Buying A Home In Michigan For The FIRST TIME! - Did you know that nearly 1 in 5 people don’t actually know the homebuying process? Well, now you do, and since I’m sure that ratio surprised you like it did me, I’m going to talk about the homebuying process in Michigan right now.
As many of you may know, I help people relocate in and out of the great state of Michigan, and I’ve noticed a pretty consistent question with every single person I have helped over the years, whether they are buying their first home, second home or even their forever home, they ask, “sooo how does this process work?” So I figured I would take some time and go step by step with my process and if you have any questions, feel free to reach out. I'm happy to be a go-to resource.
If you’re someone relocating here, there’s of course the need to know how the markets doing, maybe buying a home sight unseen, figuring out your Michigan lifestyle or even just getting a sense of all the areas out there to live, and if that’s the case I have linked several of those videos below because that’s exactly the type of videos I put out on a weekly basis, this one in particular will be more loosely geared toward, “what the heck am I supposed to do?” Great question.
Let’s say you’re someone who's got some money burning holes in your pocket, you’re moving here for family, work, or just the overall beauty this state has (I don’t blame you) or maybe your state just has a yucky cost of living and Michigan hit your radar (which I also don’t blame you). The first step to this process is to ask yourself, are you ready for this next step? This question isn’t fully referring to the financial aspect of things, but the emotional and physical aspects too. You might be wondering, what are you even talking about Andrew? And to be honest that’s fair because I probably wouldn’t have brought that up if I didn’t see it first hand. I have had people reach out to me on impulse to move to Michigan without another thought, I’ve had people reach out to me that I could sense it wasn’t the decision they actually wanted to make or pursue, and that’s why I ask the loaded question, are you ready? Take some time to really think that through, what are you needing to make that decision more sound? Why are you wanting to relocate in the first place? If it’s just because you see this cool guy on a video and think wow, there’s some sweet people in Michigan, think again, because I am one of a kind. In all seriousness, just make sure this decision is sound, I wouldn’t want you to come over here with my help just to text me months later and say you made a mistake.
After you have decided this decision is right for you, it’s time to get those ducks in a row. You will need to make sure your finances are in order and you chat with a preferred or recommended mortgage professional to help you understand what you can afford and what you can do to increase that affordability if that’s something you want to do. This process is often looked at as very intimidating, maybe you have never met this mortgage person before and they are requesting your social security number, credit, work history, tax information, etc. and it feels like they are invading your personal space without a breath mint, and I hear you, but understand that the more information you provide, the more they can ensure you can afford what you can afford and there’s not a concern of not being able to pay for the home. It’s very important that you do your due diligence and choose a lender that works best for you, I have linked a few of my preferred lenders in the description below to give you some trusted professionals. My clients have used them, I have used them and so has my family, so I can assure you, they aren’t about to take your bank account numbers and buy a Lamborghini because I’m sure that’s how much you have in your bank.
After the mortgage professional issues you a pre-approval letter after collecting all your personal documentation and working out any budgetary concerns, they create this letter that states your name, what your loan amount is, and how much money you are wanting to put as a down payment on the home. This is submitted with an offer on a home to a listing agent to showing that you can actually afford what you’re putting an offer on.
So you’ve got your pre approval letter in hand, now it’s time to get that home search going, chatting with an agent like myself to set up a home search in a portal so you can get notified every time they hit the market, favoriting and deleting homes as they come in. Then you come across a home you love, so you send that address my way. I will take a look at it, give you my thoughts and opinions on price and the condition of the home based on the seller disclosures I will provide for you. Once that step is satisfied and there are no red flags pushing you away, we find a time to view the home in person together. If you’re out of state and are in a hurry to view the home be sure to watch my video about buying a home sight unseen which I have linked in the description. Once we agree on a date and time that works for us both, we meet at the home, and take a look at the home's interior and exterior, along with any outbuildings, sheds or garages. More times than not, people will start talking about where they will put their couches, chairs, and furniture throughout the home, while looking out for any red flags, in which you can lean on your agent to point out any areas of concern that may bring up some questions, but understand that despite the amount of issues and homes a real estate professional has seen, they are not a home inspector and this showing should never be seen to cover that portion of the transaction.
Let’s say you loved the home and want to put an offer in, now what? There’s a few things and questions to ask prior to doing so. First, your agent needs to call the listing agent and get the inside scoop on the current offer citation as well as anything the seller would be expecting or wanting in an offer. In this housing market, it’s been very much in the sellers favor, so unfortunately, buyers are having to be flexible in different ways to offer sellers an incentive to accept their offers, which is sad, but the truth, especially when demand is so high and the supply is so low. If you want to know what flexibility you need to get an offer accepted in Michigan, I'll link a video I just made about 5 strategies to get your offer accepted. So be sure to add that to your queue. Now I want to explain what an offer is, because I feel like I don’t see anyone do that these days and buyers are oftentimes misinformed about the process and say “okay let’s put in an offer” like it’s some quick phone call and a handshake, and it is to a certain extent, but there’s a lot of paperwork in between all that.
Outside of the question to ask the listing agent and the strategies to get an offer accepted, there’s also first and foremost, the need to circle back your lender and provide them the address so they can make up a quick little worksheet to give you some insight on what the home will cost you, along with tax information that is very important, and if you’re not familiar with how property taxes work here in Michigan, I’ll link to another video I created with a Michigan assessor talking about all that and more. It’s very important to do this step of the transaction, because once ownership transfers in a home, the taxes increase drastically, and if you aren’t made aware of that and you're just basing everything off what Zillow says, you may have an affordability issue down the road. Referring back to the “paperwork” that needs to happen to submit an offer, I'll briefly break down the forms involved along with a quick explanation of what they are. Keep in mind that in this day and age, offers are signed electronically, and when you have questions or issues, you can call or facetime your agent anytime and they should be more than willing to help.
Firstly, we have the purchase agreement, which outlines all the terms of the offer such as the price, what’s included in the home, down payment, inspections, possession, personal request or addendums, along with the earnest money deposit amount, which is typically 1-3% of the purchase price. I stated the earnest money deposit last to touch on it a little more. I have worked with enough out of state clients to know this process can be a little different there than here, we have one initial deposit made when an offer is accepted. This just tells the seller that you’re serious about purchasing the home and you’re willing to put forth some cash now to show them that. When closing time rolls around these funds are credited to your closing costs which is something you have to pay for anyway, but understand that if you back out of this home purchase for no reason you have the ability to lose this deposit, it must be within a contingency period such as a home inspection, appraisal or the inability to obtain financing, which I’ll touch all on more going forward.
The next documents are the seller's disclosure and lead based paint disclosures. These are typically 3-5 pages and filled out by the seller of the home indicating the condition of the home/ Whether the roof has leaked, the basement has flooded or they changed up the insulation and know that was put in the walls, this would all be disclosed on this document. It touches on whether certain items are working in the home or not, from the appliances, water heater and AC to the hot tub and attic fan, that would all be put here. Just a quick tip for the future, if you plan to sell the home, keep records of every change and repair you make, because when that time comes, the more you disclose, the less a buyer will nickel and dime you when the inspection rolls around because the price of the home would reflect all the issues and changes. The lead based paint disclosure only pertains to homes built before 1978, as that was a paint type they used back then that is hazardous, so a seller would need to disclose whether they know about it or not. Most times they say they have no record or knowledge of it, because once a home is repainted or remodeled, that alleviates the concern according to several home inspectors I have worked with.
It’s like when they used asbestos tile when building homes, it’s another hazard, but if you don’t mess with it and just throw new floors over it, there’s no harm. Of course, I recommend you to chat with your home inspector while in the process for clarification, as I am just sharing my experiences here. The next documents are the disclosures for real estate agency relationships and the exclusive buyer agency contract. The agency relationship document just states that you are the buyer, and I am the buyers agent, and we have our relationship in writing that way. The exclusive buyer agency contract is more in depth and states that you’ll be solely using me as your agent until a certain point, but if we don’t jibe, then of course we just void the contract, we aren’t holding anyone against their will here, you either like working with me or you don’t, no hard feelings. Next you’ll probably sign a document about wire fraud and how you should call to confirm the instructions before sending over thousands of dollars just to have it intercepted by a hacker, as well as a document about electing a title company, which I know several and have worked with several that do amazing work. Tack on your pre-approval letter, and we submit that over to the listing agent and once it’s accepted, it is off to the races.
When your offer is accepted, it can feel a little overwhelming, because you’ll not only have to whip out the check book for the earnest money deposit or obtain the wire instructions to send the funds, you’ll also need to get a home inspection on your calendar within the next 5-7 days, which I myself schedule for all my clients, as well as begin to receive and answer requests to formally start the mortgage process. Obtaining your pre-approval letter is just saying, okay this person makes X amount and they have some good job history and credit, so they can afford Y amount, but after an offer is accepted, it takes an even deeper dive into your finances, verifies your employment with your company’s HR, along with providing any additional documentation to help get your home financed. Inspection day rolls around and you can either attend or not. I always attend my client’s home inspections and relay any questions or concerns you might have but also be another set of eyes for your sake. Once the home inspection is completed, you are either satisfied with the findings or you are not, depending on how you structured your offer of course.
If there are some items that are big red flags, decide if it’s something you should back out of the transaction for or try to chat with the listing agent and seller with your agent to see if they’d be willing to do any repairs or give you any money to make those repairs. In this crazy housing market, sellers are not very open to making or paying for repairs unless it’s something huge even they didn't know about, but most times, they will say they aren’t willing and you’ll back out and they will sift through the 3-5 other offers they received and proceed with that one instead. Once agreements are made and things are satisfied, I would let the mortgage professional know and they would work to get the appraisal scheduled, and if you don’t know what that is, that’s an individual who goes out to the home and values it based on comparable sales, features and other characteristics.
This person determines the market value of your home and how much a mortgage lender is willing to give you to purchase the home. Let’s say the home is $250,000, but this person prices it at $225,000, that would mean the mortgage lender will only give you a loan to satisfy the $225,000, not $250,000. At that point, 3 things could happen 1) the seller lowers their list price to that point and you proceed as normal, 2) they don’t want to lower it that much and you love the home too much, so you meet in the middle, paying x amount out of pocket while they lower the purchase price to another amount. And 1) They say they won’t lower it at all, you can’t proceed and you back out and they work with another offer. Once that process is satisfied, you begin the conditional approval stage, where the lender may request for even more documentation, verify your employment, and have you get a homeowners insurance quote, because part of your closing costs will be a one year homeowners insurance premium. Once the lender has everything they need to get you your financing, and you didn’t just buy a new car before closing to ruin that, you can then schedule a closing. Before I touch on closing day I want to circle back to purchasing things before closing day. I know you want a new car in your new driveway, new appliances and those 2-3,000 dollar couches you can mix and match, but listen to my words, do not do that. Unless you have this crazy amount of adequate funds and you chatted with your mortgage professional to get an OK, save the purchases for after, because if you buy that new car and take on a new payment right before closing, chances are you will not be able to get that home. It may seem obvious to some but I promise you it is not too many.
NOW, we schedule a closing date, and once that date is in place, we can chat about transferring utilities, electric, gas, etc. change of address forms, and what you need to bring with closing and what you need to do after closing. At closing, if you are doing it in person, you will need to bring two forms of ID and a hand ready to get some arthritis after all the singing you are about to do. Traditionally, closing consists of a title representative or closer from the title company you or I chose, a title rep or closer on the sellers side, both the listing agent and buyers agents as well as the mortgage lender on occasion. Once you sign all the documents, the title company will print the documents for everyone, put them in envelopes and you’ll get some keys in your hands for your new home. They’ll mention to you that there are a few documents in there: the principal residence exemption form and a property affidavit in which you will need to bring to your local city hall to get them stamped and recorded within 45 days stating that this home is yours and it’s your primary residence. If you don’t do that you will be faced with a ton of fees after those 45 days and your taxes will be much more expensive since they won’t be primary residence exempt, since landlords and people with multiple houses are taxed more when it’s not their primary home.
That was a very quick and brief roadmap to purchasing a home in Michigan for those of you that may have had no idea of how the process works. For those of you that have made it this far, I wanted to give you a special gift, and that is a homebuyer's guide to outline not only what I mentioned in this video but a lot more as well, which I have linked below for you.
FREE GIFT ⬇️ →FREE E-Book "How To Buy A Home: The Complete Guide": https://conta.cc/3JBKzc8
Cheers,
Andrew
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in Brighton, Michigan.