It’s one thing to buy a house when you can drive around the neighborhood, scope out its proximity to parks and schools, or hop on public transportation to time your commute. But it’s an entirely different thing to buy a house in another state, particularly if you’re unable to visit first.
According to the U.S. Census Bureau, while the overall move rate for the U.S. population has declined in recent years, the rate of people moving between states has held steady at one-fifth of all moves. People cite the reason for their moves as housing-related, family-related, and job-related.
Jenah Mahan is an experienced agent in Tacoma, WA, an area that serves the military community. She often works with out-of-state buyers, and says one of the biggest pitfalls to avoid is miscommunication — it comes down to meeting her buyer’s expectations. “My version of clean might be different than somebody else’s, and my version of a large bedroom is different,” she says. “That can be the biggest pitfall, putting your total trust into somebody else.” When she works with out-of-state buyers, she says it’s incredibly important to communicate and get into their head.
If you’re moving states, it can be overwhelming and hard to know where to start! Do you find movers first, or talk to a real estate agent? This step-by-step guide will help you through buying a home out of state.
1. Save for your down payment and closing costs
There’s always a cost to moving and buying a new house, but that cost can vary widely between states. Average home prices could be more or less than where you’re currently living, which will impact the size of your required down payment. Conventional and FHA loan limits also vary by state and county, so you might be able to afford more home than you think.
If you know the move is coming, do some preliminary research on the housing market in your new state. Try to get a feel for the housing prices in potential neighborhoods — a local agent is a great source — and how much you will need for your down payment. As soon as you possibly can, start saving money.
Also, consider cutting back on any unnecessary expenses. If you’ll be driving across state lines and are a two-car family, consider selling one car to save on gas and insurance before the move. For more tips on saving for a down payment, check out these tips.
If you don’t think you can put 20% down on a new house, look into down payment assistance programs at the state and county level. Many states have programs that help first-time homebuyers, veterans, and more. A local mortgage broker could point you in the right direction.
Don’t forget that you’ll need to cover closing costs, too. Closing costs are typically between 2% to 5% of the total purchase price. Once you have an idea of average home prices in your new state, you can use our closing costs calculator to estimate how much you’ll need to save on top of your down payment.
When you’re planning your cross-state budget, leave room for moving costs! Long-distance moves can cost more than a quick, half-day move across town. We will break that down later.
2. Get preapproved for your mortgage
Lenders need to be licensed in the state you are looking to purchase in, so chances are your local lender won’t be able to help you here. Do your research to find a local reputable lender, or work with a mortgage broker who can network with several local lenders to find you the best deal.
If you are relocating for a job, your lender will need to see your offer letter and your projected start date to determine your ability to repay the loan. When preapproving a loan, lenders also look at:
- Your credit score
- Your debt-to-income ratio
- Down payment amount
- Employment history
- Savings and investment account balances
If the move is several months to a year away, use that time to improve your credit score. Pay down any revolving debt, like credit cards, and make sure you make all payments on-time.
For more credit improvement tips, see this guide.
3. Do you research and determine where you want to buy
While you began researching average home prices and neighborhoods in the first step, once you’re preapproved for a mortgage, you’ll have an idea of your home shopping budget. Now is the time to dig into where you’d like to buy in the state.
Look into neighborhoods with median home prices in your range. Make a list of “must-haves,” “nice-to-haves,” and deal breakers, and start looking for neighborhoods that meet those criteria. Think about the kind of lifestyle you enjoy — urban living or suburbs, close to parks and schools, or a large lot and further out? Once you start looking in earnest, you can enlist your agent to help show you the neighborhoods you are interested in.
Mahan will often FaceTime her out-of-state clients while standing in the street and videoing up and down at different times of day. A neighborhood can look completely different at noon vs. when everyone’s home. Mahan will also take pictures for buyers of the neighborhood, showing them the route they’d walk to their favorite spots. She thinks it’s helpful for buyers to see what a day in the life would be because while “the house is important, the neighborhood is almost more so.”
4. Create a wish-list
Having a wish-list prepared before meeting with a real estate agent will help them find you a home that will meet your needs. If you know that you want to live within walking distance of a grocery store or coffee shop, and that you need a three bedroom, two bath, it helps your agent narrow down potential neighborhoods. Sometimes, however, your wish-list can be in conflict with your lifestyle.
For example, what if you’ve got your heart set on a two-story colonial but also want an urban lifestyle where you can walk everywhere? Your agent will be able to tell you if that even exists in your new state, or if you’ll need to compromise.
That’s why it’s helpful to know where you can compromise and where you draw the line — giving up a second bath and living in a Ranch-style home could be worth it for some people if it means that they can have the lifestyle they want.
When you’re moving to a new state, you are going to have some blind spots. Online real estate listings can only tell you so much, but if you have a clear idea of what you want in a home, a good agent can help you sort through listings to find a match.
5. Find a buyer’s agent and attorney (if applicable)
In case it wasn’t obvious by now — you need a local real estate agent. When you’re moving into the unknown, they will be an invaluable resource. You can look at online reviews and try to find one yourself, or you can answer a few questions on HomeLight.com and get matched with several top agents in your area.
A great agent will be able to find homes in your desired neighborhood, schedule showings (or virtual showings), negotiate with the seller and listing agent, and so much more. Without being there yourself, you will need to be able to trust your agent to find you the best home. Take your time during this process — interview a few agents to make sure you feel comfortable with their expertise and the amount of time they have to invest in finding you a home.
Some states also require attorneys to be present for real estate transactions, and a good agent likely has one in their network.
To find an attorney on your own, search for “real estate lawyer” or “real estate attorney” plus the city and state where you’re moving. Read online reviews to make a list of potential attorneys, then reach out and talk to them. You can also call the state’s bar association and ask for recommendations. Some bar associations have an online directory that you can search, or an online form you can submit to receive the names and contact information for lawyers who can help.
When you’re buying a home out of state, certain things need to be done by your agent. You’re not going to be able to possibly measure rooms, so you want someone who is familiar with your wants and needs and make sure that they’re met.
- Jenah Mahan Real Estate AgentCloseJenah Mahan Real Estate Agent at Gateway Real Estate Currently accepting new clients
- Years of Experience 18
- Transactions 542
- Average Price Point $311k
- Single Family Homes 499
6. Start home shopping and plan a visit
If possible, planning a visit to see homes in person with a real estate agent is very important. Strategize to have showings scheduled during your trip to maximize your time, and be sure to drive around potential neighborhoods.
What if you can’t visit? Ask your real estate agent to conduct a virtual tour and take a lot of pictures and videos to get a feel for the space. “When you’re buying a home out of state, certain things need to be done by your agent,” says Mahan, “you’re not going to be able to possibly measure rooms, so you want someone who is familiar with your wants and needs and make sure that they’re met.” The right agent will be willing to put in the work, and take the time to get to know you so that they can find you the perfect home.
7. Make an offer
Once you find a place you love, it’s time to make an offer! An offer will include details like: time to close, the offer price, financing or home inspection contingencies, and possibly an offer letter. What’s common — and legal — in markets varies widely, so lean on your buyer’s agent’s advice.
Most offers will include:
- Purchase price – how much you’re offering to pay for the house. Your offer might also describe any escalation clauses, i.e., if you’ll beat someone else’s offer by a specified amount, up to a cap.
- Contingencies – Are you requiring a home inspection? Do you want to be able to negotiate with the seller after the inspection, or will it be for informational purposes only? Your offer letter will lay this out. Financing contingencies give you the ability to back out of the deal if the appraised value comes in lower than the purchase price or you can’t get approval for the loan.
- Closing date – Are you willing to offer the seller a flexible close date? Or, maybe you need a firm commitment so you’ll have a place to live. Are you willing to offer the sellers a rent-back period? Ask your agent to help you negotiate this part of your offer letter to make it the most attractive to the sellers.
- Financing – How will you be paying for the house? Some buyers in hot markets have been making all-cash offers but, if this isn’t you, this section of your offer will lay out financing and the amount of your down payment.
- Earnest money deposit – How much earnest money will you be putting in escrow towards the house? Many sellers prefer a larger earnest money deposit as it’s a sign that you are truly serious about the home. If you’re an out-of-state buyer, they could worry that you’ll back out once you’ve seen the house, so a larger earnest money deposit could sway them towards your offer.
- Closing cost stipulations – Who is paying for which closing costs? Will escrow and title fees be split evenly? Or will the sellers provide a credit to cover some closing costs?
8. Order home inspections and appraisal
Even if you’re willing to waive negotiating repairs or price after a home inspection, it’s vitally important that you have one done — especially if you’re buying in a different state. Common home issues — from mold in the basement, to asbestos, to pests — could be different than what you’ve dealt with in the past. A home inspection will tell you what you’re moving into, and what’s normal for your new area.
In certain states, as well as a general home inspection, specialty inspections will be needed to check for things like pests, radon, or foundation damage. Not only can your agent advise you on which tests to order, if you’re unable to attend the home inspection in person they can walk you through it on video and record anything worrisome that the inspector points out.
Your mortgage lender orders the appraisal. They will have several local appraisers that they work with — people who know the housing market and values in your new neighborhood — who will assess the home’s value. If the appraisal comes in below your offer price, you might not be able to qualify for the loan amount you need to close on the house. Options at that point include negotiating a lower price with the seller, putting down more money to make up the difference, or walking away.
9. Start planning for your move
Now that you’ve found the house, what about all your stuff? A cross-state move takes more planning than a move across town. Costs for different moving options can range from $300 to $12,000, so the more time you spend planning, the greater likelihood you can find an option that fits your budget.
Not all moving companies handle long distance moves, so it may take you longer to find a moving company that both does non-local moves but also has availability when you need them. Check online reviews and ratings at the Better Business Bureau, and read the contract carefully.
If your closing date isn’t set in stone, or you’ll be renting for a while before moving into your new home, consider using a moving container company. Handyman and service provider sites are a great way to find people to help load the container if your friends are tired of showing up for pizza and beer. Take this time to clean out and get rid of old, broken furniture, toys your kids have outgrown, and anything you won’t need at your new home.
Mahan advises buyers to get measurements of everything ahead of time. “If you’re moving everything across states, you’re paying for the amount of space that you need,” she says,”If a piece of furniture doesn’t work in the house you’re living in, you might as well get rid of it.”
Another option is to rent a moving truck and drive everything to your new home. If you’ve got a tight budget, this can work, but don’t forget to calculate mileage charges, hotels, food, and gas. Some people opt to ship their belongings and cars, but this could mean tossing out all toiletries and cleaning supplies.
10. Close on the home
You’ve made it! Getting to your new state will feel like a big relief, but you’re not done yet. You still have to close on the home. In some states, you can sign everything remotely and your agent can meet you at the house with the keys. Others require that all parties be physically present at the closing.
If you’re selling one home to buy another, you’ll want to know the difference between a “wet funding” and a “dry funding.” In a wet funding, the seller receives the funds from their sale at the close. If you live in a state that mandates a wet funding at close, you’ll have the money immediately available to buy your next house.
Sellers that live in states with “dry” funding, or whose buyers may not have had time to complete the loan process, could wait a few days for their funds. Talk to both your buying and selling agent to find out when funds get disbursed in each state so that you can time the sale of any current home and purchase of another.
Another thing to know is that some states require that a lawyer be present at all closings. In areas with hot housing markets, attorneys can book up weeks and months in advance. A local agent can help you find one and get on their calendar in time.
11. Finalize your move
All of the excitement of your new home might dim if you walk through the front door and can’t turn on the lights! You’ll need to set up accounts for utility services at your new home. Some companies will allow you to set it all up before the actual closing, others force you to wait until the home is legally yours.
Once you have your new address, apply for a driver’s license in your new state. You’ll likely have a deadline of a few weeks to a month to get important documents changed. Arrange to have your mail forwarded from your old address, and ask old neighbors to look out for stray packages.
According to Mahan, your agent should know all the utility companies. “If you don’t have another place to stay while getting stuff moved in, you’ll want the power and water on, and everything is ready to go when they get there,” she says.
Your agent will be your best resource when buying a home out of state. They’re familiar with the area, understand what you need and are looking for, and as she puts it, “They’re representing you to make sure you’re getting what you think you’re getting in a home.” While there might be some speed bumps on a cross country move, with expert help and if you follow these steps, you’ll find your way home in the end.
Header Image Source: (Jared Murray / Unsplash)