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Navigating your first home purchase

The real estate market is ever-changing and can seem daunting to understand, but with an experienced agent by your side, the home buying process is relatively straight forward.

First and foremost, you want to assemble a fantastic team that you trust. The relationship between a buyer, their real estate agent and loan officer is a working relationship. Effective communication is key. Make sure the professionals you chose are people you are confident about working well with for six weeks or more.

1. Become pre-approved for a home loan = Knowing your price range.

A home loan is a product you are purchasing as a 30-year commitment (sometimes 15-year). Shopping around for a lender that has a product to suit your needs, and at the best interest rate possible for your situation, is imperative. Once you have been pre-approved for a home loan, you will know the price of home you can afford and can start viewing and writing offers on properties with the help of your realtor. There are plenty of great lenders out there, but it can be helpful to ask your realtor to send you a list of lenders that have closed successfully with their prior clients.

2. Choose a realtor = Start viewing and offering on properties.

A realtor represents your interests to listing agents and their sellers. A great realtor will be a skilled negotiator, adept at understanding the motivations and needs of each party to a transaction. Choose a realtor who is actively in the market, meaning they have sold more than a few houses in the past year and help clients beyond their extended family. Getting an offer accepted in today's market is fiercely competitive and you want a winning realtor by your side. You also want to make sure your realtor has thorough knowledge of houses in general, what kind of maintenance they need and what issues may present more problems than others. A realtor with this knowledge can alert you to problem properties before you offer on them (and subsequently pay to inspect them).

As a buyer, your realtor is called a "buyer's agent". The buyer's agent is paid only once you are the owner of your new home. In most instances, the seller in a transaction pays both the listing and buying agents when the transaction closes. As a buyer, you do not directly pay your realtor unless you specifically agree to a separate buyer's agreement with an alternative payment arrangement.

Once you have decided to work with a specific realtor, stick with them (unless of course something occurs that causes a lack of faith in their representation). They will be your advocate and guide through the entire process.

3. Your first offer = Fingers crossed!

You've found a property you want to write an offer on, exciting! Your realtor will do a market analysis to make sure the price you offer is in line with market value. This is important because the bank will require that you have an independent appraiser perform an appraisal (valuation) as a condition of the loan. The bank wants to make absolutely sure that the home they are lending on is worth the amount they are loaning you to purchase it. The purchase price you offer should be a price that your realtor believes will appraise.

Your realtor will help you craft the most competitive offer you're willing and able to present. There is often more to a winning offer than price alone. Close date, inspection period, financing type, earnest money amount, can all play a role. Sometimes you will receive a counter offer from the seller which you can decide to counter, accept or reject.

It is very common for homes to have more than one offer. It is also common for buyers to have to write multiple offers on different homes until one of their offers is accepted. It can be emotionally draining and deflating. Make sure you've chosen a realtor who can help keep your spirits up and continues working diligently to get an offer accepted for you.

4. Accepted contract = Congratulations!

Yes, congratulations are in order at this stage, HOWEVER, there are still contingencies at play that may mean you will need to terminate the contract. These contingencies are the inspection contingency, appraisal contingency and loan contingency.

You have an inspection contingency period which is usually ten business days long (unless you specify differently in your offer, five days is somewhat common in a competitive market). During this inspection period you pay licensed professionals to inspect the property. They are service providers and you cannot get this money back if you decide to terminate the transaction based on what they find. Based on which inspections you chose to perform, the cost ranges from around $500-$1,000 for inspections.

However, you will receive your earnest money back if you terminate within the inspection contingency period. Earnest money is a part of your overall downpayment for the loan, it is not extra on top of your downpayment. It is usually 1% of the purchase price of the home, so if the home is $450,000, your earnest money deposit would be $4,500. This earnest money is deposited with the title company within three days of an accepted contract.

If you terminate during the inspection period, you will receive your earnest money back in full. If the home does not appraise and you and the seller are not able to negotiate a different price at that time, your earnest money will also be returned. If you do not end up qualifying for the loan, in most cases your earnest money is returned. Imagine earnest money as your good faith promise to the seller that it is worth their time for them to accept your offer and stop marketing their property to other people. If you do not perform the purchase for some reason other than your contingencies, the seller may keep the earnest money.

5. Contingencies removed = Onwards to close!

You've made it through the inspection, your realtor may have also negotiated repairs to be completed by the seller before closing or perhaps a price reduction based on the findings of the inspections. Once your realtor has helped you navigate the inspection contingency and possible repair addendum and you have ordered an appraisal that came back at or above your offered purchase price, it is time for your lender to fund the loan.

Your lender will require paperwork, signatures and proof of income from you as the buyer. It usually takes a minimum of 3-4 weeks to fund a home loan. In some cases, it takes slightly longer. That is why the close date on your offer will usually be one month from the day you submit the offer.

6. Closing day = Homeowner at last!

Once the title company has everything they need from your lender, including wired funds for your loan, they will schedule a time for you to come in and sign closing documents. The title company will give you a final figure you need to bring to close that will include the rest of your downpayment, buyer closing costs and title fees etc. Your lender and title company can give you an estimate of these fees before the close date, but it will not be an exact number until just a couple days (sometimes hours) before you sign closing documents. Once they tell you the amount you need to bring to close, they will instruct you to bring a certified check or wire the funds depending on the situation and title company.

Once the signed deed is recorded with the county where the property is situated the home is officially yours! Most contracts say the buyer takes possession after 5pm on closing day. Your realtor will deliver keys to you and leave you to start your new chapter as a HOMEOWNER!

This blog post is intended as an overview. Keep in mind every real estate transaction is unique, and always rely on your realtor, their principal broker or an attorney in real estate law for specific questions.

All information is in relation to Oregon and the Portland Metro market specifically.

Katelyn Convery is a licensed real estate broker in Oregon and Washington. Happily guiding clients homeward since 2017.

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