Home buying is almost as much of a “project” activity as home building. Both require tasks performed in sequence to complete the owned/finished home. A successful project of any type has well defined milestones that serve as markers for completion of different phases. Let’s apply that logic to a simplified task list for the purchase of a home.
- Describe your dream property
- Select Agent
- Determine Budget
- Begin Search
- Locate Target Property
- Write Offer
- Negotiate and Finalize Contract
- Due Diligence End
- Financing End
- Contingency Release
- Paperwork Signing
- Take Possession
That’s a short version of the steps necessary for any home purchase. If you are buying your neighbor’s house for your kids, you can skip some of the initial phases and start with “Write Offer”, but you will still need an agent to help with the paperwork and guide you through the process.
The initial home buying milestones vary widely in duration. For some lucky buyers, the “Locate Target Property” might take an hour. For others it may represent months or even years searching for the property of their dreams. By the time anyone reaches the “Negotiate and Finalize Contract” milestone, the timing randomness is mainly gone. In place of randomness, the buyer slips into a well defined role within a process that is repeated millions of times per year. There is still some flexibility available via extensions of time and the use of addenda, but the due diligence must be done and signed off on schedule. The financing has to be finalized and put into place to close. The buyer has to summon their courage to move forward and accept the liquidated damage* potential when the contingency release(s) are signed and the property moves from “contingent” to “pending” on the MLS.
A great buyer’s agent is going to help their clients understand the project nature of the home purchase and prepare them for each milestone in advance. A lot of the stress and turmoil of a home purchase can be eliminated by careful explanation and advanced preparation. Happy Hunting.
*Liquidated damages refers to the penalty a buyer may have to pay to a seller if they remove all the contingencies for the sale and then decide not to go ahead with the purchase. In California, the maximum liquidated damages represent 3% of the purchase price. The key to avoiding liquidated damages is to make certain you are moving forward before releasing the final contingencies, particularly financing.