review your offer to purchase before you submit it to the seller. If accepted, it becomes a binding agreement between you and the seller. It’s important to make sure that everything you want included in the deal is contained in the initial contract, because once it is signed by all parties, it may be too late to add or change anything.
Tip: In some states, the contract simply contains an accepted offer to purchase a particular property at a specified price. Once the purchase price has been accepted, other contract terms are negotiated in the purchase and sale agreement.
Your offer may not be accepted. If the seller wants to negotiate, a counteroffer is made. If the counteroffer is not acceptable, you can allow it to expire or make another offer. Negotiation can go on for weeks, although an agreement is typically reached by the second or third try.
Be sure you’re getting clear title to the house
Before closing, an attorney or a title specialist should conduct a title examination. The purpose of the title examination is to discover any problems (such as outstanding liens or judgments against the property, unpaid taxes, ownership disputes, etc.) that might prevent you from getting clear title to the home. Generally, title problems can be cleared up before the closing or immediately after by applying some of the sale proceeds to clear encumbrances. But in some cases, severe title problems can delay the closing or may even cause you to consider voiding your contract with the seller. In order to preserve your option to void the contract, make sure a guarantee-of-clear-title clause is included in the purchase and sale agreement.
You should also consider purchasing an owner’s title insurance policy. Before a title insurance policy is issued, a title report is prepared based on a search of public records. This report gives a description of the property, along with any title defects, liens, or encumbrances discovered in the course of the title search. After reviewing the report, the title insurance company issues an owner’s title insurance policy, which protects you against additional title defects that were not discovered in the title search (e.g., forged signatures). The cost of this insurance can vary significantly from state to state and among insurance companies, and you will generally pay a one-time premium.
Tip: Owner’s title insurance coverage should not be confused with lender’s title insurance, which is required by most mortgage lenders. Lender’s title insurance simply protects the lender’s lien against the property, making the mortgage more attractive on the secondary market. Lender’s title insurance does not protect your investment in the property. Thus, you should purchase owner’s title insurance in addition to the required lender’s title insurance.
Be sure the house is in good condition
Since a house is such a major investment, you should learn as much as possible about the condition of a house before you buy it. A professional home inspection will uncover both positive and negative aspects of the home.
After conducting the inspection, the inspector will create a report explaining his or her findings. If the inspector’s report indicates that the house needs minor or moderate repairs, such as a new roof or water heater, the seller may lower the price of the home to cover the cost of making the repairs. The seller may also agree to make the repairs before you buy the house. If major flaws are uncovered in the course of the inspection, you may choose not to buy the home. As long as your purchase offer is contingent upon a satisfactory inspection and you act within the time period specified, you should have no trouble walking away from the house and receiving a full refund of your deposit if the inspection uncovers any major problems.
When does the house actually become yours?
The house becomes yours after the closing (also called settlement, title closing, or closing of escrow). The purpose of the closing is to transfer ownership of the property from the previous owner to you. At the closing, you will fill out the required paperwork, which is necessary to make the transfer of ownership official. Closing can be an arduous process, but once it’s over, you’ll be the proud new owner of a home!