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The initial step in the home-buying process involves gaining a realistic understanding of your borrowing capacity from a lender. While you may be comfortable with a higher monthly payment, lenders are bound by specific requirements to ensure your monthly payment aligns with your income and other financial obligations. Therefore, before investing significant time and resources in viewing homes, it's prudent to obtain pre-approval or pre-qualification from your lender. It's important to note the distinction between pre-approval and pre-qualification (for more details, refer here).
You have the flexibility to choose any lender you prefer; it doesn't necessarily have to be your current banking institution, though that could be a good starting point. We also have recommendations for reliable lenders. Feel free to reach out, and we'll provide you with contacts we've had successful experiences with. Additionally, it's beneficial to explore mortgage lenders and brokers who may not be affiliated with a bank (we can provide contacts in this category as well).
Now comes the exciting part - exploring potential properties! If you haven't already, this is the opportune time to engage a Realtor. Some buyers opt to contact the listing agent to view a specific property, which is perfectly acceptable. Just bear in mind that with recent changes in 2023, a buyer's agent may be required to obtain written buyer's agency documentation when an offer is made on a property.
There are numerous websites available that display listings from the Multiple Listing System (MLS). However, not all of them encompass the full range. To ensure you're viewing every property that fits your criteria, make sure the platform you're using covers all listings. At Properties, we feature all MLS listings on our search page. Registering for Automatic Email Alerts is an excellent way to stay updated on the latest listings. You can sign up for these alerts here.
When new properties hit the market, you may choose to conduct a drive-by if you're uncertain about the area, or you can contact your Realtor to arrange a showing. If you're not local, we can conduct a "preview" of the property on your behalf, capturing videos and additional photos to help you visualize it. In our market, it's not uncommon for buyers to make offers on properties they haven't seen in person, (with an inspection contingency), especially when inventory is scarce.
We streamline the process of finding a home and negotiating with sellers.
Once you've identified a property you're keen on purchasing, it's time to collaborate with your agent to formalize your offer terms in writing. In Michigan, we utilize a standard form known as the "Offer to Purchase Contract." Your agent will present your offer to the seller's agent (or directly to the seller in certain cases).
At this juncture, the seller may accept your offer, establishing a contract with you. Alternatively, the seller may decline your offer or propose revisions. If a counteroffer is made, negotiations commence. Once both parties agree to the terms and document them in writing (with signatures from both parties), a contract is established.
An Earnest Money Deposit is a good faith deposit that shows the seller that you are a serious buyer. Many buyers put a large EMD down in order to make their offer stronger and more competitive. This EMD is deposited with your agent's broker escrow account and is applied to the purchase price of the home at closing. Most EMD deposits are refundable during the "Inspection Period" unless otherwise negotiated and stated in writing on your contract.
The standard Michigan Offer to Purchase Contract allocates an "Inspection/Due Diligence Period." Normally 7-10 days. This designated time frame (negotiated in the prior step) affords the buyer the option to withdraw from the deal for any reason, or for no reason at all.
The Inspection period holds significant importance. It grants the buyer the opportunity to conduct home inspections, surveys, and other essential due diligence measures required to finalize the sale (and to instill confidence in the buyer). Should the buyer opt to withdraw from the deal due to, for example, a septic system inspection failure, they must do so before the Due Diligence period concludes. Canceling the contract after this period results in the forfeiture of the buyer's Earnest Money Deposit. Earnest Money is refundable during the Due Diligence/Inspection Period, but it becomes non-refundable after this period.
It's also advisable to consult your lender before submitting an offer to ensure that the time frame specified in the contract allows sufficient time for your loan approval.
As per the Offer to Purchase and Contract, the seller is obligated to furnish marketable and insurable title to the buyer. However, it falls on the buyer to conduct a title examination. In Michigan, the Underwriting department of the title company oversees this process. The title company also secures a title insurance policy for the buyer.
In most cases, the title company (or "closing" attorney) becomes involved during the Due Diligence period. If not, this is the juncture to engage an attorney and prepare for the closing process. In a financed sale, your lender will generate the Closing Disclosure (the type of closing statement used for transactions involving a mortgage). In the case of a cash sale, a HUD-1 closing statement is utilized. The closing statement delineates the allocation of every dollar in the transaction and specifies how much money the buyer needs to bring to closing. In certain instances, a buyer may not be required to bring any funds to closing.
On the day of closing, or shortly before, a buyer may opt to conduct a pre-closing walk-through of the property. In the Michigan, lakefront real estate markets, remote or "mail-away" closings with out-of-town buyers are customary. If the buyer is not present, the buyer's agent can carry out the walk-through on their behalf.
A "sit-down" signing is customary for transactions involving a mortgage, as they entail more paperwork compared to cash sales. This is also when the keys are handed over to the buyer. While traditionally referred to as closing, it can also be termed "Settlement." Post-settlement, the title company still needs to update the title and file the deed (and deed of trust in the case of a mortgage) at the county courthouse. Upon closing, the buyer will need to take 2 forms to the city, the first form is the "Homestead Tax Form" and the "Property Transfer Affidavit." You are allowed 45 days to file these forms before being charged a penalty of up to $250. We highly recommend that buyers file these forms immediately after your closing.
When you're ready to embark on the home-buying journey and make the move, we're eager to assist!