Dear Monty: We are first-time home buyers. Being rookies, we get lots of advice from family and friends. Still, the process is different with everyone giving us advice. We would appreciate step-by-step guidance on exactly what we should be doing all the way through. How do we make an offer on a home?
Monty’s Answer: Making an offer is just one step in the process. You will often hear people say, “I wish I had known that when we bought our house.” By following the steps and reading the links in each step below, you may never make the “wish I had known” comment. Here is a general overview from Dear Monty of what steps to take when buying a home that includes creating an offer.
No. 1: The first step to take is prequalifying for a mortgage. There is more to the loan than the interest rate, and it will pay to shop. Seek out a reputable bank, credit union, and mortgage broker to compare.
No. 2: When you know what you can afford, you can start determining preferences that fit. You can save time by not looking at homes or neighborhoods that don’t work.
No. 3: It is vital to gather accurate information. The authors of the book “Freakonomics” describe a situation called “information asymmetry” that exists in many services, including real estate. The asymmetry occurs when one party has a lot of information, and the other party has very little. According to the book, it is not uncommon for the party with the knowledge to take advantage of the other party.
No. 4: Choosing a broker today offers many choices. There are full-service brokers, discount brokers, for-sale-by-owner brokers, and for-sale-by-owners (choosing to forego an agent).
No. 5: Sometimes home buyers have a plan when viewing homes. They will have specific items they are going to check out.
No. 6: Real estate negotiating is much easier when both parties have the correct, identical data about the market and the best comparable sales.
No. 7: Making an offer is the most critical component of the transaction. The contract is the culmination of applying the research and time you have invested.
No. 8: Applying for a mortgage should be a simple matter of contacting the source of your preapproval document and submitting the purchase contract. This statement assumes you completed the work suggested in Step 1. There may be additional information required if your circumstances have changed since you received your preapproval letter.
No. 9: Inspecting the home is the step that is out-of-place, in this writer’s opinion. Home sellers should have the house inspected upfront. Suppose you can find a pre-inspected home. In that case, it likely will eliminate the inspection contingency, which may negate a second negotiation.
No. 10: Satisfying contingencies in the contract is an after-the-fact exercise. Make sure that all contingencies are satisfied before they expire.
No. 11: A title company manages the real estate closing in most states. It follows the purchase contract in carrying out their duties. There are some decisions in the contract that dictate what happens at the closing. Read this section carefully before signing the purchase agreement.
No. 12: Moving Day! Yes, there is still work to be done. Finish strong.
Check out the book “Freakonomics,” with its thoughts on real estate agents at your local bookstore or an online retailer like Amazon.
Richard Montgomery is the author of “House Money: An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty or at DearMonty.com. Email him at email@example.com.
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