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The Home Buying Process
Beginnings
The first person involved in the purchase of your new home is a real estate agent. The agent is the person who will help you choose the property that satisfies your needs and desires and fits your budget. This person is the "Selling Agent". The selling agent may represent you, the seller, or in some cases, neither party. When you first meet the selling agent, they should show you the State of Maryland "Agency Disclosure Form" which simply outlines the various types of agency relationships the agent can offer.
If you choose to have the agent represent you as a "Buyer Agent", you must enter into a written agreement with the agent wherein the agent agrees to work for you and be responsible to you, and you elect not to work with any other agent. As a Buyer Agent, the agent can give you advice regarding the transaction, and if you authorize them to do so, they can negotiate on your behalf. If you work with a Buyer Agent and you become interested in a house listed for sale with that agent's company, the agent will become a "Dual Agent". As a Dual Agent, the agent no longer owes a duty just to you, but also to the seller. The agent will still be a terrific help to you in purchasing the home, but they can no longer disclose to you private information about the seller such as the seller's willingness to sell for less. Similarly, the agent will not disclose to the seller information about you, such as your willingness to pay more for the house than you state in your initial offer. If you engage a Buyer Agent, the agent will also have you sign the State "Dual Agency" form authorizing the agent to act as a dual agent with you on any properties listed by their company.
If you choose not to engage the agent as a Buyer Agent, the agent will work with you as a"Cooperating Agent". Cooperating agents represent the seller, but like all types of agency they have a legal obligation to treat you fairly and honestly. Like the Buyer Agent, they can show you any home that is on the market through the Multiple Listing Service, help you qualify for a loan, write the contract for that home, and provide you with numerous other services. The seller typically pays the agents' commissions, so these services cost you nothing at all! The selling agent will ask you some basic questions about your finances in order to help you determine the loan amount for which you may qualify and therefore the price of home you can purchase. The agent will also ask you questions about your preferences in a home, such as the number of bedrooms and bathrooms, size of yard, etc. This will help the agent narrow down the number of houses you will inspect, and enable them to show you homes that may interest you without wasting your time.
Loan Process
One of the most important people you will meet during the home buying process will be your loan officer. This is the person who will take your loan application and work to get your loan approved. Like the real estate agents, the loan officer does not get paid until you settle on your home. When shopping for a lender, do not look only at rates or points; ask about the lender's reputation. Remember, without the loan, you will not be able to purchase this house. The real estate agent can be a great resource by recommending a loan officer with whom they have had successful transactions. You will also get to know the loan processor who will gather and organize all the information necessary for your loan to be approved. This is the person who will contact your employer to verify that you are employed and obtain your credit report, along with many other documents.
The Search
After the agent determines what kind of home you want, and the lender pre-approves your loan, the agent will begin to show you houses. Remember that the agent working with you does not get paid until you settle on the house of your choice. That agent will do an enormous amount of work for you that you will never see. For instance, it can take hours to sort through all of the houses on the market to find those that may interest you and to make appointments for you to see them. Respect the work the agent does for you, and do not look at a house without that agent because they will not receive a commission on any house they do not show to you. Again, the agent can show you any house listed in the Multiple Listing Service used by the local Board of Realtors, and can also frequently show you houses that are for sale by owner.
The Contract
Once you have found the house of your dreams, the selling agent will help you write the purchase contract. This is your offer to the seller to purchase the house for the terms stated in the contract. The selling agent will present your contract to the listing agent and seller as soon as a meeting can be arranged. The seller may accept your contract as it is written by signing at the bottom. At that time you have a RATIFIED CONTRACT. In many cases though, the seller will counter your offer by changing some terms, for instance the price, the number of points to be paid by the seller, who will pay the transfer and recordation taxes, or even the settlement date. If this happens, the selling agent will bring that contract back to you to consider the counter offer. You can accept it, reject it, or counter the seller's counter. Most contracts do not go back and forth too many times before being acceptable to both purchaser and seller.
Inspections
After your contract is ratified you may need to contact a home inspector, pest inspection company or other according to the terms of the contract. You may or may not meet the inspector, depending on the type of inspection, but you will receive a copy of any inspection reports at or before settlement.
Surveyor
Unless you are purchasing a condominium, the lender will require that a current "Location Drawing" showing the location of the improvements within the boundaries of the property be provided to them prior to settlement. The house location survey is inexpensive (generally $175 - $225) but does not include setting markers on the property lines to show you definitely where your property lines lie. You can order a more complete survey, which will result in stakes being placed at the corners of your property. This type of survey costs $500 and up depending upon the size and location of the property. Prior to work being done on either type of survey, the State of Maryland requires that you sign a State survey order form, which will be provided to you by the settlement company. They will then order the survey of your choice. You will receive a copy of the survey at settlement.
Insurance
To protect your new home and possessions against disaster, and to comply with your lender's requirements, you must purchase homeowners casualty insurance. You should arrange for the insurance policy several weeks before settlement.
Settlement
Settlement is the time when the money and deed are exchanged through the settlement attorney. Upon completion of settlement you will be the owner of the property! The attorney conducting settlement will gather information from you, the people mentioned above, and a few more, and coordinate settlement.
Among other things, the attorney will make sure that the terms of your loan are accurate, that all your lender's documents are properly signed, that the seller's loan on the property is paid off and released, and the deed transferring the property to you is in proper form and is signed. The original deed is sent to the
courthouse for recording and later delivered to you.
The last people involved in this transaction are the movers. Let's hope they come on time.
Beginnings
The first person involved in the purchase of your new home is a real estate agent. The agent is the person who will help you choose the property that satisfies your needs and desires and fits your budget. This person is the "Selling Agent". The selling agent may represent you, the seller, or in some cases, neither party. When you first meet the selling agent, they should show you the State of Maryland "Agency Disclosure Form" which simply outlines the various types of agency relationships the agent can offer.
If you choose to have the agent represent you as a "Buyer Agent", you must enter into a written agreement with the agent wherein the agent agrees to work for you and be responsible to you, and you elect not to work with any other agent. As a Buyer Agent, the agent can give you advice regarding the transaction, and if you authorize them to do so, they can negotiate on your behalf. If you work with a Buyer Agent and you become interested in a house listed for sale with that agent's company, the agent will become a "Dual Agent". As a Dual Agent, the agent no longer owes a duty just to you, but also to the seller. The agent will still be a terrific help to you in purchasing the home, but they can no longer disclose to you private information about the seller such as the seller's willingness to sell for less. Similarly, the agent will not disclose to the seller information about you, such as your willingness to pay more for the house than you state in your initial offer. If you engage a Buyer Agent, the agent will also have you sign the State "Dual Agency" form authorizing the agent to act as a dual agent with you on any properties listed by their company.
If you choose not to engage the agent as a Buyer Agent, the agent will work with you as a"Cooperating Agent". Cooperating agents represent the seller, but like all types of agency they have a legal obligation to treat you fairly and honestly. Like the Buyer Agent, they can show you any home that is on the market through the Multiple Listing Service, help you qualify for a loan, write the contract for that home, and provide you with numerous other services. The seller typically pays the agents' commissions, so these services cost you nothing at all! The selling agent will ask you some basic questions about your finances in order to help you determine the loan amount for which you may qualify and therefore the price of home you can purchase. The agent will also ask you questions about your preferences in a home, such as the number of bedrooms and bathrooms, size of yard, etc. This will help the agent narrow down the number of houses you will inspect, and enable them to show you homes that may interest you without wasting your time.
Loan Process
One of the most important people you will meet during the home buying process will be your loan officer. This is the person who will take your loan application and work to get your loan approved. Like the real estate agents, the loan officer does not get paid until you settle on your home. When shopping for a lender, do not look only at rates or points; ask about the lender's reputation. Remember, without the loan, you will not be able to purchase this house. The real estate agent can be a great resource by recommending a loan officer with whom they have had successful transactions. You will also get to know the loan processor who will gather and organize all the information necessary for your loan to be approved. This is the person who will contact your employer to verify that you are employed and obtain your credit report, along with many other documents.
The Search
After the agent determines what kind of home you want, and the lender pre-approves your loan, the agent will begin to show you houses. Remember that the agent working with you does not get paid until you settle on the house of your choice. That agent will do an enormous amount of work for you that you will never see. For instance, it can take hours to sort through all of the houses on the market to find those that may interest you and to make appointments for you to see them. Respect the work the agent does for you, and do not look at a house without that agent because they will not receive a commission on any house they do not show to you. Again, the agent can show you any house listed in the Multiple Listing Service used by the local Board of Realtors, and can also frequently show you houses that are for sale by owner.
The Contract
Once you have found the house of your dreams, the selling agent will help you write the purchase contract. This is your offer to the seller to purchase the house for the terms stated in the contract. The selling agent will present your contract to the listing agent and seller as soon as a meeting can be arranged. The seller may accept your contract as it is written by signing at the bottom. At that time you have a RATIFIED CONTRACT. In many cases though, the seller will counter your offer by changing some terms, for instance the price, the number of points to be paid by the seller, who will pay the transfer and recordation taxes, or even the settlement date. If this happens, the selling agent will bring that contract back to you to consider the counter offer. You can accept it, reject it, or counter the seller's counter. Most contracts do not go back and forth too many times before being acceptable to both purchaser and seller.
Inspections
After your contract is ratified you may need to contact a home inspector, pest inspection company or other according to the terms of the contract. You may or may not meet the inspector, depending on the type of inspection, but you will receive a copy of any inspection reports at or before settlement.
Surveyor
Unless you are purchasing a condominium, the lender will require that a current "Location Drawing" showing the location of the improvements within the boundaries of the property be provided to them prior to settlement. The house location survey is inexpensive (generally $175 - $225) but does not include setting markers on the property lines to show you definitely where your property lines lie. You can order a more complete survey, which will result in stakes being placed at the corners of your property. This type of survey costs $500 and up depending upon the size and location of the property. Prior to work being done on either type of survey, the State of Maryland requires that you sign a State survey order form, which will be provided to you by the settlement company. They will then order the survey of your choice. You will receive a copy of the survey at settlement.
Insurance
To protect your new home and possessions against disaster, and to comply with your lender's requirements, you must purchase homeowners casualty insurance. You should arrange for the insurance policy several weeks before settlement.
Settlement
Settlement is the time when the money and deed are exchanged through the settlement attorney. Upon completion of settlement you will be the owner of the property! The attorney conducting settlement will gather information from you, the people mentioned above, and a few more, and coordinate settlement.
Among other things, the attorney will make sure that the terms of your loan are accurate, that all your lender's documents are properly signed, that the seller's loan on the property is paid off and released, and the deed transferring the property to you is in proper form and is signed. The original deed is sent to the
courthouse for recording and later delivered to you.
The last people involved in this transaction are the movers. Let's hope they come on time.