The Process: Step-by-Step
The Initial Agreement and Deposit.
An effective legal arrangement occurs between the seller of the property and the potential buyer.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. For the sake of clarity, it is extremely beneficial to transcribe all verbal agreements, including counter-offers and addendums, into written agreements, to be signed by both parties. Your real estate professional will assist you in drafting all the paperwork that comes with purchasing a home and will make sure that you have copies of everything that you need.
- Stick to the schedule. Once you have decided on an offer, you and the seller will receive a comprehensive timeline, detailing every stage in the process of closing the real estate contract. To guarantee a smooth flow of negotiations, it is vital to meet the requirements on time. Keeping to the timeline also ensures that neither party will breach their contract. Your real estate professional will give you constant updates, throughout the process, to make sure you’re always prepared for the next step.
The Closing Agent.
Either a title company or an attorney will be selected as the closing agent. The closing agent is responsible for holding the deposit in escrow and researching the recorded history of the property, ensuring that the title is clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions that limit various activities such as building or parking. There may be recorded easements and encroachments, which limit the rights to use your property.
How to Hold Title.
You may wish to consult an attorney or tax advisor on the best way to hold the title. Different methods of holding titles have various legal, estate, and tax implications, especially when selling or upon the death of the title holder.
Inspections.
Once your offer is accepted by the seller, you must have a licensed property inspector inspect the property within the agreed-upon time frame. You may also elect to have additional inspectors that specialize in a specific area (eg. roof, HVAC, structure) examine the property. If you are purchasing a commercial property, an environmental audit must be done on the site for the lending institution. I can recommend you to several trustworthy inspectors if you do not have one.
Depending on the outcome of these inspections, one of two things may happen:
- Either each milestone is successfully closed and the contingencies are removed, bringing you one step closer to the close, or
- The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of the contract (usually adjusting the price).
Appraisal and Lending.
Keeping in constant communication with your lender is imperative as they will inform you when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, the property will be appraised by a licensed appraiser, who will determine the value for the lending institution, via a third party. This is done so that the lending institution can ensure their investment in your property is accurate. Appraisers specialize in determining the value of properties, based on factors such as square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within the two week mark of closing, make sure to confirm with your lender that the loan will go through smoothly and on time.
Association Approval.
If you’re purchasing a property that is conditional upon an association’s approval, make sure to request the rules, regulations, and other important documents from the seller once you have an effective agreement to purchase. Application documents and processing fees must be submitted to the appropriate person at the association by the required time. To avoid processing delays with the application, fill out the information to its entirety and do so legibly. If you are required to meet with the association for your approval, make an appointment as soon as possible. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing so that it can be recorded with the deed in the county public records.
Property Insurance.
If you are obtaining a loan, your lender will require you to purchase a certain amount of insurance on the property. The lending institution and the purchase price of the property will determine the value. If you’re looking to save money, investing in homeowners is a great way to save hundreds of dollars a year.
Here are a few others you can save:
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. If your home has safety features such as dead-bolt locks, smoke detectors, an
alarm system, storm shutters, or fire-retardant roofing materials, you may be able to get a lower premium. Discounts may also be offered to persons over 55 years of age or long-term customers.
- Insure your house NOT the land under it. After a disaster, the land is still there, but your home might not be. When deciding how much homeowner’s insurance to buy, make sure to subtract the value of the land, to ensure that you do not pay more than what’s necessary.
I am happy to recommend you to experienced and knowledgeable insurance agents for any property type.
