Dear Ney Ney

Talking about buying a house is a great way to learn some of the basics about buying and investing in real estate. When we talk about buying a house here we are talking about buying a house that you are going to live in or for a house that you might rent out. The process is similar when purchasing commercial property, so learning about purchasing residential real estate is useful no matter what type of real estate investing you decide to do.

Before starting your search for a house you need to talk to a bank. Houses are very expensive, so to buy a house you get a loan called a mortgage. Before you start looking at houses you will talk to a bank about how much money they are willing to lend you to buy a house. This is called being “pre-qualified” for a loan, and when you offer to buy a house from someone it will help you if you are pre-qualified. 

A bank decides if it will lend you money to buy a house based on your income, your credit score, and how much other debt you have. You credit score is a numerical grade grade that shows how well you pay your debts and ranges from a low of 300 to a high of 850. A higher score is a better score. 

If you can’t get pre qualified then you won’t be able to buy a home. We will talk more about mortgages and loans another time, but getting pre-qualified is an important first step.

The next step in buying a house is deciding on your criteria for the house. Your criteria might include price, how close the house is to stores or parks, size, the number of bedrooms and bathrooms, if the house has a garage, how nice the house looks, how safe the neighborhood is, how good the schools are near the house. When looking for a house it can be difficult to find one that meets all of your needs and wants, so it important to know what is most important to you before you start to search for homes. Your criteria for a house that you want to live in will also be different than that for a house that you are buying as an investment.

After you define your criteria, it’s time to find a real estate agent. A real estate agent is a person who helps you find properties that are for sale. They help you decide which houses you might like, take you on tours of the properties, give you advice on how much to offer to pay for a house, help you inspect the house for problems, and make sure the purchase goes smoothly. 

Many people find a real estate agent through their friends or family. It is important to find a real estate that is easy to talk to and that you trust. Buying a house can be hard, so you will need someone you like and trust to help you. Friends and family can tell you what it is like to work with their realtor so you have a good idea what they are like before you meet.

Real estate agents make money when you buy or sell a house. The money they make is called a commission, which is a portion, or percentage, of the sales price. Normally the person selling the house pays the sales commission to both agents. Most agents earn 2.5 or 3 percent of the sale price of the home as a commission.

After you find a realtor, the next step is for many the most fun - start looking at properties. Based on the criteria you set, your realtor will send you properties that you might want to purchase. Homes are listed for sale, or “put on the market,” all the time, so you should regularly get lists of different homes you might want to buy. When you see a house on the list that you like then you go see it in person, or tour the house.

Once you find a house that you want to buy the next step is to offer to buy the house. Your real estate agent will write out the details of your offer, which is also called a sales contract. Sometimes people who are selling their house get multiple offers to buy their house, so the details in your offer are important to think about.

An offer includes information such as the price you are willing to pay, when you want to buy it, how you are going to pay for the house, how much money you will give the sellers immediately if they accept for offer, and anything that needs to be completed before the sale is finalized, such as an inspection of the property.

Sometimes when you offer to buy a house the person who is selling the house will try to get you to make changes to your offer, this is called a counter offer. For example, maybe they know something is broken in the house and you want some money to fix it, but they don’t want to give you the money to fix it. Each purchase is unique and you will need to make the decision about how much the house is worth and if you want to change your offer or find a different house.

Once you have an signed agreement on the purchase of the home, called a ratified sales contract, in the phase often called “under contract” or “in escrow.”

Escrow refers to a special bank account that contains the amount of money that you offered to the seller towards the purchase of the home in the sales contract. The money is often called an earnest money deposit, or EMD. The escrow account keeps the EMD safe, and lawyers decide who gets the money in the escrow account if the contract is not completed. If you break the contract, the sellers get to keep that amount of money, otherwise you get it back.

During this time you will finish applying for a mortgage to buy the house, conduct any inspections of the house, and have a lawyer check with the government about the ownership of the house, called a title search. Usually if you are unable to get a mortgage to buy the property, or there is something wrong with the house that you find during your inspections, you can cancel the contract and get your escrow returned to you. It depends if your contract has contingencies for financing and home inspections. Sometimes these contingencies make your offer less attractive to the sellers, but they protect you. Depending on where the house is located, the state might have laws that require contracts to buy houses include certain contingencies.

Sometimes, but not always, you might make a final walk through of the house before the final step of the purchase. The walk through let’s you make certain any repairs that need to be made were completed and that the house is I’m still in the condition it was when you made your offer on the house.

The last step in buying a house is called closing on the property. When you close on a property you sign the papers that hold you responsible to pay the mortgage and transfer ownership of the property from the sellers to you. A business called a “title company” usually handles closing, including holding the escrow account. Sometimes a lawyer can perform a closing, and also write a sales contract for you.

The government uses the papers signed at closing to update their records, as the government is the final determiner of ownership of the property. The government issues a document called a deed that has your name on it, and if you used a mortgage to buy the property, they also make a note in their records, called a lien, that you owe the bank money for the house. This lien lets everybody know that if you want to sell the house, first you have to pay back the money you owe to the bank at the time of sale. Congratulations, you now own the property!

Selling a home is different than buying a home, but some of the steps will sound familiar. 

First, you need to decide if you are going to sell your house. Do you need a bigger house because you have a growing family? Are you moving to a new city for a job or because you want to? Do you want to sell an investment property to buy a better one? These are all reasons to sell a house.

Once you decide to sell a house, the next step is to hire a real estate agent to sell it for you. The real estate agent will prepare your home for sale, have photos taken of it, market the house to potential buyers, and organize yours of your home.

Like finding an agent to buy a house, you want to be comfortable with your agent and trust him or her. Agents who want to sell your home will talk to you about how much they think your home is worth and how they will market your home to sell it quickly and at a high price.

Some people stay in their home while it is for sale, other people move out. If you live in it then you will have to keep it very clean and leave when people come to tour it. 

When you receive offers from people who want to buy your house your agent will show you the offers and talk to you about them. He or she might give you advice about if the offer is a good offer or not, and suggest if you should accept the offer, reject it, or give a counteroffer. 

After you have accepted an offer then you wait until closing. Depending on the sales contract you might need to allow access to the house for inspections. If the inspections find a problem with your house, such as a leak in the room, the buyers may ask for money to help fix the issue, or ask you to fix it before the sale. If you say no, depending on the contract, the buyers may br able to break the contract without losing their earnest money deposit.

The final step in selling a house, just like buying one, is closing. At closing you sign documents confirming that you are selling your house. Usually the seller signs the paperwork before the buyers. After closing is finished by both you and the buyers the title company will pay off the balance due on any mortgages on the property and send the remaining proceeds. Congratulations, you just sold your property!

A lot goes into buying and selling a home. The more you know the better prepared you will be when you do it yourself. 

I love you.