Obviously, this is our first time buying a house or property, so this process is so weird and foreign to us. We totally had no idea what goes into it all - from pre-approval, looking at homes, your price range, mortgage rates, inspections, etc. There isn't a ton of places out there that really tell you who's job it is to do what, so we have been trying to keep track of the terminology to help us understand it all better.
BUYER - That's you. It's your job to stand up for yourself in all cases. It's up to you to determine your price range based on your income, your expenses, and how much per month you are okay with spending on a mortgage.
SELLER - The person who is selling the property usually through an listing agent or on their own. This person is trying to sell their property for profit or to come even on their original investment.
AGENT - There are two types - The buyers agent and the listing agent. It isn't the same agent as to protect both parties' interests.
The Buyer's Agent: To be your advocate and drive your house buying train into the station. They will give you advice, help you with the offer/contract process, and secure your inspections, appraisals, and anything else you will need to close.
NOTE: Do check to see if the listing agent is associated with your buyer agent. The umbrella companies do both, and in that case their interest is to sell the house!
The Listing/Seller's Agent: This person only works directly with the seller and your agent to work out the details. They are the seller's advocate and spokes person. Their job is to sell the house for the highest price they can get.
PRE-QUALIFY vs. PRE-APPROVAL
This is the stickiest part. Banks use these two terms and they are not the same thing. A pre-qualification is basically a letter that they asked you about your employment, basic income, and checked your credit. It's kind of a trust letter that they send to the listing agent when you make an offer. This approval can last up to 90 days. A Pre-approval is a more in-depth search into your employment, tax history, income to debt ratio, credit history, etc. This takes more time to complete, but you can lock in an interest rate for your mortgage and get a better idea of what you can afford. Typically you would do all of this before you start searching for homes, but not always the case.
OFFER / UNDER CONTRACT
Okay, so this is the weird part. You decide you really want a house and you are pre-qualified already, so you let your agent know that you would like to make an offer. He/She will sit you down and you begin a contract to complete an offer going into a contract phase. It sounds serious (it is), but you are also able to say "no, stop" at any point with no repercussions. Remember: You aren't buying anything today. You get the next month or so to inspect, survey, and negotiate. In the end, you can still say no - this part of the process is to protect the buyer!
I believe this goes state to state, but in North Carolina you get 21 days of "Due Diligence." It basically means you have 21 days to inspect, survey, get repairs/negotiate, title search, and get appraisals while the house is off the market and "under contract." This period is to protect the buyer and allow all opportunity to say no.
YOUR OFFER WAS ACCEPTED - CONGRATS!
That all being said there are other players, reports, and fees that you have to keep in mind for after your offer gets accepted:
TITLE SEARCHES (Lawyers) - I'm not sure if title searches are done all over, but in Western NC title searches are necessary when buying land or houses with land. This gives you peace of mind on whether or not someone's long lost cousin Jerry doesn't have a copy to your land title too. This process starts almost immediately since it takes a while to make sure your titles are clean. From my understanding this typically gets paid for at closing. (Not sure on cost yet, but I think it will end up being anywhere from $500-1500.)
INSPECTION - Your agent will help you find an inspector if you don't already know one that you would like to use. They will reach out to them for a quote and a date to come to check out your future property. They typically take any form of payment ahead of time (out of your pocket) and they write up a huge long report of all the random weird things that are going on in your potential new home. (We paid almost $1000 for the inspection of 2 of the 3 homes on the property, but it included full look at foundation, roof, structural issues, plumbing, electrical, pests, appliances, testing HVAC, testing radon, furnace/heating, water damages, etc. You may need to also think about further inspections like HVAC and get further quotes on pest treatment and control.)
APPRAISAL (Bank) - Appraiser will come to your potential new home to assess its value based on apparently very secret criteria that they don't share publicly. It can be more or less than the asking value and should be more than the tax value on the home. This should give you a better sense of how your mortgage will fit in and if the home fits into your pre-qualification range. (This cost us $375 each for the two "livable" houses).
EARNEST CHECK/FEE (Agent/Lawyer) - This is basically the only thing that goes toward your total at closing. It is usually an arbitrary amount (ours was $1000) that serves like a deposit. The agent holds on to it during due diligence and into closing. If you decide that you do not want to buy the home during due diligence, then you get your full Earnest Check back. If you wait to say no after due diligence, you lose that check. It does however apply to your total at closing - If you are buying a $200,000 home, you would now owe $199,000 at closing.
SURVEY - This is not necessary to close or make your decision on, but it helps to know how much land you are looking at and where your property lines lay. It can cost a pretty penny, but definitely worth it if you have land and neighbors. You can always do this after your close if you want! (We were hesitant to jump in on doing a survey since the difference of 8-10 acres doesn't bother us too badly since most of it is woodland. We didn't want to do the survey yet incase we want to pull out of the offer after the inspection. Once we know we are 100% in, we will do the survey!)
Apparently this happens after your inspections, appraisal, and radon tests get back. The agent will sit us down to talk about the quotes we have received or arrange for those quotes to happen to help with the negotiating phase. We already know from the inspection that there needs to be pretty intense pest treatment and control as well as HVAC repair. We've received a quote for the pests which seems reasonable to us and there will be an HVAC repair quote done this week. These quotes will give us a good idea about how much we will try to get the seller to concede on or repair for us. The seller listed the heating and air conditioning as working and neither are working properly or at all. They also listed the houses as no pests, and there totally is including a major flea problem inside of the main house which NC state does not allow the inspectors to actually report. (A whole other blog post to be written!) We hope that these are things that the seller will either repair for us or let the pricing go down.
Still not 100% sure what really happens at closing, but we will find out and update!