Checklist for Buying a Home - Part 3 of 3

By Brandon Cornett
© 2011 All rights reserved

Editor's Note: This is part three in a three-part checklist for buying a home. If you missed the first two parts of this tutorial, you might want to start at the beginning. This section of the checklist deals with housing hunting, negotiating, appraisals and closing.

House Hunting and Negotiating

In this part of the home buying checklist, we will discuss the events that take place when you (A) find a suitable home and (B) make an offer to buy it.

• Start by making a list of your housing needs. What's the minimum square footage you are willing to accept? How many bedrooms and bathrooms do you need? Is it okay if the house backs up to another home, or do you want open space behind you? What part of town do you want to live in? Is there a particular neighborhood you have in mind?
• If there are certain things you would like to have in a house, but don't necessarily need, you can put those on the list as well. Just be sure you divide the list between needs and wants. This will help you remain flexible when shopping for a home. You're going to have to compromise in some way -- I can guarantee that much.
• Once you have all of the stuff on paper, give a copy of it to your real estate agent. This will make your agent's job easier and the process more efficient.
• If you haven't done so already, find a good real estate agent. The best way to do this is by getting referrals from someone you know and trust. Do you know someone who has bought a home in the area where you plan to buy? Ask them if they were happy with their agent, and get the agent's contact information. You can also find a real estate agent by using the search tool on this page.
• You've been pre-approved by a lender. You've created a list of your housing needs. And you've chosen an agent to work with. Now you are ready to start the house-hunting process. The Internet is a great tool for house shopping. I recommend using three websites in particular -- Realtor.com, Trulia.com and Zillow.com.
• If you're open to buying a bank-owned foreclosure home, you should sign up for RealtyTrac.com as well. This will give you access to a wealth of foreclosure data for your area.
• In addition to the websites listed above, you can also get property listings from the Multiple Listing Service (MLS). Your agent should have access to this database. He or she should be sending you properties that match your requirements.

So you've found a suitable home, and you're ready to make an offer on it. What next? Do you just offer the full asking price and get on with the process? Not so fast. The house you've chosen might be under-priced, overpriced or priced at market value. So for starters, you need to figure out which scenario you're dealing with...

Making an Offer on a House

Let's assume you have found the perfect house, and you are now ready to make an offer. In the next part of the checklist for buying house, you will learn how to make a smart offer based on market research and data.

• Before putting an offer on paper, you need to evaluate the seller's asking price. Remember, it's referred to as an asking price for a good reason. This is what the homeowner is asking for. But this number may not reflect the current value of the home. In order to determine the true value of the property, you will need to look at comparable sales.
• A comparable sale (or "comp" for short) is a similar home that was sold in the same area recently. The more comps you can collect, the easier it is to determine the home's value. Your real estate agent should assist you with this part of the process. Specifically, they should pull up a list or spreadsheet of recent sales in the area. You would then compare those sale prices to the asking price on the house you are considering.
• When using comps to determine your offer amount, be sure to consider any unique features that might add value. If the seller is asking for more than similar homes that sold recently, ask yourself why. Is there something unique about this house that would justify the higher price? Maybe a swimming pool or a completely renovated interior?
• You should also realize that some people simply overprice their homes to begin with. It's common for homeowners to set their asking price based on the amount they need to get out of the deal. This is a flawed pricing strategy, but a common one. The question is, is the seller willing to negotiate with you?
• When you put your offer on paper, you should also include certain contingencies for the purchase. A contingency is something that must happen in order for the deal to go through. At a minimum, you should have a contingency for the home inspection. If the inspection uncovers a serious flaw the seller is unwilling to repair, you should be able to back out.
• You should also make the offer contingent upon your mortgage being approved. Sure, you've been pre-approved for a loan. But that doesn't guarantee you will actually get a final approval. So it's wise to have a contingency in place for this purpose.

This concludes the offer stage of the process. You are now ready to move into the next (and final) section of the home buying checklist. This is where you have the home inspected, and the lender has it appraised. After that, it's on to the closing!

Inspections, Appraisal And Closing

If the seller accepts your offer, you will then need to go back to your mortgage lender for final approval. You should also have the home inspected so you will know the true condition of the property. And then there's the closing process, which is a flurry of paperwork and signatures.

Here is a mini checklist to get you through the final stretch of the home buying process:

• Get the home inspected soon after the seller accepts your offer. If there are any serious problems with the house, you want to know as soon as possible. That's why most buyers schedule the inspection within a few days of the offer acceptance.
• When the inspector completes the inspection process, he should sit down with you and go over all of the things he found. A good inspector will thoroughly explain any issues he found, as well as the cost of repairing those issues. It's important to understand what it might take to repair a particular item.
• You can request that the seller repair all of the discrepancies, some of them, or none of them. The amount of leverage you have will depend on the type of real estate market you're in. In a classic buyers' market, you can ask for almost anything. In a sellers' market, there's a higher chance the homeowner will refuse to make repairs.
• This is an area where your real estate agent's experience will pay off. An experienced agent will have a pretty good idea what you can get away with, in terms of repair requests. The worst the seller can do is tell you no. So it never hurts to ask.
• After your offer is accepted by the seller, you will need to give your lender a copy of the purchase agreement. They want to know how much you have agreed to pay for the house.
• The lender will send a professional home appraiser out to determine the value of the property. Your mortgage company has a big financial stake in the house, probably more than you do. So they want to make sure the home is worth the price you've agreed to pay for it.
• If the home is appraised at a value equal to or greater than the purchase price, you're in good shape. This means the loan will probably go through. But if the house gets appraised for less than the purchase price, you got a problem. A mortgage lender won't give you more than a house is worth.
• If the appraisal comes in low, you should ask the seller to lower the price. They may or may not do this. If they refuse to lower the price, you have an important decision to make. Do you want to pay the difference out of your own pocket? Or would it be better simply to walk away from the deal? Learn more

I hope you have found this checklist for buying a home helpful. There is plenty more to learn about all the topics we covered above. Fortunately, you can research all of them right here on the Home Buying Institute. I've provided quite a few hyperlinks for this very purpose. Good luck.

Note: This is a three-part checklist on buying a house. If you haven't read the first two parts of the lesson, you can start here.