The American Dream: buying a new house

A few weeks ago when we began talking about owning a business, I made a reference to the pursuit of the great American dream(s). One of the greatest of those great dreams is owning one’s own home. That will be the subject of the next few articles.

If you own your own home, you fall into one of two categories: You either bought an existing dwelling or you purchased land and built a dwelling. Each is exciting, and each has its pitfalls.

The process is somewhat different depending on whether you are looking to buy a house or looking for vacant land on which to build your dream house. Let’s start with buying someone else’s dream.

The process will usually involve some combination of Realtor, lawyer, building inspector, title company and bank.

For most of us, the place to start is with our friendly neighborhood Realtor. There is apparently no shortage in this department in Teton County. There are 20 or more real estate brokerage firms in Jackson, employing approximately 300 individual Realtors.

How does one go about selecting a Realtor? Word of mouth may be helpful. A recommendation from a friend or acquaintance with firsthand knowledge is a good place to start. You should look for a professional with a good reputation. Do your homework. This decision should be strictly business. It is not the time for favors or friendship.

As s buyer it is very important for you to understand the legal relationship you are establishing with “your” Realtor, who we will name Karen Swan. Unless you sign an agreement with Karen, which says that she is your agent, technically Karen does not represent you.

We have this goofy law in Wyoming — the Brokerage Relationships Act — which states that a Realtor is either the seller’s agent, the seller’s subagent, the buyer’s agent, or an intermediary.

Trust me, unless you have an IQ higher than 140 and your mother repeatedly read the Wyoming Brokerage Relationships Act to you while you were resting up in the womb, the various distinctions will elude your comprehension. This is the place where I suggest to you that it is a wise idea to have your lawyer review and discuss with you the Real Estate Brokerage Disclosure Statement and related documents submitted to you by the Realtor before you sign.

You have selected Karen as the Realtor to help you pursue your dream. You and Karen then spend a lot of time driving around Teton County in her Suburban (or Totoya Land Cruiser, or Jeep, or…) looking at  houses that are beyond your budget, but isn’t that a very fun part of the dream. By the way, how does Karen know where to look for those houses which are just slightly beyond your reach?

When a property owner wants to sell his or her property through a Realtor, a “listing  agreement” is signed with the seller’s Realtor. The Realtor then advertises the property in the MLS, the Multiple Listing Service, a magazine published every other week for Realtors which contains all the available real estate for sale in the county. It is the Realtor’s lifeline. It enables the Realtor to study the available market at a glance, and to find every property in the Client’s price range. It is a brilliant marketing tool, and whoever came up with concept 25 years or so ago has got to be filthy rich, and has undoubtedly built a trophy house in Jackson Hole.

After you and Karen have looked at more houses than you ever cared to see, you narrow it down to one or two. Then what?

Karen prepares a written contract, an offer to purchase, using a form approved by the state realty association. The contract contains standard language regarding the purchase price, payment terms, financing, title insurance, condition of the house, and inspection of the house, among other things. Any unique or special conditions which you want to apply to your offer are set out in the form of an attachment to the contract.

This is the next place where I suggest  to you that it is a wise idea to have your lawyer review and discuss with you the offer to purchase before you sign it.

After you sign the offer to purchase, Karen delivers it to the listing agent, the seller’s Realtor, who presents it to the selling homeowners, Fred and Thelma Flintstone. After some back and forth negotiations through the Realtors, you and the Flintstones agree on the basic terms of sale and the closing date.

Usually there are a number of things which must still occur before you are required to buy the Flintstone house. You and the Flintstones have agreed that your purchase is contingent on your obtaining a bank loan for 80 percent of the purchase price at prevailing interest rates, and the agreement gives you five business days to submit your loan application to the bank and get that process under way. (If the bank does not approve the loan, you and the Flintstones may back out of the deal.)

Your agreement with the Flintstones also gives you 14 days to have the house inspected. The timing is perfect because it is just enough for me to figure out what happens next and then write the article as though I actually know what I’m talking about. I think maybe I’m ready to be a teacher.

See you next time.