A who's who guide to buying your first home
From your real-estate agent to utility companies, many folks may be a part of your homebuying experience. Here's what they do — and why they do it.
If you want to buy a latte or a novel, you find the one you want, hand over some money and go on your way, interacting with one or two people along the way. But if you're buying a house, the process — and the number of people involved — is exponentially more complicated.
It can be overwhelming to keep all of the players and processes straight. Who does what? Do you really need all of these people? Why can't you just do it all yourself?
"Without all those people, buying a house would take at least a year," says Ilona Bray, author of "Nolo's Essential Guide to Buying Your First Home." "You'd have to figure out all these things yourself, and it's a complex thing."
Each of the people involved in the homebuying process is an expert in that particular step. Just as on a sports team, each player has a role and ability that helps the team come together to get the job done.
Here's a look at all the players and why — or if — they are essential to the process.
In "Nolo's Essential Guide to Buying Your First Home," the real-estate agent is called the team captain. Your agent will be with you every step of the way and is the person with whom you'll spend the most time.
Most agents are found through word of mouth: A friend or neighbor had a good experience and passed along the name to you. You'll want to interview prospective agents to find out whether they specialize in the neighborhoods or property types you are looking for, whether they can answer your questions and whether you feel comfortable with them.
You should also check an agent's license by visiting the website of the Association of Real Estate License Law Officials. Many agents are also members of the National Association of Realtors and have the Realtor designation, which means they comply with NAR's ethics code and standards of practice.
Michael Wolf, a San Diego-area agent and author of "The First Time Homebuyer Book," says an agent should be a local expert who understands the nuances of location. Agents can tell you if homes north of a certain street are better than homes south of it, for instance.
After helping you find the right home, your agent will manage the process of putting in an offer and negotiating the sale. The agent should explain the steps of the process from the beginning and keep in constant communication with you.
So, is an agent necessary? Considering that a buyers agent usually doesn't cost a cent, it doesn't make much sense to go without one, Wolf and Bray say. A buyers agent makes a commission that the seller pays, though this sometimes is worked into the final sale price. If you buy a home without an agent, you could save on the purchase price, but it's not a certainty.
"Compared to what you give up in negotiating power, a good agent can earn back their commission and then some by finding ways to talk the price down, etc.," Bray says.
Wolf says a buyer may not know which reports are necessary, which inspections to get, whom to contact, how to rank and address problems that come up, and whether something is a deal-breaker. An agent who spends every day entrenched in the homebuying process will be familiar with these things.
Mortgage broker or lender
The financing aspect of your home purchase may begin before you find an agent with a loan pre-approval. But the real work with a mortgage broker or lender starts once you've found a home and want to buy it.
A mortgage broker's job is to shop around to find you the best loan and lender to fit your needs.
Your local bank may offer home loans, but it may only have one or two options, says Don Frommeyer, vice president of the National Association of Mortgage Brokers. A mortgage broker will be more aware of the dozens of other options out there.
"This is all we do for a living," Frommeyer says. "Banks are also worried about their checking and savings. We are dealing with mortgages all day long."
A mortgage broker can assess your financial needs and plans and find a loan to match. If you have a child heading to college in a few years, for instance, that may affect your desired monthly payment and the type of loan you want to get. You'll probably have daily contact with a mortgage broker for a couple of weeks while you're finding the right loan and filling out all the paperwork.
You can go straight to a lender for a loan, but you're going to need to do a lot of research on your own.
"For the number-crunchers, that might be a way they're happy to spend their time, figuring out all the various comparisons to be made," Bray says. "But it seems like the average human being isn't excited to be doing that."
If you do go straight to a lender, you may interact with one person or several. A loan officer or mortgage banker will help you pick a product from the lender's offerings and help you apply but may have assistants during the approval process.
Before you can get a loan, the bank will have an appraiser look at the home and decide if it's really worth the money you're planning to spend. Many homeowners hire their own appraisers to make sure they're getting the best value.
"With so much supply in the market, if a home is overpriced, people are going to bypass that and go on to other homes," says Joseph C. Magdziarz, president of the Appraisal Institute.
Magdziarz says an appraiser is an unbiased third party who can actually tell you the truth.
"He has no vested interest in a sale or purchase and can give you a reasonable and reliable opinion of the value," he says.
An appraiser isn't actually determining the exact value of the home but is mirroring the market using comparable sales and listings. An appraiser answers the question: What can people buy if they don't buy my home?
If someone is buying a home with cash, an appraisal isn't required, but Magdziarz says it's not something you'd want to skip.
"For the amount of money spent in the deal, the appraisal is probably the least costly but most important tool you can have in making that decision," he says. "It pays to be well-informed."