How do you actually buy a house? (Part 2)
Welcome back to another week of all things Cleveland real estate related thank you for being here. I’m excited to keep writing these weekly and I hope anyone reading has been enjoying them as well! So last week we started talking about how to actually go through the process of buying a house! So for continuities sake, we’ll finish with part two of that today. Someone asked me this week if it’s really that simple to buy a house. My answer: “yes, it is! That being said its a lot more nuanced, and there’s a lot of work that happens in the background from the realtors, the title company, inspectors and appraisers. But, yes it really is this simple”. So without further ado lets jump right into part two!
4) Have an Inspection! (Optional, but highly recommended)
So congrats, your offer has been accepted, and you are now under contract - yay - now what? Well in your contract your agent probably wrote after discussing it with you that you wanted an inspection. So now you have a limited number of days to get a qualified home inspector out there. Not a problem your realtor has probably worked with quite a few. However, you might be thinking what is the point of a home inspection? Isn’t my realtor supposed to know about houses? They told me this house looks great, doesn’t that mean it’s great?! Yes, some of us know a lot about houses, maybe some of us know A LOT A LOT about houses because we’ve been to 100s of home inspections and stood there for hours going through the house with the inspector. But lets be real, most of us have no electrical training, no refined knowledge of the finer issues of plumbing, we might know that your roof looks old, but not know enough about flashing to tell you if it’s time to do some work, on the chimney. Plus as realtors we maybe spend at most an hour showing a client through the house. Your inspector is going to spend at least an house specifically checking out the details of your new place, so it’s well worth it. Plus after the inspection you can re negotiate your contract to try to adjust for any issues that might come up, so it’s definitely worth doing.
5) Bank Appraisal! (If buying with a mortgage)
So while this part requires no action from you the buyer, it is extremely important to know its happening and know what the outcomes could be. Furthermore, this is to make sure you are not OVER paying for the house (as well as to help with money laundering, and fraud etc etc, not an issue for most of us). A home appraisal, could potentially have a major impact on if you get to buy your home or not. As good as we are as realtors at estimating home value, and making sure our clients are getting a good deal or making sure our clients are paying what they should for a house, we are not appraisers. The appraiser’s only job is to state to the parties involved the actual value of the house. Isn’t the value of the house what tim buying it for? Yes, it is, but also it isn’t. Lets say you’re buying a house for $150,000 and you’re doing a $10,000 down payment so your loan from the bank would be $140,000. The appraiser then comes out and, well, appraises the house.
A few things could happen here: 1) your new house, is worth $150,000 and you are free to finish the deal, and everyone is happy. 2) the house appraises for more than $150,000 and congrats, you got a great deal! 3) the house appraises for less than $150,000. This third option is where you could have issues closing on your home, but it’s also where the system is working for your to ensure you don’t over pay. The thing is, the bank isn’t going to lend you money if your house under appraises. So lets use the numbers above, so lets say your house appraises at $140,000 and you’re trying to buy it for $150,000. To protect you, and themselves, the bank is going to adjust the loan they are giving you to only cover the appraised amount. That means that instead of lending you the difference between your down payment, and the rest of the agreed contract price on the house: $150,000 - $10,000 = $140,000. they are instead only going to lend you the appraised value of the house $140,000 - $10,000 = $130,000. So now what happens? Can I still buy the house? Does the seller come down in price? Do I pay the difference in cash? The answer to all of this is yes. Any of the above could happen depending on what you work out with the seller and the bank. I would generally not advise you to buy something for more than it’s worth, but at the end of the day, that is totally up to you the buyer!
6) Get Ready for a lot of Signing!
So once everything is figured out, and you’ve given your lender and the title company enough time to get all the documents ready, all you now have to do, is get your money together for your closing costs and downpayment. well you also have to get together with someone from the title company to sign all your paperwork. After than all you have to do is wait for the house to transfer to your name (usually under 24 hours) and voila, you have a new home!
Bonus Pro Tip: don’t forget to bring toilet paper to your new place when you’re moving in!