This guide was created by Alto Home Inspection, LLC with the goal of helping first-time home buyers, out-of-town investors and others understand the complicated process involved in closing on a home near Buffalo and Western New York.
We get so many questions about the home buying process that we wanted to take the time to share the basic information that we’ve learned from our vantage point as a home inspection company.
This guide is not intended to replace advice from a lawyer or real estate agent – it is intended purely to provide general information on the process of buying a home.
First step – Decide on where to live near Buffalo
Those looking to buy a house, townhome, condo or patio home have a wide choice when it comes to choosing where exactly to live. Between the Southtowns, Northtowns, Buffalo and more rural areas you can choose to live in a dense city environment, suburb or rural location.
The most populated cities and towns in Western NY are Buffalo, Amherst, Cheektowaga, Tonawanda, Hamburg, West Seneca, Lancaster, Clarence and Orchard Park. By visiting open houses here you’ll be able to get a good feel of what makes each of these places unique.
I think the reason why so many love it here in “the 716” is that it’s got such a wide diversity of places to live. You probably already have a good idea of where you want to buy a house, so let’s move on to the more complicated stuff.
People & Services Involved in the Buffalo Home Buying Process
- You, your spouse, partner and family – together you decide where to live, how much to spend, how big the house is and what type of home to buy, whether it’s a house, townhome or patio home.
- Real estate agent – They guide you through the process of buying your home. For first-time buyers, they should help you understand finance issues, the importance of a home inspection and the order of things in the process.
- Bank or mortgage broker – You can obtain a mortgage through your local bank, credit union or a mortgage broker. Mortgage brokers can be helpful in unique or challenging finance situations.
- Real Estate Appraiser – An appraisal will be ordered by your bank or mortgage company after you have a home under contract. The appraisal is used to determine the market value of the home, based on prior sales in the neighborhood and other market conditions.
- Real Estate Attorney – Most areas of the country don’t generally require that an attorney is used to buy or sell a home. I’m not quite sure why it’s mandatory here. The role of the attorney in Western NY generally is to review the purchase contract, secure a title search and survey, coordinate title insurance and broker the money exchanges between the buyer, seller and lienholders.
- Title Company – Title companies are used to perform the title search, which is a historical record of sales, purchases, subdivisions and liens on the property. Title searches are generally ordered by the seller’s attorney. Interestingly, they typically date back to the 1800’s!
- Licensed Home Inspector – A New York state licensed home inspector should be used to assess the home for visible problems with the home’s structure, exterior, electrical and other areas. A home inspection can help you save literally thousands of dollars, and is well worth the minimal expense.
- Radon testing company (highly suggested) – Radon testing is a process that lasts at least 48 hours, and will reveal the average level of radon in the home. Radon is a radioactive gas which is the 2nd-leading cause of lung cancer.
- Mold Assessor (sometimes) – A licensed mold assessor is able to test for mold in a home, find out what caused it and create a plan for removing it. It’s highly suggested that if mold is found during a home inspection that the cause of it is corrected and the mold is removed before you move in.
- Homeowner’s insurance broker or insurance company – insurance is always required for the home by mortgage companies, and it would be a terrible idea to go without it anyway.
Steps involved in Buying a Home in “The 716”
As a home inspector in the Buffalo area, my services are used near the beginning of the home purchase process and sometimes after my client moves into their house (most often for radon and mold testing). Although most real estate agents are great at helping their clients understand the timeline and steps involved in closing on a home, I still get lots of questions from buyers about the steps involved.
The truth is that our part of New York state has possibly the most complicated home buying processes in the country.
What does the process typically look like?
Make sure your finances are in good shape
Unless you are paying cash for your house, you’ll want to make sure that you qualify for a mortgage. Mortgage companies will consider your household income, debts, credit rating and years of experience in your field of work.
Most professionals would recommend a few things prior to getting serious about house hunting:
- If you are currently renting, coordinate your house hunt with your lease expiration date.
- Run a credit report, and make sure any debts listed are accurate. If any aren’t, contact the company listed as the debt holder and have them update the credit reporting agency.
- Save up for a down payment of ideally 20%. That’s not always easy, but it will allow you to get the best possible mortgage interest rate.
- Think hard about your budget. Don’t forget about county taxes, school taxes and homeowner’s insurance. These all add up to thousands of dollars per year, and mortgage companies typically require that they pay these out of an escrow account that you pay into monthly.
Get Pre-Approved for a Mortgage
It’s critical to be pre-approved for a mortgage before getting serious about house shopping. Without a pre-approval, most offers will not be considered seriously by the sellers because there’s no assurance that you’re in good enough financial shape to actually buy the house.
Getting pre-approval is usually a simple process that essentially validates your income, debts, credit report and other factors. At the end of the process you will have assurance that you can buy a house in the price range that you are looking for. You’ll also get a pre-approval letter that can be submitted to the seller as part of your offer. Without this document, your offer may not be taken seriously and in a competitive situation you’ll be at a disadvantage.
Team up with a Real Estate Agent
Your choice of real estate agent and home inspector are the two most important people involved in the home buying process. What does the agent do for you?
- They get to know what you’re looking for in a home.
- They coordinate showings with you
- They negotiate with the seller
- They act as a conduit between your attorney and yourself (sometimes)
- They keep things on track
- They handle problems if they come up
If your agent isn’t on the same page as you are, then the relationship won’t be productive and you could have a messy house hunt. Take the time to meet different ones, talk with them and get to know them.
Many buyers meet their real estate agent at an open house, but others find them through friends, by reading reviews on ZIllow, by cold-calling real estate offices or through the Buffalo Niagara Association of Realtors (BNAR).
One word of warning: Once you have been pre-approved for a mortgage and have come this far, do not apply for new credit cards or buy autos until you have closed on your home and have moved in! Doing these things can wreck your chances of landing a mortgage!
Start Looking at Houses
Home buyers today have more tools available to them to find houses than were available when many agents started their careers, but keep in mind that sites such as Zillow don’t always list all of the houses or properties that are on the market.
It’s smart to be your own advocate by searching for homes online, but also stay in lock-step with your agent so that they potentially find unlisted properties by networking with other agents and other methods.
Make sure you consider the location of the house, and review the Property Disclosure Statement, which by law must be provided to you before an offer is made.
Don’t get too caught up on the specific condition of the property, including structural issues, exterior problems, electrical or plumbing concerns. These items should all be assessed by your home inspector. As long as you select a great home inspector, you’ll get both a verbal review of big problems as well as a home inspection report that clearly identifies important findings.
Make an Offer
This is where a bit of real estate voodoo comes into play. Depending on the town, time of year and condition of the property the listing price of a house might be lower or higher than the seller plans on getting out of it. This is where your agent starts to really earn their commission.
When thinking about an offer, make sure you don’t overextend your finances, and that you keep enough cash to pay for repairs or improvements.
Expert real estate agents will know how to strengthen an offer without necessarily increasing the dollar amount. For example, the earnest money can be increased, closing time decreased, financed $ reduced, and home inspection pre-scheduled.
Think about if you’d like to keep the appliances, sometimes the seller is willing to part with them for very little.
Negotiate with the seller
You should expect the seller to make a counter offer, even in a multi-offer (AKA “bidding war”) situation. Think about your maximum offer price before this happens and you’ll be in a better position to think quickly without killing your savings.
Attorney Review & Approval
The standard real estate purchase contract used here in Erie and the surrounding Western New York counties includes an “attorney review” clause. This clause requires that the attorneys for both the buyer and seller review the contract. The review essentially is a safety check to make sure that the buyer knows what they signed, and grants an easy escape from it if they desire.
Pay your earnest money
“Earnest money” is a deposit that typically amounts to a few % of the purchase price, and is paid into an escrow account within 48 hours of the attorney’s approval. Oddly (in my opinion), the escrow check is normally paid to the name of the selling real estate brokerage. It seems to me that this should be the name of an independent 3rd party, buy I’m just a home inspector…
Have a home inspection & radon test
Now that your earnest deposit has been made, the clock is ticking on the contingencies that are written into the contract. Usually you have a 1-week period in which to have a home inspection, radon test and possibly other inspections or tests performed. You may even have the contract written to allow a remodelling contractor visit the house.
The home inspection is by far the most critical of the contingency period items. This inspection should be performed by a NY licensed home inspector, and should provide you with a strong understanding of any major and costly issues with the home.
As a WNY home inspection company, Alto Home Inspection, LLC is serious about our part of the home buying process. The home inspections that we provide to our clients are detailed and informative. Our clients are provided with a home inspection report that’s simple to understand, and includes pictures of problems and other observations.
A few areas that we focus on:
- Major structural components such as the foundation, basement and attic
- Electrical wiring and panels
- Plumbing pipes and fixtures
- Roof coverings
- Exterior siding
- Ground drainage
- Interior spaces, including the kitchen and bathrooms
- Windows and doors
- Garage door operation
If the inspector identifies a big problem that would cost you many thousands of dollars to repair, then what happens next is highly dependent on the individual situation. Some problems are so bad that either the appraisal or homeowner’s insurance may have issues with them. In this case, the seller would need to correct the problem before closing.
Other problems are smaller, such as a furnace that’s been damaged by a condensate leak . In those situations, the seller may credit you for a replacement.
Sign off on contingencies
Once you’re satisfied with the home inspection and any credits or repairs, then inform your attorney that you’re ready to move forward. At that point they should have you sign a contingency release document, which really kicks things into gear.
In general, the following will take place:
- Your attorney will notify the seller’s attorney of the sign-off
- The seller’s attorney will order the title search and land survey
- Your attorney will coordinate with your mortgage lender, the seller’s attorney, and others to coordinate the finances.
- Your attorney will eventually receive the title search and land survey, and will review them to ensure that the chain of title is free of questions or problems.
- Your attorney will coordinate with a title company to secure title insurance
Get a tentative homeowner’s insurance policy
You’ll need to contact a homeowner’s insurance company prior to closing in order to satisfy the bank (and also because it’s common sense). The insurance company may want to see a copy of the home inspection report, to review it for signs of major problems with the structure.
Ready to close
Once the seller’s attorney, your attorney, the banks and lienholders and the seller are all satisfied and money is ready to change hands, you will be notified by the attorney that you are “ready to close”. This is an exciting time and means what it sounds like. You’ll be able to schedule the closing.
This is literally the point in time where the title to the home is transferred to you, and you become the legal owner of the property. Closing technically occurs when the sale is recorded in a written book in the Erie county clerk’s office. It’s a weird, slow and mysterious process but it’s gratifying at the same time! You’ll get the keys, and can usually move right in!