The DC real estate market has been hot for years but 2018 is proving to be unique. Inventory is low, multiple offers are still a reality and most listings are under contract in 7 days or less. Interested in buying but have no idea where to start? I’ve pulled together a cheat sheet for you.
Talk to a lender.
Besides finding the place you want to buy, choosing a lender is the most important step in purchasing. Obtaining a loan is difficult. Your credit has to be good. Your debt to income ratio has to be just right. Lenders need reams of documentation. Stay away from the big banks. Work with someone who’s local and knows the market. Once you’ve spoken to a lender and they have all the info they need (bank statements, salary stubs, financial records, your credit score. it’s invasive. get ready.) you’re pre-qualified and ready to start searching.
Find a property.
While searching online is the place most people start, photos can only tell you so much. Visit properties. See as many properties as you can to see what appeals to you. The search can take a day or several months.
Make an offer.
Once you find a property you love, write an offer. The DC market is competitive which means you’ll need to make quick decisions. If a listing is priced well, looks good, and is in a desirable location, it’s going under contract in 1-7 days and often has multiple offers.
Execute the paperwork.
After your offer has been reviewed and ratified, the contract is sent to the lender and the title company. The title company reviews the title work. Their job is to make sure the property is delivered with a clear title. The lender starts processing your loan and orders the appraisal.
Fulfill the contingencies (if there are any).
With the increase in multiple offers, contingencies have been on the decline. If the sellers accept an appraisal, financing or home inspection contingency, fulfill them. If it goes smoothly, you head to closing.
Execute the final reviews.
Before closing, you do a final walk-through to see if the property is still in good shape. You will also review the CD (the closing document) 3 days before closing to make sure all your fees are correct. If everything is in order, you sign the documents at the closing table.
Complete the documents.
Once all the documents are signed, you’re a homeowner! Congratulations!
The entire process: making an offer; its acceptance, ratification, expiration of any contingencies to closing usually takes 25-45 days. The days till closing starts the day you submit the offer to the listing agent. The new norm for closing is 25 days in competitive situations. If it’s not competitive, expect closing in 30-45 days.
A few definitions: Ratification means when all parties (the seller and buyer) agree to the terms of the contract. There are lots of variables to an offer. All terms stated in the contract are negotiable points: the price, the closing date, how many days you have for your home inspection, financing contingency, and appraisal contingencies. Once ALL negotiating points have been agreed upon, the contract is ratified.
Contingencies are a fulfillment of a condition. There are 3 contingencies that are normally used in a contract that protects the buyer: the home inspection, financing, and appraisal contingencies. All 3 of these contingencies have to be met before you can close on a property if they’re included in the contract. There are different reasons to have these contingencies. Essentially, they protect the buyer from losing their earnest money deposit. As I mentioned above, contingencies are used less frequently as the market becomes more competitive.
An earnest money deposit (EMD) is the deposit that the brokerage or title company holds in an escrow account. It goes towards your closing costs. The earnest money deposit is usually 3-5% of the offer price. It’s not deposited into the escrow account until the contract is ratified. If the contract is not ratified, the EMD monies are returned to you.
Closing costs in DC run about 3% of the purchase price. The two biggest costs covered by the 3% are the title insurance and the recordation tax that goes to DC Gov. This tax is 1.45% of the purchase price over 400K and 1.1% of the purchase price under 400K. Until October 2018, DC passed a first-time homebuyers tax break and the recordation fee is .0725% if you qualify for the program.
While buying a home can be stressful, the end result is worth it. You own a home! 2018 is shaping up to be a wonderful time to buy while interest rates remain low and the first-time home buyers' tax break is in effect. Ready to buy this year? Contact me via phone or email: [email protected]/202-285-4238 and we’ll get started!
