10 Steps to Buying a Home

     If a mortgage loan is going to be required, make sure your agent or broker has a copy of your pre-approval in file. "Pre-approval" means you have met with a loan officer, your credit files and employment history have been reviewed and the loan officer believes you readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre-approval letter which shows your borrowing power and that you have the ability to go through with the purchase. Provide your agent with a copy of that pre-approval early on as your lender and agent will be coordinating a process. The documentation is also important prior to preparing an offer as it should include a specific mortgage contingency clause. Additionally, most sellers won't accept an offer without it. Having it available and current gives your offer credibility as your ability to purchase under the terms you've offered.

     There is no doubt that cash offers are attractive to a home seller. And many buyers, especially those purchasing second or vacation homes use cash resources. Often they will acquire funds from the equity in their primary homes with a Home Equity Line of Credit (HELOC) which they have already secured and to which they already have access. Others have the funds in savings accounts or investment funds they can readily access. Cash offers still require "proof of funds" so make sure your agent has a copy of such when presenting offers.

     While getting a pre-approval for a mortgage loan is an important step, determining what you feel you can afford is a personal decision. Only you know what feels comfortable. Remember, in addition to your loan payment (that includes principal, interest, taxes and homeowner's insurance: PITI) there are also heating and cooling costs, potentially maintenance and association fees, and water and/or sewer charges if hooked up to town utilities. Note that much of Cape Cod is on private septic systems and have their own wells. In that case, budgeting for maintenance of those privately owned systems needs to be considered.  If you want to live near water bodies, whether ocean, bay, estuary, marsh or creek you may need to factor in flood insurance. 

     Make a list of the features and benefits you want in a home. Consider such things as pricing, location, size, schools, amenities and design. Consider your priorities. Are you you looking for move-in ready or are you willing to do some updates? If so, which updates? If you can't get a home in your price range with all the features you want, then what features are most important? To keep within your price range, would you consider less home closer to water or with a water access? Or since Cape Cod fresh and salt water beaches are all close, would you consider living inland a bit and taking a short drive to your favorite beaches?

     A local agent or broker truly knows the local market. They have been in many of the houses and neighborhoods that are for sale that you have seen online. They understand why certain homes in certain neighborhoods are priced the way they are. They are also in the best position to help you find the house and location that most closely matches what you want in a home. Most importantly, choose a BUYER'S AGENT who will represent you and be looking out for your interests. Did you know if you are calling listing agents, those agents represent the sellers? There are many reasons to choose Buyer Representation. In MLS listings the Buyer Agent's fee is already covered within the Listing Agent's contract with the seller. In the case of homes "For Sale By Owner" (FSBO) most independent owner's are more that willing to cooperate and compensate a Buyer Agent working in your behalf. Your Buyer Agent will know how to arrange that so you incur no extra expense.

     Once you have found a house that you would like to buy, your agent will help you prepare an Offer to Purchase contract. In a typical situation, you will complete the "Offer" along with an initial deposit that your agent/broker will present to the Seller's Agent or the seller directly in the case of a FSBO. The seller's response will determine your next step. (Please note: unlike many states, Massachusetts real estate transactions generally follow a two-step contract process. with a Purchase and Sale Agreement to follow. Note, however, that the initial "Offer" when signed by all parties is a legally binding contract. Your Buyer's Agent will be able to guide you through the process.)

    After your offer is accepted, it is routine to have a home inspection. During these examinations, a licensed inspector determines if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family homes, depending on square footage, often require 2 to 3 hours and you should attend if at all possible. This is an opportunity to examine the property's mechanics and structure, ask questions, and learn far more about the property than is possible with an informal walk-through. Note that sellers, depending on language in inspection contingency clause, usually have no obligation to repair or fix anything but they may opt to do so. However, also depending on language in the contract, you as the buyer could have the opportunity to opt out of the contract and have a deposit returned if notice is given before inspection contract deadlines. These conditions are based on contract language and deadlines and may differ.

     If obtaining a mortgage loan, a contingency of the loan approval will be that the home be appraised to verify value. This is done as part of the loan process and the fee for the appraisal is paid by the buyer as part of the mortgage application fees. 

    Note that even when paying cash for a property, a Buyer's Agent will often suggest the Buyer add a clause to the "Offer" making it subject to a home appraisal for no less than agreed price at the expense of the buyer on or before the Purchase and Sale Agreement is required to be signed. This is an option usually utilized if a cash buyer wants to finance the home shortly after purchase. But it is strictly an option. A buyer agent can explain the pros and cons.

     Provided you are satisfied with the home inspection, the next step is to sign a Purchase and Sale Agreement. This document details the specifics of the transaction, such as: repairs to be completed if any, fixtures to remain with the property, the property's regarding lead paint and, if a septic system exists, the confirmation of a Title 5 certification (required in Massachusetts). The closing date is finalized and a secondary deposit amount is made which is held in escrow until the closing. If you have any questions about your legal rights or responsibilities, you should consider consulting an attorney. (Please note: the initial deposit with the offer and the subsequent deposit with the P&S can be negotiable but both are stipulated at the offer stage.

     Prior to closing, you will have a walk-through of the home you are buying. This is to make sure repairs (if any) were made and that the house is in the same or better condition than when you made the offer and that the property is ready to convey under the terms of the P&S. By this time, the Seller will have already had the smoke detectors and carbon monoxide detectors inspected by the local fire department (in accordance with Massachusetts law). A certification that they pass will be provided to your agent, the lender and the closing attorney.

     This is the day when you will become a home owner, but there are several steps that are necessary.  Most lenders will require that you have a homeowner's insurance binder (proof of insurance) before they will close the loan. Many buyers also purchase title insurance that is bought with a one-time fee at closing. Title Insurance protects owners in the event that title to the property is found to be invalid in the future. After signing the loan and closing documents (and there are many), the deed and other associated documents that require recording by the registry of deeds will go on record, the sellers will receive the remainder of the payment from the closing attorney and you'll be handed the keys.

Disclaimer: These steps are intended to provide a general guideline on how the home buying process works within Massachusetts. However, every transaction can have its own special situations or circumstances and might not be covered within the information. This information is intended for general educational use only. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL QUESTIONS OR PROBLEMS, CONSULT LEGAL COUNSEL.