A lot of buyers don’t realize they are buyers. All it takes to go from window-shopper to home buyer is wandering into the right open house. Or, swiping to the photo of your dream house for sale in your favorite real estate portal. Or, maybe you found a crazy property you can’t live without on ZillowGoneWild. Suddenly, you have embarked on the unexpected and mercilessly-fast-moving adventure of home buying. Taking some key steps before buying a home, or before even starting to shop for one can make the entire process less stressful and more successful.
A surprising percentage of home purchases get set into motion before the buyers are ready. If you happen to stumble into your dream home before your finances are ready, that lack of readiness can sometimes translate into a purchase that doesn’t come together. Competitive markets can be particularly unforgiving in this regard. The question of what to do before buying a home is best addressed sooner rather than later. The first step in this is having your finances in order.
1 – Ready Your Finances and Get a Pre-Approval / Proof of Funds
Without question, my recommendation as the first step in your quest to buy a home is to get a preapproval from a reputable lender in your area. In addition to a preapproval, you will also want enough funds to cover your down payment and closing costs. If you are a cash buyer, you will need enough cash to cover your total purchase and closing costs. Cash buyers may need to mentally prepare their financial advisors for a sizable withdrawal as well.
When submitting an offer, your agent (and the listing agent) will ideally want to include a copy of your preapproval letter and proof of funds. Proof of funds are typically one or more recent bank / financial account statements showing funds sufficient to cover your down payment and closing costs. Proof of funds are sometimes screenshots, or even a letter from your banker stating they have personally verified funds sufficient to cover the down payment and closing costs (or the full amount for all-cash buyers).
Listing agents and their clients have varying levels of strictness when it comes to proof of funds. However, the less you leave to the imagination, the better. Except for account numbers, which should be redacted. As long as you have sufficient funds, proof of funds are much easier to pull together quickly than a preapproval. In short, if you plan to finance your purchase, get that preapproval rolling asap! It is considered by many to be one of the most vital steps before buying a home.
2 – Find a Great Agent
I might be slightly biased here, but people VASTLY underestimate the value of a great agent. Many assume since anyone can find a home on Zillow, Realtor.com, etc. that they don’t need an agent. Finding the home, while important, is only one component of what a skilled agent might do for you. Just a few roles that an agent can serve include:
- Connecting you to skilled, reputable local lenders.
- Helping you identify what you are looking for in a home.
- Prompting you to consider factors in your home search that you may not be thinking about (schools, commute time, lifestyle considerations, area pros and cons, etc).
- Helping you evaluate different neighborhoods.
- Introducing you to neighborhoods you may not know or have considered.
- Identifying on-market properties that might be a fit for you.
- Identifying off-market properties that might be a fit for you.
- Suggesting reasons a home might NOT be a good fit for you when you might be overlooking significant problems (helping you avoid buyer’s remorse).
- Providing a market analysis and opinion on the price of a home you might purchase.
- Explaining important aspects of the purchase contract.
- Negotiating a favorable purchase price and/or terms.
- Connecting you to a skilled home inspector.
- Providing contacts for supplemental inspections when warranted.
- Giving context to findings discovered during inspections.
- Assisting you in smoothly exiting a transaction you determine is not right for you.
- Negotiating on your behalf during any request for repairs.
- Recommending vendors for potential repairs to a home.
- Guiding you once in escrow to keep timelines and contractual obligations on track.
- Maintaining effective communications with the listing side to keep escrow running smoothly.
- Assist with navigating the appraisal process and any unexpected results.
- Communicating with you and the title company regarding any title concerns.
- Answering your questions throughout the search and purchase process.
- Helping you avoid problems and liabilities throughout the process.
- Reducing the stress in what is frequently a very stressful event.
The list above is not comprehensive. Agents representing buyers often find themselves playing a myriad of roles. Your agent will likely be representing you on a process with tremendous financial and lifestyle implications. A good agent will be laser-focused on protecting you and advocating for your interests. Prioritizing finding a great agent is another mission-critical step before buying a home. But, what about finding the actual house?
3 – Set Up a Property Search
I like setting up a property search for my clients. Even if they have a search in place with Zillow or another portal, having them in my search system provides several advantages. Whether the property search is with your favorite app or your agent, it is very important for market awareness.
By seeing listing activity and prices, you can start to get a better sense of market activity. If your search spans multiple neighborhoods, you will also start to get a better sense of how far your dollar goes in each area.
A targeted search also can help you pursue a property shortly after it hits the market. Sometimes, being one of the first in to see a property can be the difference between buying your dream house and missing your dream house. While searches can be set to notify you less frequently if you are a serious buyer I recommend having your search email you the moment a property hits the market.
Lastly, if your search is through your agent, you may have a direct path to communicate feedback on various properties to your agent. This can help inform your agent of your preferences and may help them better identify opportunities for you.
4 – Spend Time in the Neighborhoods You Are Considering
Unless you are already living in the neighborhood you plan to buy in, awareness of the nuances that make up a neighborhood is important. Drive around the neighborhoods on your shortlist. If possible, walking the neighborhood can provide even more insights. Sometimes a well-timed walk can lead to a conversation with a potential neighbor. Most people are happy to talk about their neighbors and neighborhood when interacting with a potential home buyer for the area.
If you will be commuting for school, work, or family obligations, try driving that commute at various times and days. Doing so will give you a much better feel than just estimating drive times on Google maps. 30 minutes noted in an estimate can feel very different from 30 minutes driving through heavy traffic.
If the neighborhoods have restaurants, shopping, etc. make a point of dining and shopping there. Spending time in neighborhoods at various times of day/night can yield insights into the sights, sounds, and comfort level you feel in any given area. Once you select a neighborhood and have a home in mind, the topic of moving might come up.
5 – Have a Well Thought Out Plan for Moving
No matter how long you have lived in your current residence, the process of moving into a new home has a lot of moving parts. Those moving parts often operate in very tight timeframes. It can be a stressful process under the best of circumstances. And, without a solid plan, circumstances can devolve to less than ideal.
If you are coming from a rental property, you probably have the most flexibility. That assumes you are on a month-to-month rental. If your move will result in trying to exit a lease early, you might consider speaking with an attorney about the potential consequences. Sometimes ending a lease early can be navigated easily. Other times it can turn into an expensive ordeal with some potential liability associated with it.
You will want to give notice to your landlord. However, it is important to give that notice only when you are certain you are moving. You will also want to give yourself enough time to move. Sometimes paying a little extra rent is worthwhile to reduce time pressure on your move.
If you are moving from a home you are selling, just sold, or plan to sell, timing can get more complicated. If your purchase is contingent on the sale of your existing home, timing will be of the essence. Timing will also have contractual timeframes and deadlines. Or, if the sale of your existing home is contingent upon the purchase of a replacement property, that too can have mission-critical timeframes. Contingent offers require careful planning and even then can result in very stressful logistics and timing.
Whatever your moving circumstances, try to schedule anything time-sensitive with both a buffer and a margin for error. It’s also important to discuss with your agent when plans should go from tentative to firm. Often that junction is when you as the buyer remove any and all contingencies.
Even with all contingencies removed, delays and the unexpected can still occur. A last-minute lending issue, title glitch, escrow mistake, or inaccessible notary are just a few of the things that might delay closing. For these reasons, it’s best to follow the buffer advice from earlier and not have movers scheduled for the minute/hour/day you plan to close escrow.
Steps Before Buying a Home – If You Don’t Have an Agent
I hope these steps before buying a home have helped you in your process. If you are considering buying or selling a home in San Diego and are at Step 2 (finding a great agent), I may be of service. I would love to consult with you on your plans and help situate you for success. Whether you are buying or selling, please reach out for a free, no-obligation consultation by phone/text, email, or in person.
If you are buying or selling real estate outside San Diego, I would be happy to connect you to a fantastic agent wherever you are in the US, or in the world. Sotheby’s International Realty has world-class agents throughout 1000+ offices in over 80 countries.
Whether you are based locally, internationally, or somewhere in between, I look forward to hearing from you!