If buying or selling a home in the Dallas area is in your near future, you may be a little nervous about what the process entails. Feeling stressed is especially common for first-time home sellers or buyers who have never had to go through the process before. Fortunately, with a bit of information and the help of an experienced mortgage broker and real estate agent, you can get through either the buying or selling process successfully (and with as little stress as possible.) Here are the basics of each process.
The Home Selling Process
- Step 1: Listing. You will either list your home for sale by owner or work with an experienced agent who can list your home on the MLS and on their website and market it to your ideal buyers.
- Step 2: Accepting an offer. Once your home is listed and your agent has shown it to prospective buyers, you will start to get offers. A multiple-offer scenario is common in a competitive market, and your agent will be able to help you determine which offer is best depending on your goals for selling.
- Step 3: Wait for escrow. Once you and your buyer have agreed on the selling price and terms of the contract, you will enter a period called escrow. During this time, an appraisal and property inspection will usually take place and the title report will be ordered.
- Step 4: Preparation for closing. Once the closing date arrives, your agent will walk you through all the documentation needed to finalize your home’s sale. During the closing meeting, you will sign all necessary documents. The buyer will also sign documents. Once everything has been signed, your home has officially been sold!
- Step 5: Identify if you have capital gains. If you sell your home for much more than you bought it, you may have to pay capital gains taxes on the profit. Under the current tax code, you will only need to pay taxes if the profit is above $250,000 (and you are single) or $500,000 if you are married. This exemption is only available every two years and only applies if the home is your primary residence. If your profit exceeds this amount, your tax rate will be determined by your yearly income.
- Step 6: Decide what to do with the equity. If you are buying and selling homes simultaneously, you’ll likely use the equity in the home you sell to put toward a down payment on your new home. If you’re not buying a new house, you will need to talk with a financial professional about the best way to invest your equity.
The Home Buying Process
- Step 1: Decide how much you can afford. Before looking for homes, determine how much you can afford to pay on a monthly mortgage. Make sure to consider additional costs that come with homeownership like HOA dues, utilities, maintenance, and utilities. Not sure how to calculate what you can afford? Try using a handy affordability calculator.
- Step 2: Get pre-approved for a loan. This is a good idea no matter what the current real estate market is like. During a seller’s market like what Dallas is currently experiencing, getting pre-approved is even more vital as many sellers will not consider an offer from a buyer who is not approved for a mortgage. To get pre-approved, your lender will check your credit history and score, debt-to-income ratio, employment history, and yearly income. You’ll also have to show documentation like your driver’s license and Social Security number.
- Step 3: Know how you’ll cover a down payment and closing costs. First-time homebuyers don’t have the benefit of accessing equity from the sale of a home to pay for closing costs and a down payment. To cover these costs, you can attempt to get a loan with little to no money down, or you can consider options like a local down payment assistance program, a loan from a private lender or family member, or a withdrawal from a retirement or savings account.
- Step 4: Find a home and make an offer. Now it’s time to start looking at houses! Once you find one that meets your needs, you’ll work with your agent to make an offer that will be appealing to the buyer. Your offer should include earnest money, which is like a down payment and usually amounts to 1 to 2% of the home’s price and may include common contingencies based on financing or inspection results.
- Step 5: Get a home inspection. Once your offer has been accepted, you will get a home inspection unless you waived this step in your offer. Upon receiving the inspection results, you can request repairs or back out of the deal if the inspection reveals significant problems with the home.
- Step 6: Get an appraisal. You must get an appraisal if you are using a mortgage to buy a home. If the appraisal comes back lower than the amount you have agreed to pay for it, you will need to come up with the difference in cash.
- Step 7: Do a final walk-through. Before the home closes, you will walk through it one last time to ensure all agreed-upon repairs have been made and that the seller has not left any property in the house.
- Step 8: Close. The final step is to review and accept the Closing Disclosure, present your proof of funds, sign a settlement statement, and sign the mortgage and deed to secure your loan. After signing all other necessary paperwork, the home is yours!