Are you wondering what to expect when you start the home buying process? Many first-time home buyers anticipate working with a real estate agent and a lender but aren’t sure who the other players are in the process.
We’ll introduce you to the different professionals who are likely to pop up during the buying journey and how they’ll prep you to get those keys in-hand.
The 9 Parties Involved In The Home Buying Process
Not all buying processes look the same, but in general, you can expect the same key people to play a role in the process. Some of these parties are mandated by your lender and the laws of your state, while others are optional but encouraged.
Here’s who may help you during your road to homeownership and when they’ll cross your path during the process.
Your real estate agent, also referred to as a buyer’s agent, is the most important person you’ll interact with during your home buying journey. Your real estate agent is a source of knowledge who will help you find the right home at the best price, negotiate on your behalf and walk you through the final steps to close on your home.
You’ll want to find a real estate agent as soon as you’re ready to begin the home buying process. It’s important to shop around for the right real estate agent who will best represent your needs.
There are many factors to consider as you look for a good buyer’s agent, but in general, you’ll want to find a professional with experience who knows the area and who is a good communicator. You can opt for areal estate agent, who will have passed licensing examinations to conduct business in your state. REALTORS®, on the other hand, are real estate agents who are members of the National Association of REALTORS®. They’re held to a strict code of ethics to protect the interests of clients, cooperation between brokers and more. REALTORS® must also hold a clean professional record.
Try to avoid using dual agents, or those who act on behalf of you, the buyer, and the seller in a transaction. Since a good buyer’s agent represents your best interests, an agent who works for both the buyer and the seller could lead to conflicts of interest.
Buyer’s agents also do not charge you commission (their fees are often paid by the seller), so if a buyer’s agent tries to charge you, consider it a red flag.
The next important party in the buying process is your mortgage company or lender. Deciding how to finance your home purchase is a huge decision, and partnering with the right mortgage company is crucial for your financial success.
You’ll want to start looking for a mortgage lender before you find your dream home. Getting preapproved will allow you to shop for a home with confidence because you’ll know how much house you can afford and the maximum loan amount you’d qualify for.
Be sure to consider what factors are most important to you as you look for a mortgage lender.
You’ll also want to be aware of your credit score and lenders’ median credit score requirements, which can vary depending on the type of mortgage you’re seeking.
You may never actually meet the listing agent for the home you’re purchasing, but they’ll play a huge role in the buying process. Just as the buyer’s agent works on your behalf, the listing agent works for the seller and represents their interests.
Once you make an offer, your real estate agent will work with the listing agent to negotiate a fair price. The listing agent will also be involved in any post-inspection or repair request negotiations.
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Your home will likely be your most valuable asset, so you’ll want to take your time searching for the right homeowners insurance company. First, search for the major companies in your area and request detailed quotes.
If you live in an area prone to weather-related damage, like flooding or hail, you might want to find a company that offers additional insurance packages – which could include flood, hail, rain, wind or even theft coverage. The type of insurance you’ll want to look for can be based on your home’s location, condition and age – do your research and compare quotes based on this information.
Another party that stays in the background of the process is the title company. During the closing process, the title company will run a title search on your property to ensure there are no outstanding liens or mortgages against the it. This is done to protect your investment.
Once this is complete, a title insurance policy will be issued for both the owner and the lender. This insurance will protect both parties if someone claims to have rights to the property down the line.
Lenders often defer to title agents and companies they’ve used in the past, but as the buyer, you can choose your own title company. It’s a good idea to partner with a local title company that knows your area and market.
Your lender will generally require a home appraisal to confirm the value of the home prior to closing. This is done to protect your lender from financing more than the home is worth. The lender will select a third-party appraisal company, although you’ll ultimately be responsible for paying the appraiser.
Appraisers are typically local professionals who conduct research on your market and visit the home to assess its overall condition and value. Appraisers perform a general inspection and present their findings to cultivate an appraised value for the home.
The appraiser plays an important role in the closing process because they could uncover significant problems with the home that impact its value. If a home appraises for less than expected, your real estate agent might need to negotiate the price with the listing agent, or you might need to pull your offer if a deal can’t be made.
The home inspector will also assess the condition of your home to determine if it’s a smart purchase. The home inspector is hired to help protect the buyer from purchasing a property with major problems.
Since the buyer is responsible for the home inspection, you’ll want to search for a credible inspection company. Your lender or real estate agent can likely make recommendations, but be sure to do your own research. Look for reviews online or ask companies for sample inspection reports so you can determine which company does the most comprehensive inspections.
Once hired, the home inspector will go through the house from top to bottom with you, pointing out any problems – from major foundational concerns to smaller, more easily repairable issues. From there, a home inspection report will be issued for you to review with your real estate agent to determine if further negotiating has to happen with the seller.
Real Estate Attorney
A real estate attorney may be involved in your closing process. Their job is to protect you from making a fraudulent purchase during the final stages of the buying journey. A real estate attorney is not involved in every home purchase, but are required in several states – Delaware, Massachusetts, New York, Georgia, North Carolina and South Carolina.
In some cases, the real estate attorney will handle the title search instead of the title company. Once they’re satisfied that there are no liens against a property, they’ll turn the results over to a title company to issue title insurance.
Your real estate attorney will also represent you during the closing, explain all legal paperwork to you and ensure that you have all of the knowledge and information you need to go through with the home purchase.
Let’s say you’re required to hire a real estate attorney, or you want additional legal protection during your purchase. Your real estate agent can help connect you with local real estate attorneys in your area.
A tax advisor might not be the first person who comes to mind when you think through the home-buying process, but they can be a very helpful asset when buying a home. There are several smart reasons to consult a tax advisor when buying a home, including:
- Withdrawing funds from your 401(k) for a down payment
- Purchasing an investment property
- Using business funds to pay for a down payment
- Purchasing a home with gifted funds
Your real estate agent can answer some of your tax questions, but it’s always best to seek professional legal advice. Do you already have a CPA or tax advisor you use for your personal or business taxes? They’re a great resource to start with. You can also ask your real estate agent or colleagues to recommend someone trustworthy.