The Home Buying Process

Congratulations on your decision to enter the real estate market! The process of buying or selling a property can prove very exciting, but many also consider the process a bit intimidating and confusing at the same time. 

The professionals at ASH MCGINTY believe that knowledge empowers our clients, and your full understanding of the real estate transaction will greatly enhance your experience. We hope the info provided on ashmcginty.com helps to minimize any confusion or uncertainty, allowing you to enter the real estate market with knowledge and confidence.

If you have additional questions not addressed on our site, please do not hesitate to contact the team at ASH MCGINTY.

The role of the real estate agent, often referred to as the Realtor®, can cause enormous confusion to real estate buyers and sellers, alike. With that said, a Realtor® typically assumes one of the following roles:

• Listing Agent or
• Buyer’s Agent

Realtors That Represent the Seller

A seller would engage a Realtor® to “list” the seller’s property, and that Realtor® would serve as the listing agent. Listing means that the Realtor® will register the property with a “Multiple List Service”, also simply called the MLS. The MLS is a vast database of available properties, giving a property the greatest possible exposure to qualified buyers. 

Only licensed Realtors have access to the MLS. A seller who wishes to take advantage of the MLS must engage the services of a Realtor® to list the property.

Listing agents will also conduct a thorough comparative market analysis (or CMA) and use their expertise to assist the seller to determine the most appropriate listing price. The listing agent provides invaluable insight to the seller on strategies to make the property as attractive as possible to potential buyers. Once interested buyers present contract offers, the listing agent will assist the seller in analyzing each offer and negotiating the final terms of sale with the selected buyer. The listing agent will help to ensure the proper submission of each offer, and, upon contract ratification, help enable the completion of settlement.

Realtors That Represent the Buyer

A potential buyer would engage a Realtor® to act as the selling agent (yep, selling agent—confused yet?) to represent the buyer’s interests. If a buyer chooses to engage the services of a Buyer’s Agent, the buyer and agent, through the agent’s real estate brokerage, must formalize the relationship by executing a written Buyer Agency Agreement.

Engaging the services of a Realtor as a buyer’s agent to find the perfect property often constitutes the single most significant decision a buyer will make. 

To achieve the buyer’s goals, a buyer’s agent will consult with the buyer to establish the characteristics of the ideal property including: 

1. How much can the buyer afford to spend;
2. Where does the buyer wish to live or where the property should be located;
3. What style of property the buyer prefers, including the preferred number of bedrooms and bathrooms.

Once the buyer and the buyer’s agent establish the criteria, the agent will research the MLS listings and prepare a list of available homes that meets the buyer’s needs. From that search, the buyer will select properties to visit, and the buyer’s agent will work with the Listing Agent to arrange the showing of these properties.

Upon choosing a property, the buyer submits a contract offer to the seller for consideration. The services of the Realtor® then prove even more critical. A Realtor® can easily access up-to-date contract forms. In addition, many counties adopt their own laws, requiring the use of particular localized forms, and the Realtor® will have access to these documents as well.

After the buyer’s agent prepares a contract offer and the buyer signs the offer, the buyer’s agent will submit the offer to the seller for consideration. 

Once receiving the offer, the seller may do one of the following: 

• accept 
• reject 
• make a counter-offer

The buyer’s agent will assist throughout the negotiation process and provide valuable insight and advice at each stage.

When the parties agree to the final contract terms and fully sign and ratify the contract, the post-ratification process, begins. Realtors receive extensive training to guide the parties through this important part of the transaction.

For the vast majority of residential real estate transactions, the seller pays the listing agent an agreed-upon percentage of the sale price. The listing brokerage then offers to pay a portion of the listing broker’s commission to an agent that finds a ready, willing and able buyer to purchase the seller’s property. Thus, the seller ultimately pays the real estate broker’s commission (except for any customary brokerage flat fees), and the buyer will generally not pay for the Realtor’s services. For this reason, we highly recommend that buyers hire a Realtor® to represent their interests. 

The buyer and seller should read and fully understand the terms of compensation to their respective real estate brokerage before executing a brokerage representation agreement.

Real Estate buyers (and sellers) are often confused about the role of real estate agents and real estate agency relationships. 

Maryland enacted brokerage-relationship laws to protect both the consumer and the licensee alike. Residential brokerage-relationship law applies to:

• The sale or lease of real property improved by one, two, three, or four single-family units
• Unimproved real property already zoned for residential use by the local county or municipal zoning authority that governs where the real property is located
• Residential leases of greater than 125 days

Note: Agency law does NOT apply to a lease of 125 or fewer days.

Many states, including Maryland, require that agents provide buyers and sellers with an agency disclosure. This form is not an agreement; it is a disclosure. It discloses the various natures of possible agency relationships, and it is important that buyers and sellers read the forms carefully to be better prepared to select the type of agency relationship they want.

Brokerage-relationship law applies to one, two, three, or four single-family units; unimproved real property already zoned for residential use by county or municipal zoning; and residential leases of greater than 125 days.

Agency Basics

So what exactly is “agency?” Agency is the relationship through which a licensee acts on behalf of, or represents a client (with the client’s authority) in a residential real estate transaction.

An agent is the licensee engaged with the client in the brokerage relationship. There are different types of agents as described in §17-530 of the Business Occupations and Professions Article of the Maryland Code.

Written Brokerage Agreement Required

When no written agency agreement exists, an agent assisting a prospective buyer to purchase is either the seller’s agent or a sub-agent of the listing agent—which must be disclosed to the buyer. Buyers who would be more comfortable having an agent who represents the buyer’s interest may decide to enter into a written brokerage relationship agreement for a licensee to serve as a buyer’s agent and represent the buyer’s interests.

It’s important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transaction. Ask what type of agency relationship your agent has with you.

Seller’s Representative 

The seller’s representative is most commonly known as the listing agent or seller’s agent. A seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.

Buyer’s Representative 

The buyer’s representative is most often referred to as the buyer’s agent. A buyer’s agent is hired by a prospective buyer(s) to represent them in a real estate transaction. The buyer’s agent works in the buyer’s best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer’s agent is typically paid by the seller or through a commission split with the seller’s agent. However, more common with commercial transactions, the buyer may pay the licensee directly through a negotiated fee. 

Disclosed Dual Agent

Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dualagency relationship, it’s vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.

Dual agency can happen even if the buyer is represented by an agent other than the listing agent if that agent is also employed by the same broker. It is the employing broker’s relationship with the seller that determines dual agency.

Designated Agent

This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.

Step 1

Know your income and expenses- Add up your monthly expenses and deduct that amount from your net monthly income. 

Step 2

Set up your priorities- If you need more room in your budget to save, it’s helpful to separate your expenses into “need to have” and “like to have” categories. Try it!

Step 3

Track your spending- Keep track of where your money goes each month and balance your budget.

Most buyers purchase property with the assistance of financing through a residential mortgage lender. The buyer/borrower will need to provide the lender with financial and other personal data that will assess their credit worthiness.

The following is a list of some of the most commonly requested items requested by a lender and required for mortgage loan approval:

• Social Security numbers of all applicants;
• List of the buyer’s addresses for the past seven (7) years and the complete name and address of landlords for the past two (2) years;
• Name, address, and income earned from all employers for the past two (2) years;
• Copies of W-2 forms for the last two (2) years;
• Copy of most recent year-to-date pay stub;
• Name, address, account number, monthly payment, and current balance for installment loans, revolving charge accounts, student loans, mortgage loans, auto loans, and other debt;
• Name, address, account number and balance of all deposit accounts, including: checking account, savings account, stocks, bonds, etc.; and
• Three (3) months of the most recent statements for deposit accounts, stocks, etc.

If the buyer is self-employed or paid by commission:

• Previous two (2) years of Federal Income Tax Returns with all schedules and a year-to-date profit and loss statement.

If the buyer includes income from child support/alimony:

• Court records and/or canceled checks showing receipt of payment.uyer chooses to include income from child support/alimony:

If the buyer owns other properties:

• Address of properties and current market value;
• Any debt owed on properties, including lender’s name, address, accounts number, monthly payment, and current balance;
• Copies of Federal Income tax returns with all schedules for previous two (2) tax years; and
• If rented, a copy of any lease(s).

If the buyer is applying for a Veterans Administration (VA) Loan:

• DD-214, Certificate of Eligibility, or statement from buyer’s Commanding Officer, if on active duty.

Note: Buyers should begin working with a lender in advance to obtain a “pre-approval” letter. While a pre-approval letter does not constitute a final commitment to make a loan, it allows a potential seller to know that the buyer has met with a lender who reviewed basic financial information indicating that the buyer would likely qualify for a loan. (Your Realtor® can recommend a qualified mortgage lender if you do not already have one.)

Additionally, we strongly recommend that a buyer submits the above documentation to a lender or loan officer prior to submission of a contract.This will expedite the real estate process and make the transaction substantially less stressful.

Most mortgage loans require the borrower to repay the loan over a thirty (30) year period. The affordability of a mortgage depends on the terms of the loan—most importantly the interest rate and the number of years that the buyer has to repay the loan. 

The lender will take into account the buyer’s total amount of debt repayments (both mortgage and non-mortgage) do not exceed the bank’s underwriting guidelines. The buyer will work with a loan officer to find which program best suits their needs. After reviewing the buyer’s preliminary financial information, the loan officer should have the necessary information to tell the buyer the approximate amount of mortgage that the buyer could afford and the ultimate sales price range.

Keep in mind that a buyer generally adds to the loan repayment 1/12th of the annual property tax bill and hazard (i.e., property) insurance costs, which the buyer pays into a special escrow account maintained by the lender. Adding the escrow items to the monthly loan repayment will provide the total monthly payment obligation and provide the buyer with an initial determination of how the mortgage will fit into their budget.

The following chart provides an approximate monthly mortgage payment based on the loan amount, interest rate, and number of years of repayment. Keep in mind, the payments does not include annual property taxes, homeowner’s insurance, and applicable homeowner’s
and/or condominium association dues.

The home loan term length that’s right for you.

The most common home loan terms are 30-year fixed-rate mortgages and 15-year fixed-rate mortgages. 

With a 30-year fixed-rate mortgage, you have a lower monthly payment but over time you will pay more in interest. A 15-year fixed-rate mortgage has a higher monthly payment but you save thousands in interest over the life of the loan.

Monthly Payments
Per Thousand Dollars 

Multiply your monthly payment per 1000 by the number of thousands you plan to borrow.

Note: Payments does not include annual property taxes, homeowner’s insurance, and applicable homeowner’s and/or condominium association dues.

Typical costs included in a mortgage payment.

In addition to principal and interest, mortgage payments include other charges as well. Here are the key components of the monthly mortgage payment:

• Principal: This is the total amount that are borrowing. Each mortgage payment reduces the principal you owe.
• Interest: What the lender charges to lend you the money. Interest rates are expressed as an annual percentage.
• Property taxes: The annual tax assessed on your property by a government authority. You pay approximately 1/12 of your annual tax bill with your mortgage payment. The servicer of the loan saves these payments in an escrow account and paid when the taxes are due.
• Homeowners insurance: Your policy covers damage and financial losses from fire, storms, theft, etc. As with property taxes, you pay approximately 1/12 of the annual premium each month, and the loan servicer pays the bill when it’s due.
• Mortgage insurance: If your down payment is less than 20% of the home’s purchase price, you’ll typically pay mortgage insurance that protects the lender’s interest in case a borrower defaults on a mortgage. Once the equity in your property increases to 20%, the mortgage insurance is canceled.