Buying a Home

This first step of preparation is so important in the home-buying process.  Why do you want to buy?  How much time can you commit to the process?  Are you motivated to find that perfect property?  There will be challenges in this process, and that’s exactly what your Buyer Agent is there for.  Your agent has not only “seen it all” throughout the years, he or she is fully up-to-speed and current with the home-buying market today, and will be able to cushion you from the bumps in the road of the buying process.

You’ve heard that the 3 most important aspects of real estate are location, location, location, and it’s true.  The first location refers to the area where you want to live, and you should have a good idea of where that is.  The second location refers to areas that match your lifestyle, whether that’s schools, local amenities, attractions, or lots of space.  And the third location refers to areas where the purchase price gives you headroom to grow equity in the property, so that it’s worth more when you go to sell.  None of these is an exact science, and your agent will explain all of this and much more to help you with your decision.

These principles not only apply to buyers looking for a primary residence, they also apply to buyers who are looking for a second home, a vacation home, or an investment property.  Once your agent fully understands your needs and all the parameters of your search, he or she will be well-positioned to advise you on the areas that are a match for you.

It’s never too early to engage a real estate agent in your buying process.

Early on in the process, you should be talking to potential lenders about your purchase.  There are dozens of banks and credit unions around the area that are willing to work with you.  If your agent recommends a lender or two, it is strictly on the basis of how easy it is to work with them, and their ability to get the job done.  There is no affiliation between a broker or agent and a lender, and certainly no kick-backs of any kind; such things are a serious violation of Federal RESPA laws.  The only “reward” that your agent receives is the satisfaction of knowing that he or she connected you with someone that was great to work with, got the job done, and did so in a timely fashion.

It is never too early to start arranging financing.  It’s also a great idea to get a pre-qualification letter to help you understand what you are able to afford.  This also helps your buyer agent to find appropriate properties for your budget.  Because the process of underwriting a mortgage can take some time, the sooner you get this rolling the better.  Talk with your agent about potential questions that you might ask of a lender.

Like any other key relationship, it’s important to have a good connection with your agent.  Will he or she listen well?  Will he or she understand your needs and be able to repeat them back to you?  Do you get a “good vibe” communicating with your prospective agent?  What do others say about your prospective agent?  Is he or she a board-certified REALTOR©?

Once you’ve settled on an agent, the next thing that you will likely do is execute a “Buyer Agency Agreement”.  In Wisconsin, this is referred to as the WB-36, and it is a contractual arrangement that you enter into with the agent’s brokerage.  It sets forth the understanding of your engagement together, and is there to protect and support the relationship.  It also gives your agent the authority to represent you in a real estate transaction.  When you sit down with a prospective agent, ask them to explain the WB-36 Buyer Agency Agreement in detail.

Wisconsin law provides that a real estate brokerage, acting through its agents, has certain fiduciary duties to it’s clients.  What this means is that in Wisconsin, a buyer agent is legally bound to act in the best interest of his or her client.  So, not only do you have the reputation of the brokerage and its agents in your favor, you also have the law of the State to back you.

Armed with all of your search parameters, your agent will likely start the hunt by consulting the South Central Wisconsin Multiple Listing Service (SCWMLS), usually referred to as “The MLS”.  Because your agent has had years of experience navigating this powerful and complex tool, he or she will quickly identify several properties that have the potential to fit the bill for you and will send you an email with a link to the listings.  After you look at the listings, you can decide which of the properties that you want to visit.

Sometimes none of the properties call to you.  That’s fine, it’s all part of the process.  Sometimes when you see properties that are listed, you will want to modify your search criteria.  That’s OK, too; let your agent know these things so that he or she can include this in future searches.  And don’t worry, this kind of back-and-forth is common until you get it just right.  When you step into that “right” property, you’ll know it almost immediately.

When you find that property that lights you up, let your agent know right away and discuss a game plan.  If everyone agrees that this is “the one”, your agent will act with blinding speed to get an offer in front of the listing agent.  In Wisconsin, the offer is referred to as the “WB-11 Residential Offer To Purchase” or, simply, “The Offer”.  It’s a good idea to review this 9-page contract with your agent early in the process as it can be a little daunting.  When the time comes to pull the trigger, you’ll want to be up-to-speed with it so that things can move fast.  You’ll hear the phrase “Time is of the Essence”, and it means that timing has a lot to do with the success of a deal.

At this point, you will likely provide what’s called “Earnest Money” to show your seriousness to the seller.  This money is usually sent in the form of a check written by you to the listing broker, who is licensed by the state to hold these funds in a special account.  The amount will depend on the deal and, again, your agent will tell you what amounts are usual and customary for your particular situation.  If the deal does not go through, you will usually get all of this money returned to you.  In very rare cases, the seller may keep some or all of the money if they feel that you did not act in good faith.  Your agent will help keep your negotiations clean so that this does not become a concern.

To get a jump-start on things, you can download the official WB-11 form from the Wisconsin Division of Professional Services below and begin reading it yourself.  Here’s a tip: The odd-numbered pages contain the “meat” of the contract, and the even-numbered pages contain definitions about provisions in that section.  Once you’ve read through the contract on your own, have a sit-down with your agent to discuss it in detail so that you feel comfortable with what you will represent to a seller.  Hint: your agent will be impressed with your desire to learn this stuff.

Download the WB-11 Residential Offer To Purchase from the Wisconsin Department of Safety and Professional Services

You might get a quick Accepted Offer from your Offer To Purchase, but that’s not very likely.  Your agent will advise you on what he or she thinks is the appropriate opening offer so that the seller isn’t turned away, and remains interested in the process of negotiation.  Market conditions vary wildly and when we are experiencing a “seller’s market”, you’ll have to give more than you take.  In a “buyer’s market”, you can offer much less.  And take note – what makes a good offer is not just the price.  Other things like contingencies and timing may be huge considerations for sellers.  Your agent will help you carefully navigate this process and advise you on your options.

If your offer has interest for the seller, there will likely be a back-and-forth between you, the buyer, and the seller.  Don’t worry, your agent will do the heavy lifting for you.  During the negotiations, you will encounter more forms such as the “WB-40 Amendment to Offer To Purchase” or the “WB-44 Counter Offer”, and these are normal.  They are used to formally negotiate the back-and-forth, changing aspects of the original offer or countering what one party is proposing.

In our current market, buyers are often being presented with the “WB-46 Multiple Counter Proposal” as a result of the seller receiving multiple simultaneous offers.  This is an ace-in-the-hole for the seller, as it means that all of the potential buyers have been put on notice that they are now bidding against each other.  Do not panic.  Your agent will help keep you grounded and remind you of all the parameters surrounding your purchase, including what you should consider about the price.  At this point, you may choose to stay in the game or throw in the towel.

As you can see, there are a lot of moving parts in a real estate transaction.  All of these have evolved over the years as a result of experiences and court decisions, and are implemented with laws that strictly govern how deals are done in the state.  Fortunately for you, your agent has gone through hours and hours of legal, ethical, and procedural training to make the experience easy and understandable to you, the buyer.

Once a back-and-forth has begun, either party can accept, reject, or counter what the other party is requesting.  When both parties accept the latest round, we say that the “contract has been perfected”, meaning that it becomes legally binding on both parties.  If one party rejects the latest round outright, the contract is terminated, and is usually followed by a “WB-45 Cancellation Agreement & Mutual Release”, releasing both parties from the contract.  If another counter is presented, the negotiations are alive and they continue.

If the offer is terminated, it’s back to the search phase for another property.  If accepted, it’s on to the closing process where the contract is formalized.  As part of the contract, either by the initial offer or by way of an accepted counter-offer, the purchase price, the contingencies, and the closing date and place were all established.  Nearly all closings are held at a local title company office, and that company is usually suggested by the buyer in the original Offer To Purchase.  There are situations where that can change and, once again, your agent will explain.

You’ve made it to the closing table.  Congratulations!  While this can be a daunting experience for most people, you are in good hands.  You’ll be supported by your agent or a closing specialist from the brokerage if your agent is unavailable.  And the Title Officer who performs the closing has likely had many years of doing closings, and knows the complicated process inside and out.  Title Officers are exceptionally great at explaining every little bit of the closing process, and what the closing documents are all about.

What the title company does is to provide you, the buyer, and your lender with title insurance.  While possession of real estate seems straightforward, on rare occasions, something can arise that puts the title in jeopardy, threatening your ownership and the lender’s security interest.  Title insurance is there to protect against such things.  It begins with a thorough “title search”, where the Title Officer has done an exhaustive search of all the legal documents pertaining to the property you are buying.  They are looking for liens, judgements, and other encumbrances that can “cloud the title”, and will require the seller to clear such things, or they will issue insurance to protect against the specific risks before the transaction can complete.

Once everything is clear, the closing is pretty much you (your lender) giving the seller money and the seller giving you the keys.  Of course, there’s a lot more to it, and your agent can explain the process in detail before you get to the closing table.  You’ll walk away with a big bundle of documents, including the Title Commitment Letter, which is the title company’s promise to issue the title insurance after closing.  You keep that insurance for the duration of your ownership of the property.

In most cases, you can take possession of your new home immediately after closing.  In some cases, you may have negotiated with the seller for an “early closing”, where you become the owner of the property and the now-former seller becomes a tenant for some period of time.  There are a myriad of reasons for this to occur, and your agent will thoroughly explain this situation should it be necessary.  Don’t worry, you have to agree to it, and such a provision will be part of the negotiations that you must agree to long before closing.

In other cases, the actual closing will be weeks or months after the Accepted Offer is received and the contract perfected.  While not normal, it’s also not unusual as sellers scramble to get their life together to move on to the next thing.  Again, the closing date will be negotiated as part of the offer, and you must agree to that date in the first place, so there won’t be any surprises.

There will be lots of little nooks and crannies that could escape your eye as you navigate this process, but your agent will be there every step of the way to shine the light in all of those corners.  It is his or her job that you show up at closing completely calm, cool, and knowledgeable about the whole process.  At Realty Executives Capital City, we pride ourselves on our ability to make that a reality for you.