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Have you decided that you are ready to purchase a home? With Phoenix rents continuing to rise faster than the rest of the country and interest rates at all time lows, now might just be the perfect time to purchase a home in the Valley of the Sun. If you have kept up with our monthly market reports; however, you know that we are currently experiencing a pretty strong sellers market. No need to worry though! Many experts are predicting home values to keep rising in 2021. This means that you could benefit from this appreciation if you chose to buy early in 2021. If you follow the steps outlined below, we feel confident that you will be able to call yourself a homeowner in the New Year!
1. First and foremost, find THE RIGHT REALTOR® for you! Many other home buying guides might place this step a little further down the list; however, we know that in a market like this, having the right representation and guidance from the get-go can help insure you get the home you want at the best price. A good REALTOR® will know the market, and more specifically, the area where you are looking to purchase. They can help guide you through every part of the process and help prevent and fix any pitfalls that can arise in the process. Depending on your price point, your offer might end up being one of many. If this is the case, it will benefit you to have a seasoned REALTOR® who knows how to write offers that have the best chances of being accepted. With nearly 90,000 licensed agents in Arizona, chances are you know someone (or several people) with their real estate license. Unfortunately, this is not the best time to rely on your family member or friend that only writes a contract every year or two. In this market, you need an agent, preferably a REALTOR® that is skilled in contract writing and real estate negotiations. Our firm is home to many successful, full-time, seasoned REALTORS® that can help you guide you through the home buying process. You can see their bios here.
2. Once you have chosen your REALTOR®, you need to figure out exactly how much house you can afford. If you haven’t ever created a budget, NOW is the time to do so. In order to figure out exactly what you can afford to pay for a home, you will need to have a good idea of what your monthly expenses look like. You need to be well aware of what you have coming in each month and the stability of the origin of those funds as well as what is going out each month. If you have a financial planner, he or she might be able to help you take a close look at your finances and help you determine exactly what you can (and can’t afford). If you have chosen the right REALTOR®, they can help you by showing homes that fit within your parameters. If the REALTOR® you choose to use insists on showing you homes outside of your price range, you might want to reevaluate that relationship. Your REALTOR® should have your best interest at heart.
3. Next, if you haven’t already, NOW is the time to start saving for a down payment. If you are looking to obtain a conventional loan, you will ideally want to plan on saving for a down payment of at least 20% of the purchase price of the home to avoid having to pay for Private Mortgage Insurance (PMI). The down payment isn’t the only cost you will have though. You should also plan on saving approximately 2-5% of the purchase price of the home to pay your closing costs. This money will be due along with your down payment when you go to close on your home.
4. The next step is to get pre-approved for your mortgage loan. Your lender will need some information from you regarding your assets and income in order to provide you with a pre-approval. If you do not have a lender you trust, just ask your REALTOR®. He or she should be able to give you several options for reputable lenders in your area that are well versed in various types of loans. Some people think it will be easiest to use your current bank as your lender. This is not always true. As the borrower, you have the ability to shop around for the best rate on your loan.
5. Finally, we get to the fun part – House Hunting! While many people spend time looking at homes on sites like Zillow or Redfin, unfortunately, these sites are not updated in real time. Oftentimes, when a client finds a home on one of these sites, it is already under contract. Your REALTOR® can set you up with a portal on his or her MLS that only shows you homes that fit your search criteria. The best thing about the portal is that it is updated in real time. In a sellers market, it is important that you don’t waste too much time looking at homes that are already under contract. Your REALTOR® can set up your portal to alert you when new homes come onto the market.
6. Once you find the perfect home, it’s time to make an offer. Your REALTOR® should work with you to create the best possible offer. This can be a nerve-racking time. It is important to have clear expectations about what can possibly happen after your offer is submitted. In this market and depending on your price point, your offer could be one of many. Best case scenario, your offer is accepted as-is. If this happens, kudos to you and your REALTOR®. Worst case scenario, your offer is rejected or ignored. If this happens, your REALTOR® can help guide you through what to do next. Typical scenario, your offer is countered in some way. Again, your REALTOR® will be a valuable resource in helping you decide what to do if this happens.
7. Once your offer is accepted and the final contract is signed the next step is to open escrow. Your REALTOR® should have given you title and escrow company options prior to writing your contract. When your contract is accepted any earnest money indicated in the contract should be wired or delivered to the title company to be held in escrow.
8. Once the contract is accepted and if inspections were not waived, a proverbial clock starts for the buyers “due diligence” period also known as the inspection period. Again, this is an important time to have a seasoned REALTOR® on your side. Because these things are time sensitive, it is imperative to have someone in your corner who is well versed in the real estate contract deadlines and required paperwork. The first thing to set up is your home inspection. Your REALTOR® should be able to provide you with a few different options for various home inspectors. In addition to the home inspection, you may opt for other types of inspections on the property such as a termite inspection, roof inspection, septic inspection, well inspection, sewer line inspection, mold inspection, pool inspection, etc. Payment for these inspections will fall primarily on the buyer. If issues arise from any of the inspections, you will work with your REALTOR® to fill out the BINSR (Buyers Inspection Notice Sellers Response) and either ask the sellers to fix the issues or credit you money back so that you can fix them yourself. The sellers may opt to do either of those things, or they might opt to do nothing. Depending on the issues, and how badly you want the home, you may have some hard decisions to make based on the sellers response. If the sellers agree to make repairs, you will be given the chance to do a final walk-through prior to close to make sure all of the agreed upon repairs have been made.
9. One more hoop to jump through… the appraisal! Unless it was waived in the purchase contract or by your lender, your lender will order an appraiser to come out to appraise the current value of the home. Because of the current sellers market, some experts predict that we might start to see an increase in overpriced homes that do not appraise for the purchase price. If this happens, you will need to talk with your REALTOR® about your options to possibly negotiate with the seller and continue with the purchase or walk-away. Your REALTOR® should be able to guide you through any sticky situations and help you come to a final decision.
10. Inspections done, appraisal done, final walk-through done, now it’s closing time! In Arizona, the title company will set up a time for you and the sellers to sign your final documents separately. At this point, you will pay your down payment and closing costs. Once funds have been received from both you and your lender, the title company makes sure the sellers are paid. They will also record your deed with the county recorder. Once the deed has been recorded, the title company will notify your REALTOR®. At that point, the home is yours! Most often, your REALTOR® will meet you to give you the keys to your new home. CONGRATULATIONS and WELCOME HOME!
If you are thinking about buying or selling a home in Phoenix, Scottsdale, Paradise Valley, Tempe, Chandler, Mesa, Gilbert, Peoria, Glendale, Goodyear or anywhere else in the Valley of the Sun, we want to be a resource for you. Please reach out to us with any questions at email@example.com.