If you are new to the home buying process, buying a home is not like buying a car. There are many steps to go through and it will take up much of your free time. Once you have found your dream home, you will be plenty busy until the closing.
Your real estate agent:
As your real estate agent, I will play a vital role in helping you not only find a home, but will assist you through the entire process. I will help to negotiate and resolve any differences or issues that may arise between you and the seller. Those issues could include, but are not limited to, items found in a home inspection or testing of well and septic.
I found my dream home. Now what?:
After viewing several homes, you have found the one that you are interested in purchasing. The first step is to prepare a purchase offer. The following areas are to be considered when making purchase offer.
Offer Amount :
The amount you offer will depend upon several factors including, but not limited to:
- the amount of mortgage you are qualified to borrow.
- how much in savings you have to spend.
- how badly you want the home.
- how many other buyers are interested in the home.
- how motivated you think the seller is.
- how much work might need to be done on the house.
- how the property compares with similar properties.
Deposit: To show all parties involved that you are serious and acting in good faith, when making an offer you will be required to make an earnest money deposit. This amount may vary, but is usually no less than $1000. When the sale is completed, your earnest money deposit is deducted from the sale price or applied to closing costs. If the seller rejects your offer, or the sale falls through because one of your contingencies is not satisfied, your earnest money is returned per the conditions of the contract.
Contingencies are a very important part of the purchase offer. They are conditions that must be met in order to move forward with the purchase.
The first contingency in an offer to purchase is usually the mortgage contingency. This simply states that the offer is conditional upon the buyer being able to obtain suitable mortgage financing. In the event that the buyer cannot obtain a mortgage, the purchase offer (contract) becomes null and void. This ends the buyer’s obligation to purchase unless they wish to renegotiate the offer and mortgage contingency.
Other contingencies may include:
- the sale of a current home.
- obtaining a satisfactory home inspection by a qualified inspector.
- obtaining a termite/pest inspection.
- obtaining satisfactory results for well and septic tests.
- getting a satisfactory attorney review of your Offer to Purchase (if offer was not prepared by an attorney)
Once you submit a purchase offer the seller has the option to accept , reject it or make a counteroffer. If portions of your offer are not agreeable to the seller, the seller can make changes to some or all of the terms of the offer an then the offer becomes a counteroffer. It then becomes your decision whether the counteroffer is acceptable or not. You can then accept , reject it or make a counter to the counteroffer. This is part of the negotiation process.
You have a contact:
Negotiations are over. You and the seller have come to agreeable terms and now have a fully executable contract. If you have not done so already, you must now select an attorney and have your attorney review the contract within 3 business days.
At this time, you must also apply for your mortgage and order any inspections.
Your Attorney: It is highly recommended that you hire your own attorney to take care of the legal work for your real estate transaction. Your attorney will approve or disapprove your contract. He/She will also do a title search, check for liens and judgments, and take care of many other legal items in regard to the transaction.
Making mortgage application:
Every real estate contract should have a mortgage clause (unless it is a cash offer) and should be for a stated amount. It is very important that you DO NOT apply for more than the stated amount. Generally, it will be stated in the contract that you have 45 days to obtain a mortgage. If you have not received your mortgage approval in 45 days you may have to prove that you were diligent in your attempt to obtain a mortgage or for show good cause for delay. Without agreement from the parties involved, going beyond the 45 days MAY make your contract unenforceable. You may also risk losing your deposit.
If you are denied a mortgage, with proof of denial from the mortgage company your deposit will be refunded.
Typically, these conditions come in the form of providing verification of certain information; which is, from the lender’s point-of-view, considered very important. It may also require you to obtain homeowners, hazard, and/or flood insurance.
Receiving mortgage commitment:
When the lender has approved your file for mortgage, they will issue a mortgage commitment letter. This is a contract between you and the lender. It is important that you READ AND UNDERSTAND THE COMMITMENT IN ITS ENTIRETY before signing it. If you do not understand any portion of it, contact your attorney immediately. Mortgage commitments are usually NOT negotiable and often contain conditions that you must satisfy. Until all conditions are met there cannot be a closing.
What happens if there are defects or problems found during inspections/tests?
While you are probably not purchasing a newly constructed home, the inspector(s) will more than likely find some flaws. As each situation is different, it is difficult to say who will be responsible for defects. Smaller items may be left to the buyer while larger ones may be the seller’s responsibility or negotiated between the parties. If no agreement is reached the contract may become null and void.
The Closing date & Pre-Closing:
The closing date in the contract is stated as a date “on or about” and is an estimated closing date. The date of the actual closing will be coordinated between you, your attorney, the lender, and the seller and seller’s attorney. Once you have received a mortgage commitment, your attorney will submit a title insurance binder along with other legal work required by your lender. Once everybody has signed off approval a closing date can be set.
Pre-Closing Walk Through:
It is highly recommended that you do a final walk through of your soon to be new home prior to closing. The final walk through allows you to reconfirm the condition of the house prior to closing. This happens 1 or 2 days before the closing. Don’t skip this step because this is your last chance to verify that there has been no change or damage to the property, all agreed on repairs have been made, appliances you expect to be there are still there and that the seller’s personal belongings have been removed. Don’t assume anything. A lot can happen between having your offer accepted and getting to the closing table.
Make sure that you bring photo Identification to the closing. This is required since 9/11.
Real estate closings are often exciting and stressful at the same time. There are many legal papers being shuffled back and forth, as well as checks for large sums of money being exchanged between parties.
At closing, the seller gives the title to the buyer in exchange for the purchase price that is stated in the contract. The seller also delivers a deed, title evidence and insurance, property survey (if required). You will be required to sign the final mortgage papers, IRS Form 1099, a form known as the HUD-1 statement or the Uniform Settlement Statement and other closing statements. Your attorney will explain the purpose of each of these.
Warranties after Closing:
In most cases, there are NO WARRANTIES AFTER CLOSING. The only defects that you can make notice of or complain about are defects that you can prove were known and/or hidden defects that were not disclosed or could not have been found out about through a reasonable investigation.
After closing, your deed and mortgage get registered and filed at the county office building.
YOUR PAPER WORK:
SAVE ALL THE PAPERWORK YOU LEAVE THE CLOSING WITH IN A SAFE PLACE. YOU WILL NEED SOME OF IT FOR YOUR TAXES WHEN YOU FILE AT THE BEGINNING OF NEXT YEAR. THE DEED AND ABSTRACT SHOULD BE PLACED IN EITHER A FIREPROOF BOX OR SAFE DEPOSIT BOX. THOSE ARE VERY IMPORTANT AND YOU MUST NOT LOSE THEM. IF LOST, THEY WILL COST $$ TO BE REPLACED.