Buying Your Next Home

The Buying Process

Financing Your Home Purchase

• To begin with, make a list of your "Needs & Wants." The more definitive and honest your priority list is, the better chance I have of finding that dream home. Be realistic about reasonable compromise however, because the absolutely perfect home may not exist!
• How much money will you need to purchase a home? You already know you’ll need a down payment. It can be as low as 0%, 3%, 5%, 10%, 20% or higher, depending on how much you want to invest in your home initially. Of course, the more you invest up front, the lower your payment will be. If you’re cash poor, but have a good income, you may elect to make a lower down payment and make higher house payments. But by making a down payment of less than 20% mortgage insurance will be tacked onto your loan making the payments significantly higher.
• You’ll have to come up with closing costs, which can be as much as 2-3% of the loan. How can you cut down on loan costs? A good lender can help you strategize your mortgage to keep payments within reach.
• Have a consultation with a lender or mortgage broker first and get clear about the real price range that is suitable and possible for you (see Mortgage Info if you need help finding a lender). Until you know what you can realistically afford, house hunting can result in devastating disappointments by shopping in an unrealistic price range. You’ll need a Letter of Preapproval from your lender before you begin to look at homes, so this will be your FIRST STEP toward actually buying the home of your dreams.

Choosing an Agent

• In selecting your Denver real estate agent, it’s important to narrow it down to one. Working with several agents at a time is really unfair to all parties concerned, including yourself. As agents, we all use the same sources of information to search for Denver homes, such as the Metro Listing Service (Denver MLS). The idea that working with several agents at a time will uncover your dream home is not really true. You’ll more than likely waste time researching property you’ve already seen.
• Real estate agents are not salaried people and are only paid when the transaction successfully comes to a conclusion. Keep in mind that when agent "A" has spent much time and effort researching and showing a buyer property and then the buyer purchases a home from agent "B", agent "A" receives nothing for their time, effort and service. Loyalty to one agent will provide maximum returns in service to you, the buyer.
• Make sure the agent you choose is someone you can work with, someone you trust to do the very best job for you in finding your dream home. Ask for references from former clients. Ask how many clients the agent works with. Ask how he or she will be paid.
• If you’re thinking about using a family member or friend, determine beforehand whether or not you’ll be able to deal with the problems that inevitably arise in a real estate transaction without alienating or being alienated by her or him. Make sure your friend or family member has the qualifications you need for the most important purchase of a lifetime. Don’t choose an agent based on how well you know them, but on how well they know real estate.
• Choosing an Exclusive Buyer’s Agent assures that you’ll have someone representing you rather than unwittingly choosing an agent who represents the seller’s best interests.

Why Choose an Exclusive Buyer’s Agent?

You’re looking on the internet and you see a house that looks like it might be right for you. After finding out all you can by looking at the information posted on the web, you decide you’d like to see it. You see an agent’s name and contact information, so you email the agent (or you call, depending on how big a hurry you’re in) and tell the agent you’d like to see the house. The agent tells you you’ll have to come into the agent’s office before you can see the house. Or maybe the agent agrees right away to show you the house and you make an appointment to see it the next day.

You meet the agent, either at their office or at the house you want to see, and the agent shows it to you. What you don’t know is that the agent has a fiduciary and legal obligation TO GET THE BEST PRICE POSSIBLE FOR THE SELLER! His or her obligation to you is to treat you fairly as a customer. But make no mistake, that agent DOESN’T represent your best interests. That agent represents the seller’s best interests.

The same thing is true whether you call from a sign in the front yard of a home you’d like to see, or whether you call the number in the newspaper ad or the home magazine you pick up at the grocery store. Even if you go to an open house or view a model home at a builder’s site. All those agents REPRESENT THE SELLER!

An Exclusive Buyer’s Agent (EBA) has a legal obligation to represent ONLY your best interests because an EBA doesn’t sell homes and doesn’t EVER represent sellers!

“Okay,” you say, “how does the EBA get paid if I decide to go with one?”

Agent’s Fee

Several methods of broker compensation are available to you. Here’s the one I use at Buyer’s Advantage Real Estate. I agree to accept whatever cooperating fee the seller’s agent offers. In Colorado the typical cooperating agent fee is 2.8% (in other parts of the country it’s 3% more or less). But if the fee is less than 2.8% you, the buyer, make up the difference. If you decide to buy a “For Sale By Owner” home and the seller won’t pay the fee, then you’ll need to pay. But this situation has never occurred in all my years in business.

The Search for Your Dream Home

• If you choose Buyers Advantage Real Estate and Judith Clausen to represent you in the purchase of your home, after the Preapproval Letter is issued by your lender, the next step will be looking for your Denver home. You can search for homes as often as you like and even save searches to look at again. If you see any homes you like, note their MLS numbers and address and email me with them. I’ll set up appointments for private showings at your convenience, and we’ll go look at them. (If you’re an out-of-towner, I’ll be happy to preview and photograph homes for you, then post them on the internet where you’ll be able to see up to 50 photos of the exterior and interior. This will help you get a better idea of the house than you can get from the MLS.) This process is designed to rule out homes until you find one you like.
• When you find the home you want to purchase, you’ll know it. After you’ve looked it over thoroughly and decided this is the one for you, we’ll talk about making an offer.
• An offer is made on a real estate form called “Residential Contract to Buy and Sell Real Estate.” This is the basic contract form. Here you’ll list the price you want to pay, all the things you want included in the sale such as appliances, ceiling fans, special light fixtures, and so on. We’ll tell the Seller about your financing — what kind of a loan you’re getting (FHA, VA, Conventional, etc.), the interest rate, the monthly payment. The Seller wants to know you’re already on track for the financing of the purchase. You’ll indicate the date by which you’ll tell the Seller the results of the inspection, and the date by which any inspection matters have to be resolved between you and the Seller. Other dates will be set, such as when the Seller has to provide the title commitment, and many other details. You’ll indicate the additional provisions you’re asking from the Seller, such as paying some or all of the closing costs. You’ll set a date on which the sale will close. And, you’ll give the Seller a deadline by which he or she must respond to your offer, usually within 12 to 24 hours.
• After calling the listing agent and notifying him/her that an offer will be forthcoming, and asking what I might need to know about the Seller, such as “Are there any other offers coming in?” and/or “Are there any special instructions, such as a predetermined closing date,” and/or “How much time do you need to respond?” I’ll prepare the offer on my computer for your signature. When it’s ready to sign, you’ll write a check, usually for $2,000 to $10,000, (called “earnest money”) to accompany the offer made out to the listing agent or his/her title company, and sign the offer. When all this is completed, I’ll fax a copy of the offer and the check to the listing agent.
• We wait.

What Happens Next?

• Your offer is accepted—congratulations!
• I’ll schedule the inspection within a week of the acceptance of your offer (now a contract). You and I will meet the inspector at the property. Plan to spend at least an hour at the inspection. Feel free to follow the inspector around as he/she does the inspection. Ask as many questions as you wish (remember, there is no dumb question!). The inspector will prepare a written report at the conclusion of the inspection. A summary will be given to me, and you’ll get the full report. This is what we’ll use to make a decision about asking the sellers to fix whatever are the most critical problems. Remember, when you buy a “used” house, it will have problems. Which ones can you live with, and which ones must be rectified in order for you to complete the transaction? As a buyer, you have the power to ask for whatever repairs you need in order to go through with the transaction. The seller may or may not agree to do what you ask. Then the ball is in your court, and you will have to decide what you can live with and what is “bottom line” for you. If you can’t accept the sellers’ offer, you can back out of the contract.
• I’ll prepare the Inspection Notice to the Sellers detailing your request for repairs, asking them to respond by signing the Notice agreeing to the terms. If they do, that’s fine. If they want to negotiate, I’ll handle the negotiations in consultation with you. The resolution will have to be decided by the deadline outlined in section 10 of the contract.
• The next part of the process involves making sure that the title insurance commitment is in order. We’ll both get a copy of the title commitment. I’ll examine it to see if there’s anything that may need to be resolved. If the property you’re purchasing is in a covenanted community, we’ll both get a copy of the Declaration of Covenants. I’ll examine it to make sure everything is in order. You should read all title documents thoroughly so that you’re familiar with what’s required in your new community.
• During the above process, the lender will be submitting your home loan request to an investor for final loan approval. Sometimes that takes a long time. Be patient! (Read my letter about why the lender may ask for what seems to be an excessive amount of information from you.)

The Final Stage

• About a week before closing I’ll be in touch with the person who will handle the closing of the transaction, generally a title company closing agent. I’ll try very hard to get the exact amount you’ll be required to bring to closing. It may be as late as the morning of closing before the figures are final. More often, it’s the day before closing. Don’t worry—this is normal. You have a “ballpark” estimate you can use in the meantime, but the exact figure won’t be certain until all the costs are given to the title company by your lender.
• As soon as I know the time of closing, I’ll call you. The time (we’ve chosen the date) is set by the seller’s agent, sometimes in consultation with me, but often not. I’ll tell you where the closing will be, usually at the title company’s office (the title company is chosen by the seller).
• On the day of closing, be sure to bring your “good funds” for the purchase. Plan to arrive within 5 minutes or so of closing, and plan to stay an hour or more, depending on how much of the documentation you intend to read—if you read every word, it will take longer. If you, as most people, are content to simply sign where indicated, it will take less time. (I’m required by law to recommend you consult with a lawyer before signing any legal documents. Having said that, if you can, do. If not, you’ll need to decide whether or not my limited ability to practice law under the rules of the Colorado Real Estate Commission is sufficient. I can generally interpret a real estate contract, but I’m not an attorney. Colorado wants you to be protected.) I’ll be there too, overseeing the closing process on your behalf.
• After closing is over, celebrate having passed through the fires of buying a home successfully, and accept my congratulations on what is usually considered the biggest transaction of your life!

Moving In

• After closing you’ll be able to move into your new home. Here’s what some Buyer’s Advantage clients said after moving into their new home.

  I was very impressed (and sometimes surprised) at how quickly you responded to my e-mails and how quickly you answered my questions. In fact, it was your quick response to my initial inquiry that led me to select you in the first place. I had sent out several requests for information while I was in Kazakhstan, but yours was the first (and more thorough) response. I was impressed with your knowledge of the areas and your objectivity as we were looking. I was very grateful for the connection to the lender and the creative financing that she was able to come up with. I also liked all the information that you emailed to me while I was out of country. You always seemed to be available. And, I don’t know how accurate, but I got the impression that we working more off mutual trust rather than the formal buyer’s agreement. I liked that. I would definitely recommend you to someone. -Randy (and Julia) H., Denver

  Judith, thanks for your patience in helping me find this wonderful property. I'm very comfortable living here. You’re a good one Judith, a special person, one who seems to understand the client and what they are looking for in a new home, you scored big with me, taking me throughout the Rockies mountains, the plains, and surprise, I bought a house less than a mile from where I work. Funny how it works out. - Terry P., Broomfield

  You are a "real person" who helped us buy a house. You honestly looked out for us and patiently helped us find the right house. No pressure. You made our experience of buying a house from an outside state a pleasure. Glenn & Sarita B., Aurora

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