How to buy a house in 25 easy steps - Part III

OK, so you've found the house of your dreams, you're pre-approved for a mortgage, you have a good Realtor (like me!) on your side. What's next? 11. Writing the offer. This step really deserves its own post (which it will get one day).

12. Write a check for earnest money. Earnest money is really just a deposit which lets the seller know you are "earnest" about going through with the deal if you eventually come to an agreement. Earnest money can vary from $0 up to 10% of the purchase price or more. For Chattanooga real estate, $500-1000 is typical although cash buyers are often asked for 10% as a sign that they actually have the cash. The amount of the earnest money and who holds it is a part of the offer and is a negotiable point. If you back out of the contract without exercising one of your contingencies, the earnest money goes to the seller. If you get to closing, the earnest money is credited toward the cash you need to bring to close.

12. Negotiating. You think they should leave the pool table, they think you should pay $20,000 more. That's where negotiating comes in. Decide what you are willing to give in on and what you aren't. Counter offers can go back and forth almost indefinitely. Once one of the parties agrees to the last offer/counter offer, the receiving party is notified. The date of that notification is the "binding agreement date" or BAD (how's that for a great acronym?).

13. Congratulations! You have a binding agreement! Now comes the fun part. Your contract will call for certain things to be done within a certain number of days of the BAD. First things, your earnest money will be deposited into the broker's escrow account if it hasn't already but that will go on without your involvement.

14. Next, you will need to make formal application with your lender if you haven't already. You may only have a preliminary approval which requires you to submit additional paperwork or information. If that's the case, get that stuff turned in ASAP. If you miss any of the deadlines in your contract, the seller could choose to terminate it based on a timeline default.

15. Arrange for a home inspection. This isn't a requirement but I always strongly recommend it. Almost all houses will have something wrong with them, even newly built ones, so don't freak out just because your inspector finds a long list of things s/he thinks should be corrected. Take a look at the list and decide which items are total deal breakers, which ones you'd like the seller to repair & which ones you are willing to live with - it's almost entirely up to you. Your contract might specify a pre-agreed repair allowance. The seller has agreed up-front to do a certain dollar amount in repairs. If this is the case, there is no reason NOT to ask for repairs that will cost up to that amount. If you don't have anything in the contract for this, which is usually the case in foreclosures and other distressed sales, you will need to decide whether you want to re-negotiate or walk away from the deal.