Steps to purchasing a property

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Purchasing a home can be a daunting process, but it doesn’t have to be. A good real estate agent will lead you through the steps and do some of the heavy lifting for you. Please note that this is generally the order in which the process occurs.

1. Know how you will be paying

If you plan on paying for the property in cash you will need to obtain a document from your financial institution showing proof of funds (POF).
If you will be securing a mortgage you need to obtain a lender’s pre-approval prior to making an offer on a property. Competitive offers include documentation demonstrating that you have the ability to pay for the property, either via a proof of funds or a mortgage pre-approval letter.
If family will be providing you with gift funds to help with the purchase, talk with a lender or your real estate agent asap. There are rules associated with using these gifts that you will need to know of in advance.

2. Identifying potential properties

Find properties of interest through an automated email out of the Western Pennsylvania multi-list (set up by your real estate agent) or on websites like coldwellbankerhomes.com, homes.com, and realtor.com. Websites such as homes.com, realtor.com, etc., pull the information from the Western Pennsylvania multi-list so having a real estate agent set up an auto email for you is preferable, as you receive notice of new properties as soon as they hit the market.

3. After identifying a property of interest

Tour the property(ies). Your buyer agent will set up a showing for you at which they will show you the property. It is best to work with a buyer agent, as they are obligated to represent your interests, just like sellers have the listing agent to represent their interests.
Review all available documentation on the property to better understand the property you are considering buying. Your real estate agent will send you the seller disclosures – documents which disclose the condition of a property, the existence of any problems, and any steps that have been taken to remediate these problems. Seller disclosures also identify the source of the property’s water and sewage systems, type of heat, whether the property has air conditioning, the age of these systems, whether the property is part of a home owner’s association, etc. These are documents sellers are legally required to complete accurately in order to sell their property.

4. Upon deciding to purchase a particular property

The buyer agent will create a comparative market analysis (CMA) to help you decide how much money to offer for the property.
The buyer agent will provide you with the buyer cost estimate, delineating the costs you will incur in the sale. It will be an estimate, but should give you an idea of your final closing costs. If you are securing a mortgage, there will be fees associated with getting the mortgage. Usually the buyer’s agent gets their commission from the listing side broker. You can see in the property listing if and how much the seller’s agent is offering the buyer’s brokerage. Your buyer agent should have had you sign a Buyer Agency Contract prior to making any offers, which details how the buyer agent is compensated.
The buyer agent will write up an agreement of sale. Pennsylvania’s agreement of sale is 14 pages, and tells you everything you need to know about how the buyer and the seller will handle the sale.
The buyer agent will submit the signed, completed agreement of sale to the seller’s agent, along with initialed seller disclosures (indicating that you have reviewed them), the buyer’s hand money check (also called earnest money), documentation of proof of funds OR a letter of pre-approval from a lender, and any other addendums as appropriate.
The hand money is usually 1-3% of the amount you are offering for the property. The purpose of this money is to show the seller that an offer is serious and if the buyer decides not to go through with the sale for a reason not approved within the agreement of sale, the seller usually keeps this money. The buyer agent’s real estate brokerage deposits the hand money in an escrow account. If all goes well with the sale, this money will be subtracted from the amount the buyer owes at the closing (final sale). If the buyer decides to revoke their offer for a reason specified as valid in the agreement of sale, the buyer gets this money back.
The buyer usually orders a property inspection (again, the buyer agent often recommends some home inspectors and facilitates the inspection) at the buyer’s expense. For a condo, usually only a general property inspection is conducted. In the case of detached homes, it is common to order additional inspections such as pest inspections, radon inspections, etc.
Upon receiving the results of the inspection(s), a buyer can choose to accept the property as is, request that the seller make repairs or provide a discount to the sales price in order to make those repairs, or choose to revoke their offer. If repairs or a discount is requested, the seller can opt to NOT do the repairs/offer the discount, in which case the buyer may cancel the contract.

5. Other potential documentation

There are other addendums which might be submitted with an agreement of sale. One common addendum is the appraisal contingency addendum. If you are securing a mortgage, your lender will conduct an appraisal. The property must appraise for at least the amount of the sales price, as a lender won’t want to lend more money than what the property is worth. If you will be paying cash, you might wish to order an appraisal yourself to assure that the property is worth what you are paying. The appraisal contingency addendum specifies that the property needs to appraise for at least the sales price, and the possible options if it does not.

6. The Closing (hooray!)

The closing is when many of the sales documents are signed by one or both parties, the parties receive copies of these documents, and the buyer receives the keys. In Pennsylvania, the closing is generally conducted by a closing agent. The buyer selects the closing company/agent, generally recommended by their real estate agent. The closing agent makes sure all the necessary documents are signed, all the monies get distributed as detailed in the agreement of sale, etc. If you cannot be physically present at the closing, you can sometimes sign remotely.
The day before or morning of the closing, the buyer does a final walk through of the property. This is so they can make sure the property has undergone whatever repairs may have been required, that all fixtures that are supposed to be included in the sale are still there, and the property is broom-clean.
Usually, the buyer may move into the property immediately after the closing.