Steps of Buying a Home
This guide will walk you through common steps of the home buying process in St. Johns County and Duval County, Florida. Depending on your unique situation, you may have a few extra or fewer steps to go through. As a disclaimer, this guide should not be considered legal advice or an interpretation of a contract.
Step 1 – Pre-qualification
Before any home searching begins, it’s recommended by some agents (and required by others) to obtain a pre-qualification letter from a lender. This letter lets not only your buyer’s agent but also any listing agent know that you have the purchasing power to buy a house and aren’t wasting anybody’s time. You are also required to submit this letter with any offer you make on a home, so it’s best to have it on hand. Typically, the lender only needs minimal information from you and can get the letter back in as little as a few hours. This would be a good time to ask the lender any questions you have about home loans. While there are some differences between lenders and what they offer, general information about loans should be uniform.
Step 2 – Building Your Search Criteria
To begin building your home search criteria, we recommend first figuring out where you want your new house to be. It’s best to narrow down this search area as best you can before you begin to seriously shop for homes so that you can make the best use of your time and focus your efforts on an area you’re sure you’ll love. Research or talk to your agent about amenities that will be available in different neighborhoods. Take a drive around areas you’re considering purchasing in. See what the drive to the grocery store, schools, and work will be like. Talk to your real estate agent to understand what types of homes you’ll find in various areas.
Next, you’ll want to separate your home criteria into two categories: wants and needs. These lists will include items you’ll find within the homes, such as the number of bedrooms, square feet, flooring type, etc. Write out your needs first. These are things that wouldn’t just be an inconvenience, they would make living in the house difficult. Make sure these needs are well-defined so that if you see a house that doesn’t meet one of your “needs,” it can easily be discarded as an option. A good rule of thumb is to exclude any criteria that you would be willing and able to change from your "needs" list. For example, if you need no carpet to cut down on allergens, consider looking at homes with carpeted areas and replacing the carpet after purchase.
Next, figure out your wants. These search criteria are anything that would make life in the home more enjoyable or convenient. A “want” may also be added on top of a “need;” for instance, you may need 3 bedrooms, but want 4. Your “wants” list will help you recognize when you see a home that you will love in the long term. Run these lists by your real estate agent and ask them if what you're searching for is reasonable within the area and price range you would like to purchase in. You may have to adjust your search area, home criteria, or budget, to have all three of these search criteria working together in your favor.
Step 3 – Home Search
After narrowing down your search criteria as best you can, the fun begins! You and your agent will start searching for homes based on that criteria. Your agent will likely send you a list of everything available on the MLS (multiple listing service) that matches what you’re looking for. They’ll also keep you updated with what comes on the market, so you don’t miss any opportunities. While your agent will be an excellent resource for keeping you up to date with the market, nobody knows what you like better than you, so keep an eye out online for homes that you might be interested in too. After reviewing what’s currently available, you’ll choose the homes you want to see and your agent will schedule showings for you. During the showings, a good agent will supply you with the information they’ve found in their research on the home. They'll answer any questions you have and if they don’t know the answer to something, expect that they’ll figure out an answer or direct you to a resource to help you find an answer yourself. It’s helpful to take notes and pictures when seeing a home to help you remember details.
Step 4 – Offer, Negotiation & Acceptance
When you find a home that works for you, all of your questions have been answered, and you’re sure about purchasing the home, the next step is making an offer. Your agent will run a comparative market analysis to figure out the fair market price of the home and recommend a starting offer price to set you up for negotiation. A formal offer for the purchase of a home consists of a few parts: a signed offer in contract form, a pre-qualification letter or proof of funds, and all required signed disclosures, addendums, or miscellaneous documents relevant to the purchase of the home. You’ll have to discuss with your agent what terms you want to put in the offer such as the closing date, various contract periods, contingencies, and other terms. Your agent will add all of these terms to the contract, and then you sign it. Once signed, the offer gets sent to the listing agent for the seller to review. The seller may respond in one of four ways: they may accept your offer, decline your offer, decline your offer and present a counteroffer, or give no response before the deadline, which is considered a declined offer. If the seller declines your offer with no counteroffer, you can safely walk away or present another offer with better terms.
Negotiation starts when you receive a counteroffer. Most often, the price is negotiated, but sometimes other terms may be negotiated too, such as the closing date and inspection period length.
Acceptance begins when all parties have signed the contract. Contract periods then begin on the next calendar day.
Step 5 – Escrow Deposit & Loan Application
The first deadline to meet is usually submitting your escrow deposit, or, as it’s sometimes called, the earnest money deposit. This deposit acts as a promise to fulfill your part of the contract, which is buying the house. It will be held by a neutral third party. That party is usually a title company, broker’s escrow account, or a lawyer. The seller usually chooses where this money is held, but it should be agreed upon before the contract is signed by both parties. There are extensive laws on how this money is to be used or disbursed. If both parties don't agree on disbursement, then there is a statutory protocol to determine how money is to be disbursed. In other words, the seller does not have access to the escrow deposit until you close on the home or you cancel the contract outside of the period when your escrow deposit may be refunded, and you do not contest disbursement to the seller.
The second deadline is typically the loan application deadline. You have a few days to talk to different lenders and find the best loan terms for your purchase. Once you decide on a lender, you make a loan application to start the loan approval process.
Step 6 – Inspection
While not required, it is absolutely recommended in Florida to have a professional home inspection and wood-destroying organism (WDO) inspection done during your inspection period. The home inspector will search the house from top to bottom for common and uncommon issues that may need repair and also provide a recommended remedy for each item. The wood-destroying organism inspector will search the house for signs of termite intrusion. Even in the most well-kept house, the home inspector will likely find items that need repair. During your inspection period, you have the right to cancel the contract and receive your deposit back for any reason related or not related to the inspection.
Step 7 – Repairs
It's common, but not mandatory, in Duval County and St. Johns County for the seller to do a few repairs that were found on the inspection report. Just as terms of the sale were negotiated and agreed upon, these repairs must be negotiated and agreed upon by both parties as well. When you submit a list of repairs that you hope the seller will do, they may do all of the repairs, they may do some of the repairs, they may offer a closing cost credit, or they may do nothing. If an agreement can't be reached within a certain period defined in the contract, then you will be able to terminate the contract and receive your deposit back. Once an agreement is reached, the seller will need to have all of the agreed-upon repairs finished by a licensed professional - unless otherwise agreed upon - before closing, and provide invoices or receipts of the work done.
Step 8 – Appraisal
If you're purchasing the house with a loan, the bank will likely schedule an appraisal to accurately assess the value of the home. The bank wants to make sure that they’re not loaning more money than what the house is worth. If the appraised value comes back lower than what the loan amount is, then the loan might not get approved. If you have an appraisal contingency in the contract, you would be able to exit the contract and receive your deposit back. However, you and the seller can renegotiate the terms of your agreement so that the sale can move forward. The seller might lower the price to the appraised value, you might lower your loan amount to the appraised value and pay the difference in cash, or a combination of those terms. If other buyers want to buy the house, then the seller would have more leverage in the renegotiation. If other buyers aren't interested in the home, that would give you more leverage in renegotiation.
Step 9 – Loan Approval
Loans are typically approved within 30 days. Sometimes approval happens faster, sometimes it takes longer. If you have a loan approval contingency in the contract, and your loan is not approved by the loan approval deadline defined in the contract, then you should be able to pull out of the contract and receive your deposit back. The seller may also allow an extension of the loan approval deadline and closing, but they are not required to. It is also not uncommon for a buyer to receive a clear to close just days before closing.
Step 10 – Wire Funds
It is recommended to wire funds that are needed for closing a few hours before closing so that it has time to be delivered to the title company's escrow account. Moreover, if you have a closing on Monday morning, it is recommended to wire funds on a Friday. If you're purchasing with cash, this wire amount will be for the full purchase price plus closing costs minus your deposit amount and any other credits. If you're purchasing with a loan, the wire amount will be for your down payment plus closing cost minus your deposit and any other credits. Before wiring, be sure to call the title company to verify the wiring instructions and the wire amount.
Step 11 – Final Walkthrough
Before closing, you will have the opportunity to do a final walk-through of the house to ensure all the repairs have been done and the house is still in good condition. This is typically scheduled as close to the closing as possible and sometimes it's done just an hour before.
Step 12 – Closing
Closing is when funds and ownership of the home are officially exchanged. It takes place at a title company with a closing agent or attorney present. You will sign documents related to the transfer of ownership, your loan, and a few other miscellaneous documents. The closing agent or attorney will be able to explain each document as you sign. Often, the seller will have already signed their half of the documents and dropped off the keys before your appointment. Once funds have been disbursed, all documents have been signed, and keys delivered, the house is yours!