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2010-08-31 14:20:21
Tips For Home Buyers

This page is designed to give homebuyers a general idea of the steps involved in buying a home in Portland Oregon. While the statements below usually apply, there are circumstances in which these statements are not relevant or parties have reach an agreement that does not include one or more of the steps below.


What is a Buyer’s Agent?

If you are considering buying a home, townhome, condo or any other type of real estate, then you will most likely interact with a real estate agent. So who are these agents and whom do they represent? In most home sales, there is an agent who represents the seller, and in many cases there is an agent who represents the buyers. The goal of the seller’s agent is to get the seller the best price and terms possible on the sale. The goal of a buyer’s agent is to get the buyer the best price and terms possible. Buyers should know that when they call a phone number listed on a For Sale sign or visit in an Open, they are most likely dealing with the seller’s agent. Again, the goal of the seller’s agent is to get the highest price and best terms possible for the seller. The seller’s agent does NOT represent your interest. In contrast, a buyer’s agent usually has no affiliation with the seller or their agent, and is motivated to represent your interests only!


What’s This Going to Cost Me?

Nothing! While most buyer’s agent represent your interest, the seller actually pays them when the property sells. The good news for buyers is that while you get the benefits of professional representation, the seller usually pays for the buyer’s agent. Be sure to check with your buyer’s agent that there will be no fees charged to you for their services.


How Exactly Does a Buyer’s Agent Get Paid?

When a seller decides to put the home on the market for sale, they often hire a real estate agent to represent them. Sellers negotiate a total amount of commission to be paid for both their agent and the agent who brings in the buyer. When a home closes escrow, the seller pays both the seller’s agent and the buyer’s agent.


What Are The Steps to Buying a Home?

There are many steps involved in buying a home, condo, or any other type of real estate:


What Do You Want?
 

Having a clear idea of exactly the type of property you want can save you a lot of time. If you are considering buying a home or condo, try to anticipate the number of bedrooms and bathrooms you need, the square footage, the size of the yard, price range, etc. The more focused your home search, the faster the process will likely be.


Find a Real Estate Agent
 

A good agent can help you throughout the home buying process. From finding the prefect home, to helping you obtain a loan, to guiding you throughout the many steps involved in buying real estate, a good agent can save you time and money.


Get a Pre-Approved For A Loan
 

Getting a loan can be a complicated process. Borrowers have to determine which loan is best for their unique situation. Buyers need understand factors such as the pros and cons of adjustable vs. fixed rate loans, how credit scores can impact interest rates, how a down payment can influence monthly payments, etc. Borrowers have many options when it comes to getting a home loan, and rates vary between banks so it’s best to get multiple quotes. Your bank and real estate agent can provide you with information about reputable loan organizations. Once you decide on a bank, ask them to review your financial information and provide you with a Pre-Approval or Pre-Qualification letter. You will need this document prior to submitting an offer on a property. Get Pre-Approved.


Earnest Money Deposit
 

Before a buyer can make an offer, they should ensure that they have some funds available to put toward a deposit. This deposit is known as an earnest-money deposit or a good-faith deposit. The deposit shows to a seller that a buyer is serious about purchasing the property. When a buyer makes an offer, they usually need to specify in the offer the amount of deposit the buyer will give to the seller if the offer is accepted. While there are no rules regarding the amount of a deposit, not surprisingly, larger deposits carry more weight with sellers than smaller deposits. Deposits in the range of 1% to 3% of the purchase price are not uncommon in Portland Oregon. If the offer concludes in a purchase, then the deposit amount is applied to either the buyer’s down payment or toward buyer’s closing costs (see below for a discussion about closing costs). The actual deposit amount is usually held in trust by either the seller’s agent, buyer’s agent, or by the Escrow Company. The deposit amount can be forfeited to the seller if the buyer does complete the purchase or cancels the contract without legitimate and legal reason for doing so. The buyer’s real estate agent should advise them about situations that allow a buyer to withdraw or cancel a sales contract and still get their deposit back.


Closing Costs 

In addition to the earnest money deposit mentioned above, buyers should also have sufficient funds to cover fees known as closing costs. Closings costs are fees charged by third parties involved in the sale or purchase of a property. Some of these fees are customarily charged to homebuyers and others fees to home sellers. These fees are in addition to the sales price of the home. Some of these third-party fees include lender charges, escrow, survey, appraisal, title search, title insurance, survey, property taxes, attorney, credit report, mortgage insurance, deed recording, etc. It’s not uncommon for the buyer’s portion of closing costs to be 3% or more of the sales price of the home. Your lender can give a good estimate of likely closing costs for your home’s sale price. Closing costs are usually paid on the day of closing, which is the end of the escrow period. In some cases, buyers are able to negotiate with the seller to pay all closing costs.


Search For Homes

The Internet has become the primary method by which people search for homes. Do a query on any of the search engines for homes, condos, or other real estate in the communities that interest you. You should be able to easily find web sites that provide you access to all the MLS listings (i.e. real estate for sale) that meet any criteria that you specify. You can also ask your real estate agent to program the MLS so that you automatically receive email descriptions of properties that meet your criteria as they come on the market. Search the MLS.


Visit Homes
 

Seeing homes on the Internet gives you a general idea about a property, but there is nothing more useful than actually seeing homes in person. Send a list of properties that you want to see to your real estate agent. Your agent can then call the sellers agents’ and make an appointment for you and your agent to see the home. Request Appointment To See a Home.


Make an Offer

So you found a home that you like and you’re read to make an offer. What’s next? Your real estate agent is key at this point. They should review recent sales in the community to help you determine a fair offer price. They will also prepare the contract documents that are required to communicate your offer to the seller’s agent. The seller’s agent will deliver and review the terms of your offer with the seller. In most cases, sellers usually do not accept the first offer, but typically come back with a counter-offer in which they propose an alternate sales price or terms. It’s not uncommon for buyers and sellers to go back and forth proposing alternate prices until both parties agree of price and other terms.


Escrow
 

A process known as escrow begins once a written offer is accepted by both parties, Escrow is an independent and impartial third party company that processes documents and funds so that the property being sold successful transfers from the seller to the buyer. In Oregon, there are Escrow Companies who provide this service for buyers and sellers. Depending on the terms negotiated with the seller, a typical escrow takes between 30 to 60 days. The property transfers from the seller to the buyer at the end of the escrow period, which is also known as ‘closing’ escrow or just ‘closing’. There are many things that need to occur during the escrow period, which include:


Lender Documents
 

Once an offer is accepted, there are many documents that the lender will require to process and approve the loan. The pre-approval or pre-qualification letter mentioned above is just the initial step to getting a final loan approval. Most lenders usually require additional documentation such as pay stubs, W-2s, tax returns, etc. Buyers are well served to send these documents to the lender within the first few days after the offer is accepted. This is especially true when is escrow period is only 30 days, when the time to process, approve and fund the loan is so compressed.


Inspections

Once an offer is accepted, a buyer usually has a specific agreed-upon time in which to conduct any inspections. Buyers usually hire a home inspector to evaluate the condition of a home and a termite inspector. There are many other types of inspections that your real estate agent can tell you more about. Most of these inspections are conducted at the buyer’s expense. If the inspections reveal information that is concerning to the buyer, the buyer can usually cancel the contract, ask the seller to make repairs, or ask for a price reduction consistent with the repairs required. The buyer’s real estate agent can advise them about their options.


Appraisal
 

Most lenders will require an independent evaluation of a property’s value before approving a loan. Appraisers perform this function. While appraisers consider many factors when determining the market value of a home, two important factors are recent sales price of similar homes in the same neighborhood, as well as a home’s condition. A lender will usually only approve a loan if the appraisal value is at or above the negotiated sales price. If the appraisal value of a home is less than the negotiated sales price, most lenders will require the buyer to pay difference out of pocket or request that the seller reduce the sales price (if the seller is willing). If either of these actions are not possible, then the lender will most likely disapprove the loan and the transaction will likely cancel. A good real estate agent will advise their buyer about the market value of a home so that problems with an appraisal value are unlikely.


Closing Day
 

This is the day during which the buyer and seller sign all the documents to initiate transfer of the property from the seller to the buyer. The lender also transfer funds to the seller’s account on this day, and the escrow company records the transfer of ownership with the appropriate governmental authority. All these steps result in the buyer becoming the new owner of the property with the lender having a lien interest.

 
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