Step 1: Choosing a Real Estate Agent

Buying a home is one of the largest purchases and biggest decisions of your life. The first thing to do is to find a REALTOR® you trust.

Ask your friends and relatives who have bought homes recently for their recommendations. Or, you can use the find-a-REALTOR® search to locate one in your area.

Before working with one, you should know that the duties of the REALTOR® depend on whom they represent.

Many REALTOR® specialize as buyer's agents, representing clients who are searching for their next home. These agents can save you time and money by researching properties based on your criteria, helping you secure the best mortgage rates, counseling you on the offer amount and terms most favorable to you, and negotiating on your behalf.

For buyers, there's really no downside to hiring a REALTOR® because the seller generally pays buyer's-agent commissions. Many buyer's agents have earned the Accredited Buyer Representative (ABR®) designation from the National Association of REALTOR® Real Estate BUYER'S AGENT Council.

If you choose not to use a buyer's agent, you could negotiate directly with the listing agent representing the owner.

All brokers must treat you honestly and fairly regardless of whom they represent.

If you choose to have a REALTOR® represent you, you should enter into a written contract that clearly establishes the obligation of both parties and specifies how your REALTOR® will be compensated.

Step 2: Setting a Price                                                                                                                        

When setting a price, the important thing is to be realistic. If the price is too high, you may not find a buyer. Too low, and you cheat yourself out of money.

Appraisal
Regardless of what you originally paid for your home and the cost of improvements you have made, the only price that matters is what the market will bear at the time you decide to sell. You may consider hiring an independent real estate appraiser with specialized training and experience. Don't rely on assessed valuations made for tax purposes. Such valuations may not be reliable indicators of value, as they are usually made using mass appraisal techniques.

Comparative market analysis
Whether or not you get an appraisal, your REALTOR® can develop a comparative market analysis. This analysis will describe homes in your area that have recently withdrawn from the market and may compare specific features of your home to others--the value of a corner lot, a city view, or an extra bedroom, for example. The analysis may also point out market fluctuations caused by the opening of a new school or business, as well as long-term trends.

Net proceeds
Once you've decided on a price range, the REALTOR® can help you calculate an estimated amount you might net from the sale. If you have owned your home for several years, you may have built up sizable equity. Equity is the difference between the value of your home and the balance on your mortgage. After subtracting what you owe on your mortgage, ask your REALTOR® what costs you will incur in closing. These may include title fees, taxes, a penalty for prepaying your mortgage, brokerage commission, attorney fees, and charges for preparing and recording documents. Finally, ask your tax adviser or attorney about the tax implications of your proposed sale.

Step 3: Signing a listing agreement                                                                                              

After you choose a REALTOR®, you will most likely sign a listing agreement--a contract in which you agree to allow a REALTOR® to sell your home during a given period and pay the REALTOR® a fee when your home sells. Most REALTORS® are independent contractors who work for a company operated by a licensed real estate broker.

The amount of compensation you pay a broker is negotiable, but the REALTOR® will generally follow the company's policy regarding compensation. The amount of the fee will be spelled out in the listing agreement. Make sure you understand how the fee will be paid before signing.

Exclusive listing
Most REALTORS® will ask for an exclusive right-to-sell listing. This means that you will owe the broker a commission regardless of who finds a buyer during the listing period. In other words, if you decide to sell the house to your cousin, your broker still gets a commission. In an exclusive listing, the broker is usually motivated to work harder to sell your home.

It's possible that a REALTOR® from another company will find a buyer for your home. In that case, your broker is the listing broker, and the second agent is the cooperating broker. Many times the listing broker will agree to pay the cooperating broker a fee from the amount you pay the listing broker. Your listing broker cooperates with other brokers who procure buyers interested in your property and offers to compensate the other brokers for procuring a buyer. Cooperating and compensating other brokers is discussed in the listing agreement you sign with the listing broker.

Length of listing
The listing agreement will specify how long you agree to list your house with a company. You want a period that's long enough to motivate your REALTOR® to advertise your home and respond to buyers, yet short enough to allow you to change to a different company if you become unhappy with the REALTOR®'s service.

Remember that the listing agreement is a contract. You should get a copy for your records. Your REALTOR® is bound to the terms just as you are. You can expect the REALTOR® to keep appropriate information confidential and effectively market your property.
 

■ Assets: current checking account balances, savings accounts, stocks and bonds, certificates of deposit, other property, insurance policies, and pension funds.
 

■ Credit: debts on cars and appliances, debts on all credit cards, and history of debt repayment. Your lender may ask for a credit report, so you may want to clear up any known negative terms in advance.
Your Texas REALTOR® can help you determine what price range and monthly payment you can afford. The monthly payment typically consists of principal, interest, taxes and insurance--PITI, for short.

Step 4: Marketing your property                                                                                                    

Preparing your home:
In preparing your home for viewing by prospective buyers, remember that people buy on emotions. Your home has to feel right, or buyers will look elsewhere. Ask your REALTOR® and some honest friends to look at your home objectively and suggest ways to make your home more inviting and sellable. Consider both the exterior and interior. Since you will be appealing to buyers' feelings, you need to pay attention to detail. An extra $50 you spend on red geraniums or new bath towels might mean a significant increase in a buyer's offer.

Clean your home thoroughly and make minor repairs such as tightening towel racks and gluing wallpaper edges. For larger repairs, consult your REALTOR® as to whether repairing the item will generate a good return on the sale. Repainting the woodwork may be worth it, but replacing the carpet may not. Hire a professional inspector to examine your house for structural and mechanical defects. Get an inspection early, and you can avoid surprises.

Honesty and candor:
If your home has a major problem you don't intend to correct, be candid about it. Don't paint over the water marks on the ceiling to hide a leaky roof. Buyers will find out about the problems anyway, especially if they are smart shoppers and hire a professional to inspect your home. In an age when lawsuits are as common as family sit-down dinners, it pays to be open about everything.
You should consider including a one-year residential service contract with the sale of your home. This buyer perk is a common practice and helps ease concerns. Typically, after the first year, the buyer has the option of renewing the coverage at his or her expense. A residential service contract is simply an agreement with a company to repair certain items on the property if such items fail to function or are in need of repair (for example, air conditioning unit, heating equipment, plumbing system, etc.).

Attracting and screening buyers:
As part of the overall marketing strategy, your REALTOR® may arrange a tour of your home for local REALTORS® and perhaps schedule an open house for the public. Your REALTOR® may also run ads in local newspapers, Web sites, and other publications tailored specifically for the type of home you are selling. As responses come in, your REALTOR® will screen out sightseers and half-hearted inquirers and make appointments with the serious prospects.

When the showings begin, keep your home clean and ready. Your REALTOR® will try to give you advance warning before showing your home but be prepared anyway. If people drop by and are not with a REALTOR®, it's best not to show them your home. Ask for their names and phone numbers and refer them to your REALTOR®.

Purposeful absence:
When a REALTOR® comes to show your home, it's best if you are not there. Many buyers feel like intruders when the owner is present; they tend to hurry away. Letting the buyers walk through your property at their own pace will help put them at ease. They will feel free to look around and ask questions. If you must be there, let the REALTOR® handle the showing. Sit quietly and be courteous, but avoid engaging the buyer in conversation. The REALTOR® needs the buyer's complete attention to show your home properly.

Fair housing:
REALTORS® are required by law to make your property available to all persons without regard to race, color, religion, national origin, sex, disability, or familial status. Your REALTOR® will not discuss any matter that may potentially discriminate against any person.
 

When a buyer makes an offer on your home, your REALTOR® will contact you promptly. The REALTOR® will scrutinize the document, review it with you carefully, and answer your questions. The written offer lays out all the terms of the proposed transaction--the price the buyer is willing to pay and the financing terms--and becomes a binding contract if you sign it.

The offer may be contingent on the buyer selling a home first or obtaining an inspection. Ask your REALTOR® how these terms affect you and whether the offer is in line with the market. The offer describes the property, states who pays for which closing costs, and specifies dates of closing and possession. Along with making the offer, the buyer may place some earnest money with the escrow agent as a sign of good faith. The earnest money will be kept in an escrow account and applied to the buyer's down payment or closing costs when the sale closes.

Your options:
In reviewing the offer, you have three options: accept, reject, or make a counteroffer. A counteroffer is a rejection of a buyer's offer with a simultaneous offer from you to the buyer. Carefully review the figures compiled earlier to determine your net proceeds--closing costs may be quite different from earlier calculations. Discuss the possibilities with your REALTOR®, your attorney, and a tax adviser.

Loan approval process
From the lender's viewpoint, approving the loan, based on your financial standing, is only part of the risk; the other part is the property itself. The lender may require an appraisal to verify that the home is worth the loan as well as a physical survey to discover any encroachments on the property. Repairs may be required. Insurance must be purchased. Verifications of employment, deposits, and other matters must be obtained. Loan documentation and conveyance instruments must be drawn and approved. In addition, the title company must research the title and arrange for paying off any liens, taxes, and other costs. All these conditions and others must be satisfied before a transaction can close.

Hazard insurance
As another protection, the lender may require insurance to protect against fire and storms. (Flood insurance could be required if the house is in a flood plain.) Even if not required by a lender, it's probably a good idea for you to consider all types of insurance.
 

Consult your real estate professional for further details.

 Step 6: Closing the deal                                  

The closing is the end of weeks or even months of research and decision making. The closing could last less than an hour but may take longer, depending on the complexity of the transaction. It often occurs at the title company's office. The title company officer will explain each document before you sign. You may want your attorney present as well.

Two basic kinds of documents
If buying a home were strictly a cash transaction, you would simply hand over the money and receive the deed. More than likely, however, you are borrowing money for the home, which means that you are actually making two transactions--acquiring the loan and buying the home.

As a borrower, you will sign a note promising to repay the loan and a deed of trust (also known as the mortgage) pledging the house (or other collateral) as security for the note. You will also sign numerous other papers including acknowledgments, disclosures, surveys, certificates, etc. Be sure to read each document carefully. Ask questions if you do not understand anything. There are no dumb questions. Seriously consider having your attorney present at closing.

As a homebuyer, you will present a cashier's check (or other good funds) to the seller, sign a document that itemizes closing costs (the lender will have given you an estimate in advance), and pay your share of the closing costs. In return, you will receive a deed, transferring ownership rights to you.

The home is yours
At the end of the meeting, you will likely receive keys to the property. At that moment, the home will be yours. Occasionally, possession of the property will occur after closing. For example, the seller may have negotiated with you for a few extra days after closing, or the loan will not immediately fund, or other concerns. But, in most transactions, you will be the new owner at the end of closing.

Some other points to keep in mind:

■ Buyer/seller agency. It's important to understand who your REALTOR® represents--buyer or seller. The REALTOR® will provide you with information about representation. As a buyer you may sign a buyer representation agreement with a REALTOR®. It will discuss the scope of the REALTOR®'s representation.

■ Pre-paids. You should be aware that your closing costs will include prepayment of an

escrow account to cover insurance and taxes.

■ REALTORS® are required to make properties available without regard to race, color, religion, national origin, sex, disability, or familial status.

 
■ Be sure to have a property inspected by licensed inspectors to determine: a) the condition of the property (structural, mechanical, electrical items, etc.); b) any environmental conditions (asbestos, lead-based paint, toxic materials, etc.); c) wood-destroying insects; and d) other matters. Brokers are not qualified to perform such inspections.

 
■ Residential service contracts can offer repair to appliances, electrical, plumbing, heating, cooling, or other systems in the property.

■ Be sure to obtain a policy of title insurance or have an abstract of title reviewed by an attorney of your choice before buying a property.

■ Seek professional advice before entering into a binding agreement.

Top Reasons to hire a listing agent:                                                                               top ▲

With the increasing popularity of the Internet in the real estate industry, some consumers wonder why they should hire a listing agent when it seems relatively simple to sell their home on their own. According to a survey by the National Association of REALTORS®, the median selling price for homes sold without an agent was $132,800 compared to $160,000 for agent-assisted home sales. There are many reasons why hiring a listing agent is in your best interest. Below are the top three.

REALTORS® have the know-how: Selling a home takes a lot of time, experience, and know how – three qualities many consumers do not have when it comes to real estate. But you don’t have to know everything about the home selling process if you hire someone who does. Your Texas REALTOR® can help you in so many ways – from setting your asking price to preparing your home for market to facilitating the process all the way to a successful finish.

REALTORS® know how to set an appropriate asking price: Setting your sales price too high or too low can have serious financial repercussions. Texas REALTORS® are experts at analyzing sales-price data and conducting market research in your area. Many REALTORS® will prepare a comparative market analysis at no charge. A CMA provides you with information on comparable homes in your neighborhood that sold, are still on the market, or failed to sell, helping you better understand the state of the current housing market and set the price that will entice buyers and put money in your pocket.

REALTORS® will manage the volumes of paperwork: If you are selling your home, it means you have undergone the home buying process. If so, then you are likely to remember the stacks of legal contracts and documents involved. The same holds true for selling property. Most purchase agreements run a minimum often pages, not including the federal and state-mandated disclosures and other related documents. A single mistake could cost you a lot of money, or worse, land you in court. Your Texas REALTOR® can handle the necessary paperwork for you – protecting you from financial or legal problems and giving you peace of mind.

Staging your home:                                                                                                        top ▲

Staging your home:                                                                                                        top ▲

There are a variety of factors that contribute to a home languishing on the market, including price, condition, and location. Pricing the house too high is one of the top reasons homes fail to sell. When setting an asking price, it’s important to do your homework. Conduct market research and ask your REALTOR® for a comparative market analysis (CMA). As a homeowner, try to stay on top of market conditions. Is real estate in your neighborhood relatively hot? Visit some open houses and see what others are doing. What terms and conditions are other sellers offering buyers?

Most buyers want to walk into a home that is in model condition. Although it may be difficult, you should walk through your house as if you are a potential buyer, being very critical and asking whether you would purchase a home in this condition. It may be as simple as getting that stove to shine, or you may need to do a little more like adding a fresh coat of paint to your home’s exterior. Whatever the case, talk to your Texas REALTOR® about staging your home to sell.

The third big reason a house won’t sell in a good market is location. Such things as undesirable schools, a higher crime rate, a busy road, or noise pollution can mark a bad location. If your house is located poorly, you may have to compensate with a lower listing price. Favorable terms, such as owner financing or a lease with options, could also help sell your house. Your Texas REALTOR® can recommend a strategy for selling that will overcome a poor location.

The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income. Check with your accountant.