One of the most stressful decisions that individuals can make during their lives is the purchase of their first home. As buying a home is likely one of the largest purchases in a person’s life, the financial stress can be daunting and this pressure can be amplified if the purchaser lacks knowledge regarding the home-buying process. Knowing what to expect during this process can significantly reduce the anxiety that may accompany the purchase of a first home. Although real estate transactions can be complex, the following major steps can be expected by a purchaser:
- Purchase Offer – When the search is over and a purchaser selects a home, either the purchaser (if acting without a realtor) or the purchaser’s realtor will submit a Purchase Offer to the seller or seller’s realtor. If this Purchase Offer is accepted, the realtors will create a Memorandum of Sale, listing the terms of the Offer, which will then be sent to the attorneys for the seller and purchaser.
- Contract of Sale – Upon receipt of the Memorandum of Sale, the seller’s attorney will prepare a Contract of Sale to present to the purchaser’s attorney. Following negotiations, the purchaser will sign and return the Contract of Sale to the seller’s attorney with a check for the downpayment amount (which is typically 10–20% of the sales price). A binding contract will exist once the seller also signs the Contract of Sale, returns it to the purchaser’s attorney, and deposits the downpayment check.
- Mortgage Contingency – Unless a purchaser is buying a home with no financing, a Mortgage Contingency Clause is typically added to the Contract of Sale, making the purchaser’s obligation to buy the home contingent upon receiving financing for a set sum. This will involve a review of the purchaser’s finances and the preparation of an Appraisal Report by the purchaser’s lender.
- Inspections – Purchasers usually conduct inspections either before signing a Contract of Sale or within a certain period following the Contract of Sale, which may include inspections for engineering, termites and vermin, lead paint, oil and septic tank sturdiness, well water, and radon gas.
- Title Report – Following receipt of a fully-signed Contract of Sale, the purchaser’s attorney will order a Title Report to ensure that no liens, judgments, violations or other problems with the home exist.
- Survey – The purchaser will order a Survey to be conducted. This is a physical map of the property illustrating the boundaries, location of any buildings in the site, wetlands and other environmental issues, and possible problems with adjoining landowners.
- Walk Through – On the day of the real estate closing, the purchaser will conduct a final inspection of the home to ensure that no damage has occurred to the home since the last inspections.
- Closing – At the real estate closing, all parties will appear. The purchaser will complete documents from their lender and the final paperwork to purchase the home, after which the attorneys will provide their respective clients with a Post-Closing Package to enclose copies of all of the transfer documents.
While a number of additional steps may be necessary depending upon the complexity of the transaction involved or problems that may arise, the above steps describe the typical residential home-buying process. Now that you know what to expect, stop delaying and make your American Dream happen today.