Buying a home is an exciting process that will go much more smoothly with a little knowledge and preparation.  In a “seller’s market” – i.e. a market where there are more buyers than sellers and good homes sell quickly – it is even more important to be fully prepared.  However, the first several steps are closely related and need not be completed in a specific order.  Rather, keep them in mind and complete each one as you look for and buy your next home.

First, educate yourself about the process.  There are many free resources on the web.  You can purchase a book written to assist home buyers. 

Second, identify your desired qualities.  How many bedrooms?  How big of a yard?  How close to schools, parks, shops, and other amenities?  How much “old world charm”?  Get creative in terms of identifying special qualities that will make the home special.  For example, if you love to garden, should the back yard have a southern exposure?  How about a swimming pool?  If you’re buying this home with someone else, such as a spouse or partner, discuss these issues at length so that you both know what the other is looking for.

Third, identify your preferred neighborhoods.  Schools are often the primary consideration, but what about other factors, such as the neighborhood businesses or particular parks?  Would you prefer an older neighborhood with mature trees and houses from an earlier period?   Or a neighborhood with new homes and lots of young families?

Fourth, get a budget.  Sit down and take a candid look at your finances.  How much money can you put down?  How much can you afford – realistically afford – in monthly mortgage and property tax payments? 

Fifth, move from the abstract to the tangible: Arrange your financing.  You can either deal with a mortgage broker or directly with a lender.  Mortgage brokers work on your behalf by looking for the best mortgage given your financial resources and particular situation, such as how long you anticipate living in the home. If you use a mortgage broker, you will be charged a commission at closing to compensate your broker.  This commission is called a “loan origination fee.”  If you deal with a lender, you won’t have to pay such a commission, but you will have less flexibility in finding a mortgage to suit your specific needs.

In arranging your financing, look closely at the type of mortgage that you plan to obtain.  Again, there are many to assist you in understanding the terms of any particular loan.  Remember that an adjustable rate mortgage looks great today, but it won’t be nearly so affordable when it adjusts to a new rate in the future. 

Sixth (and here’s where it gets fun), start SHOPPING!  If you’re interested in buying directly from an owner – and thus saving the cost of an agent’s commission that is included when you purchase from a seller with an agent – don’t look on your local MLS, the database of properties for sale maintained by the real estate agent industry.  Rather, check those sources on the internet where owners without agents advertise property for sale, such as craigslist (the community bulletin board of our times) and Google Base, a craigslist challenger.  Check one or more of the many FSBO web pages.  Check out web pages that aggregate both MLS and non-MLS listings.  Drive around your preferred neighborhoods, as many owners simply hang a sign in the front yard. 

If you have not done so already, hire an attorney.  Most experts believe you should hire an attorney to assist you.  By hiring the attorney early in the process, you will have an invaluable source of information – and a real person, no less – who can answer your questions and address your concerns as they arise. 

The shopping step should be broken down into two stages.  In the first stage, look at lots and lots of houses, even those that don’t necessarily fit your preferred criteria.  In doing so, you’ll get a better feel for the local market, so that when you make an offer you are a more informed consumer as to a reasonable price.  Also, you’ll learn more about what qualities you want in the house you eventually buy.  During this first stage, spend a few weekends going to open houses, even though most of those houses will probably be listed on the MLS.  In the second stage, limit your efforts to those houses that really might be the home for you.

Seventh, once you find your house, make an offer.  To do so, contact the attorney you retained earlier or, if you did not do so, hire one now.  The attorney will work with you to draft an offer for the particular property you’ve identified.  In drafting the offer, you should consider which contingencies you want to include in your offer.  Think long and hard, and recognize the risks, before presenting an offer without a financing or inspection contingency.  A prudent buyer also includes a title contingency and, if you’re thinking of substantially remodeling the property, a feasibility contingency.  If you think there will be multiple offers for the home, you may want to consider including an escalation clause, but again understand the risks and benefits before doing so.  Include in your offer the identity of your chosen escrow agent to act as escrow for the transaction.

Eighth, if the offer is accepted – nice work! – and assuming you included an inspection contingency, find an inspector to inspect the property.  Work with your attorney following the inspection to draft and provide to the seller a response to the inspection.  You may be able to negotiate a reduction in the purchase price, a credit towards closing costs, or seller repairs prior to closing.  Also, during this period, review the preliminary title commitment to insure that there are no encumbrances on the property, such as an easement, that will impair your use or decrease the value.

Ninth, open escrow, which will remain open until the closing date.  Customs and laws regarding escrow services vary widely from state to state and community to community.  During this period, title insurance is ordered and title is cleared, the home is appraised by buyer’s lender, and contingencies in the contract are either satisfied or waived.  The buyer will deposit the earnest money when escrow is opened.  Again, an attorney will be able to assist you in this stage of the process, particularly where the parties dispute some aspect of the transaction, such as whether a contingency was waived.

Tenth, the sale closes and you get possession of the home – HOORAY!  The escrow agent will insure that title is clear, title insurance is in place, title is conveyed to the buyer, and the proceeds of the sale are released to the seller.  Congratulations on buying your home.