Buying a Home

The largest purchase most people will ever make in their life is a purchase of a home.   Before making any decisions, remember that above all else, a home is an investment so this decision is important.


Many of the same considerations for renting an apartment apply to buying a house.   However, with buying a house, start with an understanding of how long you intend to stay in the house.  If you intend to stay in the house through the growing of your family, then the size becomes an issue and buying something larger may be your best option.  If you intend to change houses as the need requires, then you can start with something smaller and upgrade to something larger as the need presents itself. However, over time your income should increase and provide more flexibility in the size of a home.


Many people consider the owning of a house to be a worthwhile goal because of the pride of ownership and the ability to make changes on your own.  If the owning of a house is a worthwhile goal then whether old or new, does it make a difference?  Let's start with the beginning.  All houses are built from the ground up.  This is a simple step by step process with lots of steps and requires working with local building officials to complete the inspections during the process.  Although this is a project you can do yourself, most people don't have the construction knowledge to complete the entire project, which leaves two other options: purchase an existing house or purchase a new house.


Either option has merit and the choice between the options is a matter of personal preference.  One serious consideration is the potential need for immediate minor repairs on an older house.   While some people are comfortable with 'handyman' or 'do it yourself' projects, some people are not.   Many people purchase a new house because they believe that they won't have to deal with these problems, however, over time, every house will have problems that must be dealt with either by the owner or hired help.


When purchasing a house, a new house is normally purchased from a builder whereas the existing house is normally purchased from the home owner through a Realtor. Remember, like a car, as soon as anyone moves into a brand new house, it is no longer new so the primary consideration is always going to be the quality of the maintenance.   You can't assume that a house that is only 1 year old will be in better condition than a house that is 30 years old.



As with a car, there are a number of considerations.   Unlike buying a car, a home purchase process can and should require considerably more time since the ownership may last for decades instead of 1 or 2 years.   Throughout the process, there are legal forms to sign, many of which are binding (designed to keep you from backing out of the purchase).     Always understand your options when and if you change your mind.



Before beginning any search for a house, start with an understanding of your current financial position.   It is worthwhile to go to a mortgage broker or your financial institution and get pre-approved for a mortgage.   The pre-approval process starts with a review of your financial position based on current income and current expenses / payments.   The pre-approval process will also take into account your credit rating to give you an idea of the possible interest rate that you can get, resulting in a projected monthly payment.   It will also help to establish the amount of money (cash on hand) you will need to bring into the purchase as a down payment to satisfy the lender requirements.

            - Type: There are basically two primary types of houses:

                            - Single Family Residence: This would be any residence where the owner is responsible for upkeep and maintenance of property and landscape.   Normally, the home owner is responsible for both landscape maintenance and the property maintenance.

                            - Consolidated Residences: This would be any residence where the unit is a member of a group of units where the exterior maintenance and landscaping are maintained by a management group for the units.   The management group will establish the projected costs for the long term to insure the exterior property value is maintained.   This type would include condos, townhouses and duplexes, to name a few.   With the additional maintenance performed by the management group, each resident is required to pay monthly dues which can be anywhere from $40 to $400 or more (in addition to the mortgage payment).

            - Price: The monthly mortgage payments must be within the range that you have established during the budget development.   Also, when considering the monthly payment, make sure the lender estimates the escrow payments to insure that you will not be surprised when the first payment comes due.

            - Location: This consideration has more to do with your convenience and commute time than anything else.   Like an apartment, determine your personal traffic patterns and rank them so that those items that are more important can influence the selection.   You can find a house in most parts of town, however, with a long term commitment, make sure that there are no negatives with the location (garbage dump next door, rail road tracks, etc).

            - Size: The size of a house has a lot to do with several long term issues:

                            - How long will you be in the house?

                            - Do you intend to raise a family in the house?

                            - Is the house intended as a status symbol?

            - These issues are very important and should not be taken lightly.   If your intention is to move as the need arises, then size becomes less important.   On the other hand, starting with a small house and planning on adding an addition requires that you have the proper amount of open space around the house to satisfy the legal restrictions and deed restrictions.

                            - Note that there is a difference between legal restrictions, deed restrictions and CC&Rs.   A legal restriction is the required distance between the side of the house and the edge of the property or how the property can be used.   Deed restrictions and CC&Rs are similar in that they are additional restrictions implemented by the builder or developer.

                            - Also, raising a family creates a need for additional space that may not be immediately known.   Small (starter) houses are perhaps the least expensive but don't provide a lot of space.   As the size increases, so does the price. However, the same price can get different sizes based on the location or the products used in the house.

                            - In those cases where children are involved, consideration must also be given to the school district that serves the area.   Are quality schools provided?   How do the schools rank compared to other districts in the area?

             -                 Safety: When you drive the area, do you feel secure?   What can be done to make the house more secure?   This can be reflective of the lighting, openness, controlled access, and more.   With a long term investment like a house, having security and safety becomes an important consideration.

            -                 Comfort: Personal preference will tell you whether you approve of the flooring, the room layout, and the styling.   The nice thing about a house is that you can make changes where desired.   If the floor plan isn't quite what you had in mind, be sure that you can make the desired changes before committing to the purchase.



As with everything else, there are additional costs to be considered.

            -               Utilities:

                            -                 Electricity

                            -                 Gas

                            -                 Water

                            -                 Sewer

                            -                 Trash Disposal

                            -                 Telephone

                            -                 Cable

                            -                 Internet

            -                 Maintenance: These costs need to be planned and money set aside.

            -                 Home Owner Association Dues: The amount of the dues are disclosed in the sales agreements.   These can be minimal or substantial, depending on the neighborhood.   



When a block of houses are built by a single home builder, this is often referred to as a subdivision and can often have a special name to separate their group of houses from those of other subdivisions near by.   Home Owner Associations are the local authority for a subdivision.   In other words, when the builder completes all the houses in the subdivision, the builder will set up a governing body for the subdivision.   This governing body is intended to help all the residents work together to keep the property values as high as possible.   This governing group normally has the authority to issue notices to request the homeowner to correct 'infractions'.   An infraction would be anything that would be considered as a potential negative impact to the property values.   The Home Owner Associations have the legal right to place a restriction (lien) on your house for failure to resolve infractions.   Most important, there are dues associated with a Home Owner Association, understand what is covered and what services are provided.



This is something that can't be ignored because it will not take care of itself.   Home maintenance is not just fixing all of the little problems but also taking care of the replacement issues.   Things can wear out with age and newer options become available that will last longer and / or save money in the long term.   A prime example is an air conditioning system that is more than 7 years old.   All appliances become more efficient as the models improve.   You may be able to save money by replacing an A/C after 7 years because of the difference in energy usage.


Start with replacement issues.   There are a number of books that can help put together a list of everything that needs to be addressed, but to give you an idea would be replacing batteries in the smoke detectors and changing the filters in the heating and cooling system.   When you own a home, the presentation or appearance of the house is under your control, however, everything involved in the presentation needs to be maintained.   When researching maintenance issues, spend some time understanding what the consequences are of failing to perform the required maintenance.  Some Home Owners Associations require the landscape be maintained and the exterior of the house maintained for proper appearance to insure that the neighborhood looks as attractive as possible.



Starting with the house exterior, does the house have landscaping?   Landscaping can have all kinds of issues that need to be managed.   Grass needs to be cut, plants need to be trimmed, debris and leaves need to be raked.   Each of these items can either enhance the house appearance or, by being over grown or messy looking, can detract from the house appearance.   The consequence of a messy yard can be a notice from the Home Owner Association demanding resolution.



Then there is the wood trim on the house which is normally found around the roof and the doors or windows.   The trim paint application can often provide character to the house appearance and, while it lasts for years, it often can become faded and peel almost overnight if it is not inspected and updated as needed.   If the house exterior is painted, then that is another maintenance issue and needs to be added into the mix.   Repainting the exterior is not a simple task and can be expensive if you contract the work out to a painter.   The consequence of failing to maintain the paint can be two fold: first, the Home Owner Association and the dreaded notice, and second, the wood under the surface can rot, requiring more costly repairs.



The exterior of the house is also where the first level of 'pests' live.   Pest control can be everything from ants and termites to roaches and rats.   Maintaining the house exterior can help control these pests while the flip side is that maintaining the pest control will help insure that the house is not damaged by the pests, with the worst being termites.   The consequence of failing to manage pests can be extensive, with almost everything requiring significant repairs.   Not only do termites destroy the wood in the house, it is not abnormal for bees and wasps to build nests in the walls when openings are left uncovered.   



Above everything is the roof.   Depending on how the roof is made and what it is made of will determine how often it needs to be inspected and maintained.   An annual inspection should be performed to find problems before any damage to the interior can occur.   Also, the roof should be cleaned of debris and dirt accumulations as needed.   Roof repairs can be either expensive or cheap depending on when the problem is caught.   Most of the time, the biggest cost is not the roof repairs, but instead the cost of repairing the damage to the interior when water leaks into the house.   



This is a simple inspection of the exterior of the house.   Other items to consider are any mechanical devices on the outside of the house, like a compressor for the A/C system.   Also, a number of landscape packages have an irrigation system.   Everything needs to be maintained in some way and knowing the required maintenance schedules is a good plan.



Let's move to the inside of the house and look around.   



Here is one of the cardinal rules about the interior of the house: uncontrolled water is a very bad thing.   While the use of water in the house makes life comfortable, uncontrolled water can cause thousands of dollars in damage through material breakdown, rot and mold.   There are a number of water sources and each one can be a problem.   Let's start with plumbing.   The problems can start with a burst water pipe in the wall, which can be quickly identified if everyone in the house knows that they should say something.   Secondly, after water is used and runs down a drain, it can become the next possible problem.   All drains should be visually checked once a month and this does not need to be complicated.   Just look for any signs of wetness or wood warping under sinks or drain lines (note: there are alarms that can be placed under sinks reacting to wetness).   Water leaking into the walls can cause rot or lead to mold and mildew.   Water leaking through the roof falls into the same problem category.   Don't forget the water heater (is it gas or electric) and check the manufacturer's recommendation for specific maintenance issues.   From the beginning, learn where the water shut off valves are for each fixture and the main water line and make sure that you can turn off the water by yourself, if needed.



This stands for heating, venting and air conditioning.   The item that requires constant attention is the replacement of the air filters at the air handler / furnace and this should be done monthly.   On an annual basis, you should have a professional come in and check the system.   Also, if you have both heating and air conditioning, have a professional come in each time you prepare to switch systems.   The heating system can be electric (most costly), natural gas or propane, heating fuel or coal.   Each type of system has it own special set of needs and maintenance issues.   Work with the professional and learn what needs to be done for your system; they are more than happy to help.   



This system can often be the least trouble, but when problems occur, watch out.   The main issue with electricity is making sure that you do not try and pull more power out of a socket than the circuit was intended to support.   Second big issue is electrical shorts but as long as you are not damaging the wiring, you should be okay, but if you decide to change the wiring, either bring in a professional or learn electrical basics.



These are the things that are intended to make your life easier.   Washing machine and dryer, dishwasher, stove, refrigerator, microwave or vacuum are all appliances that are nice to have around and, at the same time, need to be checked on occasion to keep them in proper working order.   For each appliance, there are manufacturer maintenance schedules.   Go around the house and make a list of all the major appliances, then go through each user manual and make a note of the suggested maintenance items and the suggested schedule.



Just like the exterior, the paint on the interior needs to be maintained.   The nice thing is that the interior paint normally does not require the same upkeep as the exterior and may last a lot longer, but the interior paint also provides the greatest flexibility to make design changes.   The biggest concern about the interior paint is when a small hole is left and repaired.   Getting a perfect color match is almost impossible and a mismatch is a lot easier to see on the interior.



This is one of the curses of owning a house.   You always want to make it a little better.   Remodeling can mean changing the flooring, the paint, the lighting fixtures, the bathroom or the kitchen.   If you want to do some remodeling, start with smaller projects, give yourself enough time (twice or three times more than expected) and then estimate and plan for the cost.   While bringing in a professional is always an option, the cost of a professional can drive up the cost considerably.



This schedule should be developed and each item checked off as completed.   The easiest thing to do is to set up a schedule on a spreadsheet program.   Remember, some items need to be checked monthly, quarterly, twice a year or yearly.   Take each item and establish the frequency, then set up the calendar based on the need.   Surprisingly, this function does not take a lot of time but making sure it is completed on schedule allows you to catch a problem before anything serious happens.                       


Equity is the difference between the current value of the house and the outstanding loans on the house.   Here's where the previous concept of remodeling comes into play.   The equity can only go up by increasing the value of the house or reducing the outstanding loan balance.   In most cases, remodeling a house will increase the value; however, the cost of the remodel may exceed the increase in the value and this ratio needs to be considered before starting any remodels.   Most houses increase in value over time, but this process can take years and during these years, the property needs to be maintained to insure that the house stays in good condition.Of course, the first question is whether or not all this effort pays dividends.   The answer for most people is 'Yes' and the benefits come in many forms.   Renting an apartment provides flexibility, but lacks permanence and rent payments have no return in value.   Owning a home gives a feeling of stability and each mortgage payment is an increase in equity as the loan balance drops.   Also, there is not an income tax deduction for rent payments but there is a deduction for interest paid on your home. Lastly, there are very few circumstances where a house, properly maintained, did not go up in value over time.   As with everything else, this may not be right for you, but deserves consideration.



If the discussion of the above items hasn't completely discouraged you from buying a house, then let's work through the purchase process.   In truth, for the buyer, the process is very simple, but there is a lot of paperwork.   Due to the differences, let's look at the three primary options: building a house, buying an existing house, and buying a new house.   Luckily, some of the later steps are relatively the same so those steps will be covered later.


Since all three options will end in a mortgage for most people (unless you are paying cash), let's discuss a mortgage.   A mortgage is a rather common loan type. Mortgages are normally set for 30 years, but it is possible to get a 15 year loan (payments are higher but it is paid off faster).   Mortgages normally come in two types: fixed or ARM (Adjustable Rate Mortgage).

            -               Fixed Loan: With a fixed loan, the interest rate is fixed for the entire length of the loan.   The payments under a fixed loan are easy to budget and don't shift over the life of the loan (changes in the escrow amount can cause the total payment to change).   Because these interest rates are fixed, the starting interest rate may be higher than the interest rate of an ARM.

            -               ARM: An Adjustable Rate Mortgage means that the interest rate can and probably will be adjusted during the life of the loan.   Depending on the terms of the loan, the rate can be adjusted as often as once a year.   Most of these loans have annual rate increase limits and overall loan rate increase limits, so the borrower is somewhat protected.   However, be aware that in times of rate increases, the payments can jump significantly if the rates shift upward.   ARMs may be offered with a low teaser rate for the first year, as an incentive.   Lenders like to have loans with adjustable rates so they can keep the interest rate in line with the economy.


Since the lender wants to make sure the insurance and property taxes are paid, they establish the escrow account described earlier.   Each payment includes a portion for the escrow and this portion is accumulated for the required payments.   The lender should provide an annual escrow review and indicate whether the portion for the escrow will go up, down or stay the same.The mortgage is 'originated', meaning that the mortgage company performs all of the reviews needed to qualify the borrower. This means that the mortgage company collects a lot of information from you about your job, checking account, other assets, and other debts with debt payments.   This process allows the lender to make sure that the borrower will have the ability to make the payments based on the information presented.   At the end of the process, the lender will run a credit report on the borrower and the available interest rates will depend on the credit score (lower credit score equals higher interest rates).   Once the lender has agreed to the loan amount and everyone has agreed to the interest rate, the loan is originated, meaning all of the paperwork is prepared and the lender makes a commitment to provide the loan amount if the borrower signs all of the agreements.   From the earlier discussion, a mortgage loan is comprised of a time period, the loan principal balance and the interest rate.   In the case of a mortgage, the loan principal balance seldom turns out exactly as expected.   Assume that you purchase a house for $140,000 and you put $20,000 down, you assume that the loan principal balance would start at $120,000.   In most cases, there are 'points', fees and charges (discussed below) that are added into the closing numbers.   Unless you can pay for the extra charges with more cash, then the mortgage loan balance is increased to cover the additional items.   You may end up with a loan balance of $122,750 instead of $120,000.   Since you will be paying off the loan over 30 years, the additional amounts become barely noticeable.   It is important to understand the points, fees, and charges.There are number of minor fees and charges in the process, however, the biggest is referred to as the 'points'.   Points or Loan Discount: This is a percentage of the loan amount.   A point is one percent of the loan balance, so 2 points would be 2% or one and a half points would be 1.5%.   Let's assume that you are getting a fixed rate loan, for 30 years.   Normally, there are options available where the rate goes down as the points goes up.   You may see something like:

            1)               6.410%               with 0.000 points               and Fees $1,175

            2)               6.125%               with 1.000 points               and Fees $1,175

            3)               5.875%               with 2.000 points               and Fees $1,175

            4)               5.750%               with 2.125 points               and Fees $1,175

These are the choices available to you for interest rates.   Notice that as the interest rate goes down, the points go up.   This is normal.   Consider the impact of each of the choices.   Assume that the loan amount starts at $120,000.

            -               Under Option 1, the loan balance: $120,000 with monthly payment of $751.39

            -               Under Option 2, the loan balance: $121,200 with monthly payment of $736.42

            -               Under Option 3, the loan balance: $122,400 with monthly payment of $724.04

            -               Under Option 4, the loan balance: $122,550 with monthly payment of $715.17

So, which option should you choose?   The options are offered because each option offers a different return based on the circumstances.     One way to review the options is to compare the money spent on the points with the savings in the payment amounts over the time frame that you intend to have the loan.   Some people will buy a house and live in it for 30 years and other people will live in a house for 2-3 years, planning on moving up when the time is right.   If you live in the house for 30 years and save $36.22 (Option 1 payment less Option 4 payment) per month on the loan payment, then the total savings would be over $13,000 and the points paid up front only increased the loan by $2,550.   However, if you live in the house for 2 years then the total savings would only be $869, so spending the money on the points actually cost more even though you got a lower interest rate.   Each option has a different payback period so that the points and savings can break even and your situation can be   fitted into one of the options.


Appraisal: This is the charge that pays for an outside party to appraise the property (estimate the house's current market value) based on recent activity in the area.   The lender wants to make sure that the loan is properly valued so he compares the price you are paying less the down payment to the loan balance.   The better that you negotiated the purchase price, the better the appraisal will compare.


Documentation Fees or Processing Fees: There are various costs from multiple agencies associated with preparing the paperwork, organizing the signing by all the parties, and the handling of the money.   Someone has to pay this charge and the buyer is normally charged.


Recording Fees: Once the paperwork has been completed, the deeds and liens must be recorded with the county recorder.   These are fees charged for processing the paperwork.


Property Title Insurance: This charge is for the insurance on the property title to protect you in case there is a claim from someone else.   While this is very rare, if the claim is upheld, you would lose the property, so the insurance protects you and the lender.


Escrow Funding: This is the initial amount needed to fund the escrow account.   The escrow account is used to pay for the insurance and property taxes.   The escrow account is funded with monthly contributions included with each mortgage payment.   The initial funding is intended to bring the balance to where it should be if you had been making the escrow payments all year.


Pre-Payment Interest: This payment covers the mortgage loan interest that will accrue before the first mortgage payment is made.   Often the first payment on a new mortgage is more than 30 days away so the interest from the date of funding to the date of the first payment is collected in advance.Needless to say, there are a number of other charges or fees that can be charged, however, this is a list of the main items to review.   Part of the negotiation process when purchasing a house is who will pay for which fees and charges, although there are some standard allocations.The mortgage should be discussed with a potential lender before the selection process begins so that you can be pre-approved for a specific loan amount.   This will give you an idea of the potential price that you can afford.   Also, being pre-approved can provide some leverage when negotiating with the seller.


At the time of the closing, you will meet with the closing or escrow agent to complete the process.   If you are paying cash, then there is almost nothing to sign, however, most people don't pay cash.   While there will be many documents to sign during the closing and mortgage process, most of them relate to the mortgage.   One of the main documents is the Deed of Trust and this is the actual transfer of the property from the seller to the buyer, making you legally responsible for the property.   The next important document is Loan Agreement, which actually spells out the agreement terms and conditions. There are a number of other approvals, confirmations and applications that go along with the loan agreement, however, the entire process can take less than 30 minutes.   Sometime during the closing process, you will be presenting the closing agent with cleared funds (cashier's check) for the amount needed to complete the closing.   One of the documents that you will want to review in detail is the HUD Settlement Statement.   This is a standardized form developed by the federal department of Housing and Urban Development.   This document lists all of the prices, fees and charges that need to be identified.   This document shows the dollar amounts for both parties including loan payoffs and final cash received and disbursed.   Read through this carefully and make sure that it is what was agreed between the seller and the buyer.   It is acceptable to question each line item that falls under the buyer side of the agreement if the dollar amount is out of line.   If you used a real estate agent, they will also review the document in advance to identify potential concerns.


Once you have signed all the papers and provided the required cleared funds, then you are done.   You should be told when and how the keys will be provided at this time.   While all of the paperwork has been completed, technically, the transaction is not complete until the loan is funded, the seller is paid and the documents have been recorded.


BUILDING A HOUSEThis is a scary prospect for most people.   To start at the beginning, you must locate a piece of property that will suit your needs.   Normally, you will purchase the property and place a mortgage on the property.   There are a number of options on the loan type but if you plan on building within 24 - 36 months, you can probably get a loan package with interest only payments and a balloon payment at the end of the loan.   The balloon will be paid off when you convert the finished house into a home mortgage.   If desired, you could pay off the land first, eliminating one potential cash flow issue during construction.


The construction process can be time consuming and it never hurts to bring in a project superintendent to help manage the construction process.   If you are a do-it-yourselfer, there are a number of jobs that you can perform by yourself, reducing the overall labor costs.   This type of a construction process will require a construction loan, with loan outlays occurring when certain portions of the work have been completed and inspected.   Once the construction is complete and the house has been occupied, you would then convert the construction loan into a standard mortgage.



This is the normal process for most people because the number of resold homes always exceeds the number of new homes that are purchased each year.   This process can be exciting and stressful because you are looking for a home to meet your desires and expectations, while trying to purchase the home for the best possible price. Bear in mind that the purchase of a home is normally an investment and you do not want to over spend while getting the best value for the money.


There are several recommendations to remember when looking for a home but the most important is very simple: never become emotionally attached to any house until you have a signed contract.   At any time, be prepared and ready to walk away if the deal or the price does not meet your needs.   It is important to look at each house and find the positives and negatives.   Before starting the search, make a list of all the desired items.   How many bedrooms are needed?   Home many bathrooms must be in the house?   Is the size and design of the kitchen a deal breaker?   How much yard do you require?   Should the yard be fenced?   This is only a partial list and only you would know all the items that need to be on your list.   This process can take hours, days or weeks.   Once the list is complete, rank the items.   Which ones are deal breakers?   Which ones are negotiable? And which ones would be nice to have?   Every house that you look at should be compared to the list.   You may not be able to find a house with 100%.   For those people that are do-it-yourselfers, there is the option of buying a house at a lower price and remodeling to bring it into line with your desires.   Remodeling can be expensive and time consuming but can substantially increase the value of the home over the purchase price.


Once you have found a house, the negotiation begins.   Work with your Realtor to establish the price that you want to offer.   Buying a house is a negotiation process between the price the seller wants and the price you are willing to pay.   The seller wants the price as high as possible and you want the best deal possible.   Think through the negatives and the items that need to be fixed and estimate the cost.   Adjust the seller's price by this amount and give yourself some leeway and make an offer.   The process goes back and forth with offers and counter offers until either of the parties gives up or both parties agree on a price and a set of conditions.   At this time, everyone agrees on a closing date and you have a limited number of days to complete any conditions that are outstanding.   These conditions are critical and provide you a means to resolve any problems discovered which were not evident during the initial house walk-thru.   The conditions include a termite report and a house inspection.   The termite report is a formal inspection by a pest professional that insures there is not unknown termite damage.   The house inspection is a complete house inspection, testing all systems for identifiable problems, providing a report of the inspection and concerns.   If something shows up as a concern on either report, you have the option of requesting the seller fix all, some, or none of the problems prior to close.   The nice thing about an inspection report is the ability to cancel the deal if the owner is unwilling to make the desired changes.After all is said and done, you are now ready to start the final mortgage and closing process described above.



This process is different from buying an existing house from the perspective that you may have the option to make changes to items in the house during the construction process.   You will start by agreeing to a price and house style along with a projected closing date.   The contract locks you into the purchase because you must provide a down payment; however, the price is also locked in protecting you.


Sometimes, you may be interested in buying a new house that has already been built but has never been sold.   Builders often refer to these houses (built without an existing buyer) as speculative houses, in other words they are speculating that someone will buy the house once it is complete.


Often the house has not been started when the contract is signed, and you have the chance to make changes to the house.   Often the changes are minor because you have already selected a house model which has a general layout that you like.   These changes are referred to as options and upgrades.   These can include minor structural changes through the appearance of the kitchen to the color of the paint and flooring.   The house will be built according to the choices you have made; however, it is not abnormal for the builder to require some additional payments during the construction process.   Before the house is completed, you will start the final mortgage and closing process described previously.



There is no way to provide a complete review of everything you need to know about selling a house.   The process for selling a house is simple, but, as with most things, the simple things can be very complicated so let's start with a quick overview.


First, you must have a house to sell.   Second, you must prepare the house for presentation.   This step, while time consuming, can increase the final selling price. While the preparations could range from picking up the yard and putting everything away, to a complete clean up and paint of the entire house.   Whatever effort you are willing to put in will normally reward you.   Third, establish the asking price.   This price is normally made up of two numbers, the amount you want and the amount that you will ask.   Most buy and sell processes include a level of negotiation and your asking price needs to be ready for a little negotiation.   Also bear in mind the price you paid.   If you get less than that price plus any commissions, then you may lose money.   The price can be established by seeing what else has sold in the area and for what price, then estimate your property value.   Often, what people think a property is worth and what the market will pay are two entirely different amounts.   Another option (for around $250 - $500) is that you can have an appraisal performed to give you a much better, objective opinion.Fourth, establish how to sell the house.   Your choices are to sell it yourself or to engage a Realtor.   A Realtor can provide value because the house can be listed in the local listing service that all Realtors work from.   This service, provided by the realtor for the buyer and seller, is paid by the seller which is normally a 6%-7% commission of the sales price.   Bear in mind that the Realtor works for you but is most interested in selling the property as quickly as possible, hence, a lower price will sell faster, but this is your decision.Fifth, discuss with the Realtor the entire process and be willing to accept advice from the Realtor on changing / updating the presentation of your home.   Sixth, be patient with the entire selling process: it normally doesn't happen overnight.   It is possible to wrap up the entire process in two months or you could have the house listed for months.   Understand your motivation to sell the house and take this motivation into consideration when pricing and negotiating the sale.

            -                 Once the house is put on the market, there will be a need to 'show' the house to prospective buyers. It is highly recommended that you not be in the house during these showings (also, be sure to remove any pets).

            -                 This is also the time to develop your alternate living arrangements.   If you are buying another house, make sure you have something picked out and have gone through the financing pre-approval.

            -                 When someone wants to make an offer, they will discuss the proposal with their Realtor and an 'Offer' is prepared.

            -                 The offer is presented to your Realtor and you can either accept, reject or counter the offer.

            -                 Accept means that you have both agreed on the price and the conditions.

            -                 Reject means that you will not even entertain further discussion.

            -                 Counter means that you have started the negotiation stage.   You will present an offer to sell at a different price / conditions.   This process of back and forth countering can go on until either party accepts or rejects a counter.

               -                 Once a price is established, the closing date is set (when the actual transfer of property will take place).   Bear in mind that this process can happen quickly (30 - 45 days) or up to six months.   If the buyer wants to wait six months, you may want to consider looking for another offer, especially if you made any price concessions.


Closing occurs at a mutually agreed place and both parties will come in at different times to sign the paperwork.   Be out of the house and everything moved before you sign the closing documents because at this point in time, you can't re-enter the property.