Unless you buy properties every few years, buying a house is a somewhat vague process in the minds of many. There’s many parties involved. Who requires what for approval? Title, lender, inspector, insurance, and appraiser to name a few. I’m based in Tampa, so some of the things I go over may have some regional differences.
Markets are regional. Each metro is it’s own market. I’ve even seen little norms differ from Tampa to Sarasota, but the big picture process is the same wherever you are.
Investing in real estate is a significant move towards financial growth, so I think new investors, first time homebuyers, and the “I bought a house 20 years ago” folks should understand what purchasing a property looks like today. Here’s a comprehensive walkthrough of the entire process, starting from our initial conversation to finally acquiring your home or investment.
Looking for your next rental property in Tampa Bay and value my insight? You can schedule your initial conversation with me one on one below.
The Call
The first step is a discovery call with me (or whoever you want as your agent). We’ll see if we’re a good fit for your goals. I don’t focus on commercial properties or mobile home parks, for example. For the rest of this article, I’m going to assume you’ve picked me!
I’m not a high-pressure salesperson or use aggressive tactics with my potential clients. If you have scheduled a call with me, you’ve likely seen my experience or my reach. The goal of the call is the get on the same page with what you are looking for and trying to achieve. An agent working with investments should know what works for different goals right now. You’ll get some education on the current market conditions and be prepared to learn.
If you’re trying to quit your job in 3 years and you want to buy long term rentals in Tampa to replace your income, I’d probably tell you that’s not a good idea. If you have plenty of capital to invest and you want the most passive way to park it instead of the stock market, long term rentals are your best path.
By the time the call is over, you’ll have some ideas of what you should be doing to get prepared (pre-approval, alternative strategies, etc). Take some time to make some decisions.
Pre-Approval
The second step to any search is to get pre-approved with at least one lender so you know you can make offers and close on something. I have lender connections that can talk to you no matter what type of loan is best for you.. conventional, non conforming, DCSR, hard or private money.
With primary home buyers, you’ll usually get approved for far more than you actually can afford. With investment properties, it’s all about the numbers. If a max budget property works, it works.
Preapprovals (or Proof of Funds) are required to send offers. Sellers and their agents won’t take your offer seriously if you don’t have one. Financing issues can come up with buyers who ARE preapproved.
Once we know your budget, we can start shaping your search. For example, a duplex might match your goals, but there’s no point in searching for one if your budget is 150k.
MLS Search
Recently, BiggerPockets podcast episode #879 spoke about the value of local agents setting up MLS searches for buyers. These searches are something any agent can do, but 95% of them do a poor job or forget entirely to do it.
There are so many filters we agents can adjust that it’s insanely more valuable than what is possible on any 3rd party site like Redfin or Zillow, but it’s a little complex for newer agents. You don’t want missed opportunities filtered out by accident or waste your time on a ton of properties that don’t meet your criteria. That’s why I recommend getting one set up after your initial call while working on your pre-approval.
This search is what you should use to look for properties every day. New listings will be emailed to your inbox daily and you can look at older listings through your portal anytime.. all for free. We will check in with each other each week to see how the search is performing, any adjustments needed to the criteria, or if there are any properties that came through you’d like more info on: rent estimate, comps, or general questions.
Off-Market
Maybe you’re not looking for an on-market property, so this section is for you. I have some off market channels, but the purchase process for off-market properties is usually a bit different than on-market. I won’t go over that process in this article, but check back for an off-market version or schedule a call with me to ask. Normally there’s no inspection period with off-market purchases and you may not get a financing contingency either.
Submitting Offers
Normally we do as much research on a property digitally before going to see it in person. This means running numbers, pulling comps, scouting location, etc. If the property is tenant occupied, it’s very likely we won’t be able to view it in person until your offer is accept by the seller. This is how sellers prevent inconveniences tenants with showings every single day.
Curious about the contract used? The As Is Florida contract is the standard one used. It’s 13 pages long and contains a bunch of contingencies. We will use them all to effectively safeguard your earnest money, time, and interest in the property.
When we find a deal that looks good, we want to balance the type of market we’re in with how long the property has been on the market. Buyers are gaining more leverage, but even a brand new on market property can be tough to negotiate. High days on market (DOM) properties can see 10-40k reductions during negotiations. Competitive offers tend to have low inspection periods, high earnest money (over 1% of purchase price), competitive offer price, and a quick closing. Closings normally take 30 days from offer acceptance.
Earnest Money
This is what you are willing to put down with an offer. Normally I recommend 1% of the purchase price, but there are nuances with each deal. This is the money that the seller could hold onto if you default.
Contingencies
These are clauses that can help you get your earnest money back if a condition is met.
The main one that everyone needs to know is the inspection period (also called due diligence period). This is a negotiated timeframe with the seller. If you have 7 days to inspect, you’ll be able to cancel the contract and get all your earnest money back within that 7 day period.
Your financing contingency normally last 30 days from offer acceptance. You’re already pre-approved by now and normally we don’t have to use this contingency, but if the lender missed something on his end and ends up denying you a loan for some reason, this will help you get your earnest money back.
Offer Acceptance
Earnest Money
You will need to wire the earnest money to the title company on the contract within 3 business days of the contract fully signed.
The title company is normally picked and paid for by the seller. They are a neutral party that holds escrowed funds, facilitates lien and title searches, schedules the closings for both parties, and records the new deed.
Inspection Period
During the inspection period, you’ll inspect! Hire an inspector and get a comprehensive report on condition of the house. Several other reports may be recommended to purchase such as termite, pool, septic, etc. It all depends on the property.
90% of the work needs to be done during your inspection period. Once we’ve done all due diligence, we will know if the deal makes sense or if we need to negotiate some repairs or credits with the seller. You need to negotiate before your inspection period is over!
Insurance
The inspector will also perform a wind mitigation and 4 point inspection which your insurance will need to provide a precise insurance quote on the subject property. 4 point inspections cover electrical, plumbing, HVAC, and roof. Any hits on these items will need to be corrected before you can get an insurance policy and insurance is required to close. For this reason, it is normal for the seller to remedy these items, but it is ultimately up for negotiation.
During your inspection period, provide the 4 point and wind mitigation reports to your insurance agent so they can give you a quote on insurance.
Once you decide to move forward with the property, ask your insurance agent to bind the policy with a clean 4 point in hand.
Appraisal
Once the inspection period has passed, you and your lender will feel comfortable ordering the appraisal. The As Is Florida Contract has appraisal issues baked-in to the financing contingency. If you offered 100k and the appraisal comes back at 90k, your lender won’t lend you the full loan amount off of the 100k purchase price so he could just issue a denial which triggers the financing contingency.
The normal way to proceed in a situation like this is to ask the seller to come down to the new appraised value. This is great for you! However, if they won’t come down or want to negotiate you paying out of pocket, you have the right to back out of the deal and get your earnest money back.
Next Steps
You’ll want to bind your insurance now and remember to set up utilities to begin the day of close. That’s it! Sit back and wait for the closing to get scheduled. Don’t buy bitcoin or a new Tesla until you’ve closed!
1-2 days before closing, we can schedule a final walkthrough to verify it’s in the same condition as when you submitted the offer and confirm any agreed repairs have been done.
This wraps up the guide to buying properties in 2024! The process of buying a home or investment property should be less vague, though I bet you still have some questions! You can schedule a call with me to get those answered or check out more material below!