How to Buy a Home in 10 Steps, Part 2

The second episode in Money Girl’s series about how to buy a home—so you save money and time.

Laura Adams, MBA
6-minute read
Episode #278

How to Buy a Home in 10 Steps, Part 2

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The more you know about the home buying process, the more time and money you’ll save. In Part 1 of this series we covered the first 5 steps of how to buy a home. Today we’ll cover the last 5, so you know how to make the right offer, negotiate the best deal, and have a successful closing.

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Just to review, here are the first 5 steps to buy a home from Part 1:

Step #1: Build your credit

Step #2: Decide what you can afford

Step #3: Get a mortgage preapproval

Step #4: Meet with a real estate professional

Step #5: Tour listings for sale

Now, here’s what happens after you find one or more homes that seem like a perfect fit for your price range and lifestyle:


Step #6: Research Your Purchase Offer

In Part 1 of this series, I mentioned that the listing price of a property is just a starting point for negotiations. Never make an offer on real estate without doing your homework. You’ve got to research pricing carefully so you know if the seller is fishing for more than the property is worth or if it’s actually priced to sell. This is another part of the home buying process where working with a seasoned real estate professional pays off.

First, ask your real estate agent to pull the listing and selling prices of similar homes nearby that sold within the last 6 months. If comparable properties or “comps” have been selling for 5% less than the listing price, you’ll know to subtract at least that much from what the seller is asking. Consider doubling that amount and making your opening bid 10% less than the listing price so you have room for negotiation.

If the property you’re bidding on is better than the comparable sales in terms of its square footage, amenities, lot size, location, or view, it may be worth more. But if it’s smaller or needs updating, you should offer less than what the comps sold for.

Your agent may have toured the comparable sales when they were on the market, so ask for his or her input on how they compare to the property you’re considering. But remember that agents typically want to sell homes at the highest possible prices so they earn higher commissions. Additionally, if the agent doesn’t represent you, keep your pricing strategy to yourself so they can’t tell the seller or use it against you.

You can offer any price you want and the agent must present it to the seller or their agent, even if it’s much lower than the asking price. But it’s possible that a low-ball offer could offend a seller and make them refuse to do business with you. So make an opening bid carefully and remember that a seller can reject your offer completely or come back with a higher counter-offer.

Step #7: Write a Purchase Contract

Once you’ve settled on an opening bid, it’s customary to put it in writing. Each state has a standard form for buying real estate that your agent will help you complete. You’ll need to decide a variety of issues like:

  • the purchase price

  • the amounts you’ll put down and finance

  • the deadline for the seller to respond to your offer

  • the date you want to close

  • contingencies, like getting a satisfactory home or termite inspection

This is where a good agent can help you get creative because everything in real estate—and I mean everything is negotiable. For instance, you could create a contract addendum that asks the seller to pay some or all of your closing costs. You could ask for the crystal chandelier that makes the dining room look picture perfect.

The sky’s the limit when you make an offer—but don’t go crazy. If the chandelier is a family heirloom, then asking for it could make the seller reject your offer. I’ve seen many real estate deals get destroyed over silly things like bar stools, porch furniture, and washer-dryer sets. Also remember that your power to negotiate depends on the pace of the market. In a slow market buyers have the most leverage to get what they want.

A good agent will help you craft an offer with appropriate contingencies so you can get out of the deal if something unexpected happens, like your financing falls through or the property needs more repairs than you thought. Just remember that an agent who represents the seller will want the contract to favor their best interests, not yours.

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Step #8: Satisfy Your Contingencies

Well done! The seller accepted your offer after haggling on price a little bit. Now it’s time to work through each contingency listed in your offer. You or your agent must get a copy of the signed contract to your lender right away. They’ll require a home appraisal to determine whether the property is really worth the price you’ve agreed to pay.

Lenders generally also require a land survey, which is a map of the property boundaries that shows where structures are located. The lender needs to know that the detached garage or fence isn’t sitting on the neighbor’s property by mistake, or vice versa, which would create big problems down the road. Your lender will order those services and perhaps others, depending on what’s customary in your area.

You’ll be in charge of satisfying other contingencies like getting a home inspection and getting homeowner’s insurance. If an inspector finds structural problems, you can ask the seller to repair them or to lower their price. If they don’t agree to either remedy you could walk away from the deal without penalty, as long as that contingency is written into the contract.

Step #9: Review Closing Documents and the Property

If you make it through all the contingencies in a real estate offer, you’re in the home stretch! One or 2 days before the closing, your agent will receive a standard closing document called the HUD Settlement Statement. HUD stands for the Department of Housing and Urban Development.

This is a very important document that you need to review carefully. It lists each charge you must pay at closing. Some of the expenses may be rolled into your financing, but typically many are not. You’ll need to show up at the closing with a cashier’s check to cover what you owe—or wire funds if you’re doing a remote closing.

One final task you or your agent should complete before the closing is called a walk-through. This is your last chance to look at the property and make sure nothing has changed. If you find a tree through the roof or a missing chandelier that was supposed to be included in the deal—you’ll need to start negotiating again.

Step #10: Execute the Closing Documents

After all the drama of dealing with lenders, searching for homes, negotiating with sellers, and managing multiple vendors, make sure you take a deep breath.

before the closing. It can be nerve-racking as you sit across the table from the seller, especially if the negotiations got heated. If you don’t want to meet the seller face-to-face, for any reason, you can always request to have separate closings.

The closing agent or attorney will go through the settlement statement with you line-by-line. Be sure to ask questions if you don’t understand anything. Then you’ll review and sign piles of mortgage documents until your hand cramps. Finally, you get the keys and are the proud owner of a new home. Congratulations!

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.