You’ve finally found the home you love. Now what? Though every market is different, you can expect to follow these seven steps, from offer to closing.

1. Making an offer

If you’re sure the home you love is right for you, it’s time to make your move. This means writing up a formal purchase offer and signing a real estate contract.

Even though it’s early in the buying process, you still must sign a legally binding contract. With your signature, you’re committing to moving ahead with the seller. Keep in mind you can add contingencies to many real estate contracts. For example, most real estate buying offers will be contingent on a property inspection, as well as disclosure review, loan approval, appraisal and other matters. Such contingencies enable buyers to opt out of the contract if unexpected problems or concerns pop up.

2. Disclosures

In most states, sellers are legally required to provide buyers with disclosure documents, a preliminary title report, copies of city reports and any specific local documents. In California, for example, an earthquake hazards report or a geological survey is required as part of the disclosures. In some areas of the South, especially near the Gulf Coast, buyers usually receive flood maps and reports relevant to the property being considered.

In addition, sellers must disclose any known issues that might affect the property’s value or habitability. Usually, in a transfer disclosure statement, sellers must answer a series of “yes” or “no” questions about the property, the neighborhood and their experience there. If there have been leaky windows, violations from the city, work done without permits or plans for a major nearby development, the seller must disclose them. If there are significant issues, the seller’s agent would likely have brought them up before the contract signing. But if something is disclosed here that is a negative factor for you, it is your “out” of the contract.

3. The appraisal

Most buyers put a certain amount of money down toward the purchase price. The balance will come in the form of a bank loan (usually). But a bank isn’t going to hand over that money without due diligence. An appraisal is the financial institution’s way of making sure the contract price is the right price. So the lender sends out a third-party appraiser, which the buyer pays for, to confirm that the contract price is in line with the neighborhood’s comparable sales. If it’s not, the bank can deny the loan or change the terms.

4. Inspections

As part of the real estate contract, you have the right to a property inspection. The most common is a “general” property inspection, in which the inspector checks the home from the foundation to the roof and investigates all major systems and components. As the buyer, you should follow along with the inspector to learn more about the property. For example, you’ll want to know about the components (such as the water heater) and have a plan in place for maintenance.

After the general property inspection, the inspector may suggest having a specialist come out. This could be a roofer, electrician, HVAC specialist or even an engineer. Listen to the inspector and have any recommended follow-up inspections. Remember: This is your one chance to approve the property from top to bottom. If issues arise, you may be able to negotiate a fix or credit with the seller. If something major arises and it’s not what you signed up for, you can exit the contract via your inspection contingency.

5. Loan approval or commitment

In addition to making certain the property appraises at no less than the contract price, the bank will want to fully approve your credit, debt and income history. The bank will also want to approve the property’s preliminary title report to make sure there are no liens recorded against the property that might affect its value. The bank can take up to 30 days to complete its review, which should result in a loan commitment or full loan approval. Once that’s completed to the bank’s satisfaction, you’re guaranteed a loan, and you’re one step closer to closing.

6. Final walk-through

Just before closing, you should walk back through the property to make sure it’s in the condition it was when you last saw it. Make sure the seller didn’t remove any fixtures, make modifications or leave behind garbage or debris. You also want to be sure any fixes you negotiated with the seller have been completed.

7. The closing

Depending on the market, the closing may happen at an attorney’s office or with an escrow officer at a title company. In some jurisdictions, the buyer and seller don’t ever meet. Each goes in to sign their closing papers separately. In others, the buyers and sellers sign the closing documents together. Also, thanks to current technologies, some closings can now happen remotely using wire transfers and overnight delivery of documents.

Regardless of how a closing happens, if you’re a buyer and getting a loan, plan on signing dozens of documents at closing. You’ll need to show photo ID, as your signature will be notarized. Prior to the closing, your real estate agent, attorney or escrow officer should send over a closing statement to review. The statement details your final closing costs and the money you need to bring to the closing. The funds can be wired in or paid with a cashier’s check on closing day. Be sure to ask for the statement early, so there aren’t any last-minute surprises.

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Are You Chasing Prospects?

There’s an outdated theory in the real estate business that suggests that if you want to be successful you have to chase as many prospects as you can.

According to this theory, if you saturate the market with mailings, postcards, and other marketing attempts, sooner or later you’ll produce a solid lead from your efforts. 

It’s a lot like real estate lottery. Keep investing your time and money and maybe, just maybe, you’ll hit the jackpot. 

The lottery has never been a solid investment strategy. The odds of winning are too astronomical to be considered a good payout. Yet we continue to use the same strategy to attract business.

 Is it possible we are overlooking a better investment plan? You bet; a far better option, one that actually pays off, is to convert loyal clients into active prospects — to invest in your proven success. 

Why We Keep Playing the Lottery

 If we know our chances of winning the lottery are terrible, why do we keep playing? Why do we keep spending money trying to attract new clients in hopes that one of the hundreds or thousands of prospects will become the producer? 

It’s far easier to hope that the lottery pays off than it is to work hard to make a million dollars. The same is true for real estate. You have to invest time and energy into your real estate business. You have to develop a strategic marketing plan and you have to build relationships with families from your farm community.

 Here’s an example: One of the most common real estate lottery attempts is to send out sold/just listed post cards as their farming effort. And just like the lottery, it pays off about as consistently.

 Experience has shown that this is one of the most ineffective methods of marketing because there is simply too much competition. There is nothing that distinguishes you from the hundreds of other agents that are sending the same kind of card, just a different property address.

 Changing Your Payoff Strategy 

Wouldn’t it be great if you could count on a return on investment for your marketing time and money? The good news is that you can, you simply need to change the way you think about your strategy. 

The strategy is simple. Focus on staying in touch with clients, family, friends and acquaintances. Keep constant contact with these “prospects”, because even if they don’t need the assistance of a realtor, they can become a powerful force in your advertising. They become “evangelists” of your service and draw prospects to you.  

Does this sound familiar? Sure, it’s the basic premise of working your database. But to make this strategy really pay off you begin by delivering an exceptional level of service. 

This isn’t the kind of service other agents are offering; instead, it’s the kind of service that starts with the first contact and continues long after the sale of the property. You show how much you really care by staying in touch. You treat the transaction as a true relationship, not just a one time sale.

 How Do You Keep in Touch?

 If you fall back into the traditional marketing process of sending out postcards, newsletters and mailings, you aren’t nurturing your relationship. You need to step outside of the box and develop some new strategies to build upon your past success and keep the relationship alive.

 Think about a farming strategy. Instead of picking a neighborhood and trying impersonal marketing efforts, find ways to get involved in that neighborhood. Find ways to become a part of the neighborhood – to build new relationships with friends and family within the neighborhood.

New Mortgage to Get Pricier for 2014

Consumers can expect to pay more to get a mortgage next year, the result of changes meant to reduce the role that Fannie Mae and Freddie Mac play in the market.

Related Stories

  • [$$] FHFA to Delay Increase in Mortgage Fees by Fannie, Freddie The Wall Street Journal
  • Statement From Rep. Watt on Delaying Fannie, Freddie Fee Hike The Wall Street Journal
  • [$$] U.S. Watch The Wall Street Journal
  • Closing Costs Set to Rise: Buy Sooner Rather than Later TheStreet.com
  • Fannie Mae, Freddie Mac Regulator Seeks Input on Lower Loan Limits TheStreet.com

The mortgage giants said late Monday that, at the direction of their regulator, they will charge higher fees on loans to borrowers who don’t make large down payments or don’t have high credit scores—a group that represents a large share of home buyers. Such fees are typically passed along to borrowers, resulting in higher mortgage rates.

Fannie and Freddie, which currently back about two-thirds of new mortgages, don’t directly make mortgages but instead buy them from lenders. The changes are aimed at leveling the playing field between the government-owned companies and private providers of capital, who are mostly out of the mortgage market now. Fannie and Freddie were bailed out by the government during the financial crisis but are now highly profitable.

The Federal Housing Finance Agency last week signaled the fee increases but didn’t provide details. The agency’s move came one day before the Senate voted to confirm Rep. Mel Watt (D., N.C.) as its director. It isn’t clear whether Mr. Watt, who hasn’t yet been sworn in, weighed in on the changes. An FHFA spokeswoman declined to comment on any discussions with Mr. Watt, who also declined to comment.

Mr. Watt will face heavy pressure by consumer groups and the real-estate industry to reverse course, industry officials said Tuesday. “There will be significant opposition very quickly once people understand what is actually being implemented,” said Martin Eakes, chief executive of the Center for Responsible Lending in Durham, N.C., a consumer-advocacy nonprofit.

The changes take effect in March but will be phased in by lenders earlier. The fee increases come as the Federal Reserve contemplates an end to its bond-buying program, which has kept mortgages rates low, and as new mortgage-lending regulations take effect next month.

“The timing of it is impeccably bad,” said Lewis Ranieri, co-inventor of the mortgage-backed security. “The question becomes: how much can housing take?”

In updates posted to their websites on Monday, Fannie and Freddie showed that fees will rise sharply for many borrowers who don’t have down payments of at least 20% and who have credit scores of 680 to 760. (Under a system devised by Fair Isaac Corp., credit scores range from 300 to a top of 850.)

A borrower seeking a 30-year fixed-rate mortgage with a credit score of 735 and making a 10% down payment, for instance, would pay fees totaling 2% of the loan amount, up from 0.75% now. The 2% upfront fee could raise the mortgage rate by around 0.4 percentage points.

Borrowers with larger down payments could also be affected. Fees for a loan with a 690 credit score and a 25% down payment would rise to 2.25% from 1.5%.

Executives at Fannie and Freddie said last month that the fees they have been charging are enough to cover expected losses, but that those fees might need to rise in order to allow private investors, which target a higher rate of return, to compete. An FHFA official Tuesday said that even with the latest changes, Fannie’s and Freddie’s fees would be considered low relative to private firms’.

Mr. Ranieri, who runs a mortgage-investment firm, predicted that the move would backfire and hit the economy. Because the private sector isn’t strong enough to lend more, “all this will do is tighten credit. You’re just making housing less affordable,” he said.

Industry executives also said the magnitude of the increases was a surprise. “It’s like Beyoncé’s album: It all of a sudden hit the market,” said David Stevens, chief executive of the Mortgage Bankers Association.

In recent months, some large banks have been offering “jumbo” mortgages, which are too large for government backing, at rates below the conforming mortgages that are eligible for purchase by Fannie and Freddie for borrowers with the best credit. The higher fees could make conforming mortgages even more expensive than jumbos.

The changes follow other announcements in recent weeks that could raise loan costs for some borrowers. The Federal Housing Administration, a government agency that guarantees loans with down payments as small as 3.5%, said earlier this month that it would drop the maximum loan limit in around 650 counties. In San Bernardino, Calif., for example, the loan limit will fall to $335,350 next month from the current level of $500,000.

Separately, the FHFA said Monday it would study reducing the loan amounts that Fannie and Freddie guarantee by around 4%, bringing the national limit to $400,000 from its current level of $417,000. Those changes won’t take effect before October 2014, the agency said.