Season 1 – Episode 02 | February 24, 2020
Anna Olcese
Hello. In today’s podcast, you’ll get an overview of the buying process, specifically in the North Central Florida market. From first-time buyers to those going on house number 4 and beyond, you’ll want to listen in and get some tips that will make the process as smooth and stress-free as possible.
Okay, so basically today, what we’re going to do is what I do every time I meet with a buyer, a new buyer. I’ve had dozens and dozens of these types of consultations and what we’ve done, as a result, I broke it down to a 10-step process just to make it a little bit more palpable. Because the first-time buyers, of course, don’t know anything, so you’re going to want to absolutely listen in and get a feel for what you’re going to be encountering during the whole buying process. But also, anyone who’s moving to the area may not know the… the nuances about buying in Alachua County. It’s a little bit different here than it is anywhere else. And I’ll break that down as well. And then also even people who have bought here and haven’t done it in 5 to 10 years, the process is different. So, hopefully this will… this will help you no matter what stage you’re in in terms of the buying process.
Step number 1 is find a buyer’s agent. So, how do you do that? A lot of people find them on Zillow, or you ask your friends, maybe you’re referred to somebody by your employer, whatever. Whatever the case is, I strongly suggest that you insist on a buyer meeting with your agent or your potential agent. Why is that? Well, you wouldn’t just go get a diagnosis from a doctor without ever meeting with them. Same thing with an agent, you need to know, if this agent is qualified. You need to know what other people have said about them. You need to know that they know.
So, by sitting down with somebody one-on-one in an office, or if you have to meet maybe somewhere like Starbucks or whatever, you can go ahead and do that too, but ideally, in their office. You see that they have an office, you see that they’re professional, they’re going through the buying process with you. And they give you that sense of comfort that they know what they’re talking about, and that you connect. I think that’s key. You know, you’re going to spend so much time with your buyer’s agent, hours and hours, months. And you’re going to want to have the rapport and the confidence in them and be able to just know that an agent is more than a door opener, okay? A lock can hold a key that can help you into a house, but an agent will tell you whether or not you should be buying that house and explain to you, you know, what the repercussions thereof are. So, okay, so that’s that. That’s me preaching about how you definitely need a buyer’s agent and you must interview one.
The second thing is find a lender and get pre-approved. Now, this sometimes is interchanged with step number 1. A lot of people do, when we first meet in our buyer’s meeting, they are pre-qualified or pre-approved by a lender or have a proof-of-funds letter if they’re paying in cash. That’s fantastic. But oftentimes, again, a first-time buyer, well, often you just don’t know what kind of lender you should use, or who even to ask. So, your agent, as a trusted advisor and consultant, can give you a list of people that they’ve worked with and they know can do a good job, and they’ve consistently done a good job for their other customers. So, they can provide that.
I always say you should interview probably like 3 lenders and ask them about different types of loans, just to get an idea of which one would be best for you, which interest rates. You don’t have… you’re not committing to this lender, right from the get go. But what you need to do is have an idea of how much you can comfortably spend on a home. And I say ‘comfortably’ because, in my opinion, okay, take it or leave it, don’t max out your budget. Things are going to come up thing. You’re going to have extra closing costs you’re not predicting. You’re going to something… you’re going to move into the house and maybe the water heater will break the next day. And then what? You have to have some cash left over. Don’t max out your budget.
Don’t ever be insulted if an agent asks you, “Well, I need a pre-approval letter in order to show you some homes.” For a variety of reasons, you don’t want to see a home that you can’t afford. You sometimes can afford more than you think; so, that’s another positive. And also, as a courtesy to the people who are selling their home, this is not like, you know, it’s a free for all, like, “Come see any house that’s available.” You need to be a serious buyer. And that’s… that’s the very least we could do for somebody who’s getting their home ready to sell. And actually, in a future episode, where I hope to have is a lender here to give you some tips about the lending, like the whole process, and also some different types of mortgage options that you can have.
Alright, so you’ve got that… you got business out of the way. And now it’s the fun part, it’s time to go look at houses. So, usually, what you’re going to do is you’re going to probably send your agent, dozens of homes that you want to see. And your agent, being a good agent is going to say, “Look, I know you. I know you and I know the list of characteristics that you have that you would want in a house and things that you must have. This one, because I know the inventory, doesn’t have XYZ,” or, “This one does. Great choice. Let’s go look at it.” And they line up those. It’s not HDTV, you will not only see 3, I promise. You will see more than 3 houses, usually. Although sometimes, I have had people only look at 2 houses and buy 1 and that’s great. Average is probably 5 to 7.
So, you’re going to go look at some houses, eventually you’re going to find the one. And then and you’ll know it. By the way, this isn’t like you’re going to sit there and analyze it and think, “Well, maybe I could possibly live here.” No, you’re going to know the minute you walk in. And so, you’re going to find this house, you’re going to want to make an offer. If the market is… if you’re in a seller’s market, you’re probably going to want to jump on it pretty fast. Because more likely than not, you’re not the only person who feels this warm and fuzzy the minute you walk into this house.
So, you’re going to… again, that’s another great reason to have your lender already have you pre-approved because you’re going to submit that letter with an offer. But before you submit an offer, your agent is going to be able to run some comps and know like, “Okay, is this a good buy? Are you going to overpay for this house.” Recently, I had an example where a great house, it was absolutely stunning, and it had been remodeled and everything, but they were just asking for too much. It was just ridiculous. And I told the agent, I’m like, “Listen, the house is gorgeous, but it’s really priced, you know, a little bit too high.” And she took a little bit of offense to this. And I said, “It’s just… that is the case.” Well, 2 weeks later, she lowered it by $35,000, right, and then immediately got a bunch of offers, so… including one from us. So, you know, it’s the same thing, but an agent… a good agent, not going to let you make that mistake, because a good agent will not have commission breadth. It’s not about getting the most money on a sale, it’s about making a lifetime relationship, make sure that you actually deserve that trust.
Another thing I want to say though in relation to this running comps and a good buy and all that, you’re buying your house for you. It may or may not be the greatest deal, but if you love that house and if you can afford that house without being, you know, irresponsible in terms of your finances, buy the house, okay? You’re not going to get a return on the house in a year. You may not get a return on that house. Hopefully, you’ll make a little bit of money from it. But if you’re happy there and you feel like you live in paradise every day and you don’t have to go through the hassle of renting, then do it. Do it for you. And now, an investment property, yeah, you buy those of course. You need ROI on that. But your personal home, I speak from experience, I love my house, and that’s that and I bought it because I liked it.
So, okay. So, moving on, you make this offer. Now you made your offer, sometimes it’s a multiple offer situation, very tense, everybody’s nervous. But eventually, hopefully, you get good news, “Your offer has been accepted. You’re under contract.” You’re under contract once the fully signed contract by both parties, buyer and seller, has been signed and delivered to your agent who then delivers it to you. So, then that means you then submit your escrow deposit. The escrow deposit is basically a good faith deposit, where… that goes toward your final purchase price. But it’s a sign to the seller that you’re serious and that in fact, you have money to buy their house.
Typically, it’s submitted within 3 days of what we call execution of the contract, which is when it’s delivered. It goes either to a title company or to an attorney. And often, that coincides with the party that will be closing the transaction. So, it’s usually a title company or an attorney. Some agents… so, like, we have a big team. So, I have 8 people on my team. We have what’s called a transaction coordinator. Our transaction coordinator essentially takes over where I leave off. Once we finish the process of finding the house and we execute the contract, I’ve negotiated, done that part, she takes over. She is the one who dots the i’s cross the t’s. And she makes sure the timelines are kept and that, you know, we’re not missing the big things that are… you know, the devil’s in the details. Well, she takes care of the details.
But sometimes if you have an agent who’s not on a team, your agent is going to be the one arranging all of this stuff. And I’d say, either way, be vigilant because people make mistakes on either… you know, whether it’s singly or a transaction, we’re all human, we’re going to make mistakes. You also need to be very aware of what’s going on throughout the entire process.
One thing that a transaction coordinator or your agents going to do, which is required pretty much from every contract is scheduled inspections. So, you typically have a 15-day inspection period from the time you go under contract to do just that, to do inspections. And so, the types of inspections vary from house to house. All homes have a general inspection. By the way, we’re in step 5. Okay, so I want to recap.
Okay, so step 1 was to find a buyer’s agent. Step 2 was to secure your financing in terms of a pre-approval letter, or at least a proof of funds, if you’re a cash buyer. Number 3 was to find the house and make the offer. Number 4, you’re under contract because your offer was accepted. So, now we’re number 5. Number 5, inspection period. Again, this 15-day inspection period, you’ll have either… or you’ll have a general inspection.
In Florida, you also have a WDO Inspection. What is that? That is a Wood-Destroying Organism Inspection, because we have these beautiful little things called termites here in Florida. And so, we want to make sure your house is termite-free. We also want to make sure that the house doesn’t have any significant wood rot, or just big things that are like red flags that the house might be falling apart. And then for some types of loans, you absolutely have to have a WDO. Again, we’re going to get into that with a lender in a future episode. But at least this gives you an idea of what you would need. And so, you’re going to have that inspection. Your… if you have a septic and well, you’re going to have that. If you have a pool, you’ll have pool inspection. But those are typically the main ones. And then your inspections are going to run total anywhere between 500 and 1500, just depending on how many things need to be inspected. And then after that, your agent’s going to negotiate the repairs.
Now, I want to mention something here because, in our area, in Alachua County in particular, we usually use an as-is contract, which is really, it puts a lot of people off, especially people from out of town who don’t understand why we use one. Because pretty much anywhere else, that means that you take the house as is, which it does. It does mean that. It absolutely means that. In Alachua County, agents and sellers are a little bit more, not necessarily lenient, but they definitely are more open to negotiating repairs, even on an as-is contract. So, just keep that in mind that that’s just a nuance. It’s just something that we do here. But you don’t have to use an as-is contract. And if you choose to not use one, that is absolutely fine. But just don’t be surprised if that’s what your agent writes up here in Alachua County.
Alright. So, let’s say you… the house is perfect and you don’t… it doesn’t need repairs, or you’ve negotiated some repairs and you’ve gotten some credit for it, or they’re making them, and you’re going to move ahead. And then now, your escrow deposit (which was contingent on this inspection) can’t be returned to you anymore at this point you’re locked in. And so, you go, and you say, “Okay, I’m moving forward with this.” The loan has kept going throughout this whole process, like your lender has been working on in the back end. And then you go into the appraisal, because they want to make sure, as your lender, they are lending you the right amount of money for this particular property.
It’s fine if it appraises over value. What’s bad is if it appraises under value. And then at that point, you either may not get the loan, or depending on the type of loan, you may have to bring money to the table, you have to bring the difference. Or if the seller is really nice, they might be willing to either split it with you or even discount it, you know? And then you have an appraisal contingency as part of your contract, then that’s a whole other thing, because then, it would actually have been contingent on it appraising for the value that you offered. but that’s a little addendum, discuss that with your buyer’s agent.
So, if everything is fine with your appraisal, and everything has been worked out, then you do a survey, unless the seller already has a survey that they can give you. Again, you need to know what the boundaries of your property are. You want to know if, you know, Mr. Smith’s fence is on your property, then that’s an issue that you have to either address or acknowledge if nothing else. You have to know if there’s a utility easement behind your property and can, in this case, Gainesville Regional Utilities, can they get in there and mess up your backyard? Well, yeah, there’s an easement, they can’t. So, it’s just a whole bunch of different things. A survey’s definitely highly recommended, and some lenders will actually require you to get one.
So, now, you’ve passed… you’ve passed all these big hurdles. The biggest, biggest hurdle is making sure that your loan is approved. So, if you’ve got all this paperwork in and your lender’s been working diligently and you’ve been working diligently, finally your loan is approved, and you get what’s called the clear to close. And everybody pretty much has a party at this point because it’s been like all tense up to that point. And so, everybody’s thrilled, it means the purchase is going to go through, you’re good to go, you’re clear. If you’re… if you’re a cash buyer, obviously you don’t have that. So, you haven’t had this buildup of pressure up to now. But most people aren’t cash buyers.
Okay, so that was Step 7. Step 8, time to get insurance if you don’t have it already. You can’t close on a property that’s… that you have a loan on until you have insurance for it. And so, your agent can give you recommendations of insurance agencies within, you know, in town or even wherever, like just some that they think are really good. You may also have your own. And then something that you just have to keep in mind, again, we’re in Florida, and Florida does have hurricanes. And even though here in North Central Florida, we don’t typically get like major direct hits, if there is a named storm nearby, you cannot obtain an insurance. So, make sure that you have that in place long before that happens during hurricane season, which is, I believe June through November. And they typically pop up later in the season for some reason. And so, make sure that you’ve got that in place, because if not, you can close on your property. And that would be… that would make everybody very, very sad, especially after being so excited about it after you get loan approval.
Now, you have insurance, step number 9, you’re almost there. You’re just like almost there, okay? Final walkthrough before closing. What is the purpose of a final walkthrough? You’ve already seen the house 10 times? Well, you want to make sure that the repairs were done according to what the seller was telling you that they were going to do. If nothing else, you want to walk through that house and make sure that a tree hasn’t fallen on it overnight, or that a pipe hasn’t burst overnight. Or you just want to be there and you want to measure and make sure your furniture fits. So, whatever the case is, you need to walk through the house, either right before closing or the day before closing.
So, and then that’s it, you’re heading toward closing. You’re actually driving over there. You’re almost a homeowner. And so, you get there, you get to the title company, and the first thing they’re going to ask you is for ID. And some will ask you for one form of ID, and some will ask you for 2. So, I strongly suggest you have 2 forms of ID with you Just in case. Right before you get there, usually either like the day before or the day of in the morning, you will have wired your funds over to make sure that you have enough money for closing and that it’s there sitting in the closing company. Again, it’s either a title agency or an attorney’s office. And you are going to be given a gigantic stack of papers that you are going to sign your life away. And then you’re going to have… your wrist is going to hurt basically when this is all said and done. But what also is going to happen is that you’re going to have a smile from ear to ear, because you will then be a homeowner. And that is a great feeling, whether it is your first home, or your 10th home. It’s a beautiful thing to be a homeowner. And hopefully your agent is as happy for you as you are. And everybody just celebrates, and you’re handed the keys and you’ve achieved the American dream.
And that’s about it. So, those are the 10 steps. And I’m happy to recap them just to make sure we’ve got them all but here, step number 1, find a buyer’s agent. Step number 2, find a lender and get pre-approved, or have your cash buyer get your proof of funds ready. Step number 3, you look for the house, find the one and make an offer. Step number 4, your offer is accepted and you’re under contract. Step number 5 is the inspection period. Step number 6 is the appraisal and survey that needs to be done. Step 7, your loan is approved; Hallelujah! Step 8, time to get insurance. Step 9, the final walkthrough before closing. And finally, step 10, closing time. So, congratulations, you’re a homeowner. And that’s about it. That’s… it’s pretty painless; although it can be painful sometimes. So, just make sure you keep it pretty painless and lighthearted.
Thanks so much for listening today. If you like what you hear and want to learn more about real estate and hear the occasional funny story, then hit that subscribe button right now. And if you know of someone who’d benefit from listening, then tell them to subscribe too, or else they may feel a little left out. For questions, topic suggestions or nice comments, send an email to anna@segwayre.com. We can also connect on Facebook at Segway RE. Thanks for listening as we bring you a new way of doing real estate. Bye!
The Ten Step Buying Process
From first-time buyers to those going on house number 4 and beyond, you’ll want to read and get some tips that will make the process as smooth and stress-free as possible.
I’ve had dozens and dozens of these types of consultations and what we’ve done, as a result, I broke it down to a 10-step process just to make it a little bit more palpable. Hopefully this will help you no matter what stage you’re in in terms of the buying process.
A lot of people find buyers agents on Zillow, you ask your friends, or maybe you’re referred to somebody by your employer. Whatever the case is, I strongly suggest that you insist on a buyer meeting with your agent or your potential agent. Why is that? Well, you wouldn’t just go get a diagnosis from a doctor without ever meeting with them. Same thing with an agent, you need to know if this agent is qualified and what other people have said about them.
By sitting down with somebody one-on-one in an office, you see that they’re professional. They give you that sense of comfort by going through the buying process with you, showing that they know what they’re talking about, and that you connect. You’re going to spend so much time with your buyer’s agent – hours, days, months – so you’re going to want to have the rapport and the confidence in them and be able to just know that an agent is more than a door opener. A lock can hold a key that can help you into a house, but an agent will tell you whether or not you should be buying that house. You definitely need a buyer’s agent and you must interview one.
Now, this sometimes is interchanged with step number 1. A lot of people, when we first meet in our buyer’s meeting, are pre-qualified or pre-approved by a lender or have a proof-of-funds letter if they’re paying in cash. That’s fantastic. But oftentimes, again, a first-time buyer often just doesn’t know what kind of lender you should use, or who even to ask. Your agent, as a trusted advisor and consultant, can give you a list of people that they’ve worked with and they know can do a good job, because they’ve consistently done a good job for their other customers.
I always say you should interview probably 3 lenders and ask them about different types of loans and interest rates, just to get an idea of what would be best for you. You don’t have to commit to this lender right from the get go, but you need to have an idea of how much you can comfortably spend on a home. I say ‘comfortably’ because, in my opinion, don’t max out your budget. Things are going to come up money wise. You’re going to have extra closing costs you’re not predicting. You’re going to move into the house and maybe the water heater will break the next day, and then what? You have to have some cash left over. Don’t max out your budget.
Don’t ever be insulted if an agent asks you, “well, I need a pre-approval letter in order to show you some homes.” For a variety of reasons, you don’t want to see a home that you can’t afford. You sometimes can afford more than you think; so, that’s another positive. And also, as a courtesy to the people who are selling their home, you need to be a serious buyer.
Before you submit an offer, your agent is going to be able to know if this is a good buy and if you are going to overpay for this house. Recently, I had an example where a great house that was absolutely stunning, had been remodeled and everything, but the sellers were asking for too much. It was just ridiculous. And I told the seller’s agent, “the house is gorgeous, but it’s really priced a little bit too high.” Two weeks later, she lowered it by $35,000 and immediately got a bunch of offers, including one from us. A good agent, not going to let you make that mistake, because a good agent will not have commission breadth. It’s not about getting the most money on a sale, it’s about making a lifetime relationship.
Now you made your offer, sometimes it’s a multiple offer situation, where it’s very tense and everybody’s nervous. Eventually, hopefully, you get good news, “Your offer has been accepted. You’re under contract.” You’re under contract once the fully signed contract by both parties, buyer and seller, has been signed and delivered to your agent who then delivers it to you. So, then that means you then submit your escrow deposit. The escrow deposit is basically a good faith deposit that goes toward your final purchase price. It’s a sign to the seller that you’re serious and that you have the money to buy their house.
Typically, the escrow deposit is submitted within 3 days of what we call execution of the contract, which is when it’s delivered. It goes either to a title company or to an attorney, and often, that coincides with the party that will be closing the transaction. You need to be very aware of what’s going on throughout the entire process and be vigilant because people make mistakes.
It’s fine if the home appraises over value, but what’s bad is if it appraises under value. At that point, you either may not get the loan, or depending on the type of loan, you may have to bring the difference to the table. If the seller is really nice, they might be willing to either split it with you or even discount it, and then you have an appraisal contingency as part of your contract – but that is a more detailed conversation for another time.
If everything is fine with your appraisal, and everything has been worked out, next you do a survey, unless the seller already has a survey that they can give you. You need to know what the boundaries of your property are. You have to know if there’s a utility easement behind your property and can the utilities company get in there and mess up your backyard? It’s just a whole bunch of different things. A survey’s definitely highly recommended, and some lenders will actually require you to get one.
