Phyllis Lerner of William Raveis Legends in Tarrytown, New York, provided this guest post detailing the homebuying process. We couldn’t have done a better job ourselves! Lerner addresses issues that face homebuyers with a fine-tooth comb. Whether this is your first time purchasing a home, you’re downsizing, or moving into a mega-mansion, there is a list of essentials you must check off before calling a U-Haul. And don’t let the big book intimidate you. Ms. Lerner clearly breaks down the most important items in just 1,200 words. Let’s see what she has to say.
The Home Search
Your real estate agent will identify, locate and show you suitable properties based on a discussion of your housing needs and wants in relationship to your budget. Your agent may work for you as an exclusive Buyer’s Agent representing your interests only. Please make sure to discuss agency relationships and representation with your agent during your first official meeting and have him or her explain all possible and lawful scenarious. You will be required by law to sign an Agency Disclosure Statement afterwards. If you need to finance the purchase of your next home, it is recommended that you obtain mortgage pre-approval from a qualified lender prior to beginning your home search. A pre-approval letter will give you a better idea of what you can afford and shows sellers that you are serious buyer. You should also select an experienced real estate attorney at this time. If you don’t have an attorney already for this purpose, your agent can usually give you names of several highly regarded real estate attorneys in the area that you can interview. Your real estate agent is not allowed by law to give legal advice but will assist you and your attorney with obtaining as much information as possible regarding your new home.
The Purchase Offer
When you have found a property you want to purchase, your agent will help you to formulate and submit an “Initial Offer” on your behalf. Offers and counter-offers can be submitted in writing or verbally. An “Initial Offer” is usually made in writing as an “Offer to Purchase” and is prepared by your agent. Subsequent “Counter-Offers” are often presented verbally. Once you have reached an agreement with the seller on the terms including purchase price, personal property to be included, projected closing date, conditions and contingencies (inspections, repairs, financing, etc.), you now have an “Accepted Offer.” After an “Accepted Offer” has been reached, a written “Memorandum of Agreement” is usually drafted by the seller’s agent, detailing the terms of the agreement. Copies are distributed to the seller, the seller’s attorney, the buyer, the buyer’s attorney, and both real estate agents. This memorandum will be used by the attorneys as a basis to draw up the “Purchase Contract.” No “Earnest Money Deposit” is exchanged at this time. The typical time frame from this agreement to closing is approximately 60 to 90 days. However, many factors can affect this time frame, including specific needs of the buyer and/or seller.
From Agreement to Contract
After reaching an “Accepted Offer,” you are given a limited time period during which to conduct a home inspection and/or any other types of inspections, if such are part of any contingency in the agreed-upon offer. This period is usually 10 business days or less. During this time period, the seller has only a verbal, non-binding agreement to sell the property to the buyer. The seller is free to listen to, negotiate, and/or accept other offers during that time. Therefore, it is imperative that you (the buyer) conduct all inspections in good faith and in a timely fashion. A binding contract will generally not be written until after all inspections have been completed.
Property Inspections
An inspection by an Architect, Engineer or Licensed Home Inspector is strongly recommended for every real estate purchase. The purpose of an inspection is to verify the condition of the home and to allow the buyer to make informed decisions. Even with newly constructed homes and with condominiums, it is possible that something could have been overlooked, is not working or does not conform to code. An inspection will typically take 3-4 hours depending on the size and complexity of the property. Subsequently, the Home Inspector will provide you with a detailed written report detailing his or her findings. Other optional inspections you may wish to perform include a fuel oil tank test, a radon test, a septic dye test (if applicable), a water potability test and water recovery test (for private wells), asbestos testing, and lead paint tests. Your lender may require any one of these tests, including a termite test. Make sure to ask your lender in advance what tests are required. Your agent can help you with finding relaible and qualified inspectors.
From Contract to Closing
Once inspections are completed and deemed satisfactory, the seller’s attorney will draft a “Contract of Sale” and have it delivered, along with the seller’s title insurance policy and copy of any existing survey, to your (the buyer’s) attorney. Of course you should review and discuss this contract with your attorney. If any changes are requested by you, the seller must agree to these changes. Once everything has been ironed out signed contracts are then returned to the seller’s attorney with the “Contract Deposit,” also called a “Down Payment” or “Earnest Money Deposit” (this down payment amount can be negotiable but is typically 10%). The contract deposit check is made payable to the seller’s attorney who holds it in an escrow account until the closing. Once the contract is signed by the seller, your attorney will receive two fully executed copies, one of which will be given to you for submission with your mortgage loan application. Your completed mortgage loan application with all supporting documentation should be submitted by you to your lender at once. Your attorney will also provide you with an estimate detailing all closing costs at this time.
Prior to closing, your attorney will order a title search of the property. The title company will issue a title report certifying clear title, and issue a title insurance policy to protect the lender (required) and the buyer (optional) in the event a title problem arises in the future. The title company will also perform a property tax and violations search (required by the lender), as well as a survey inspection. If the existing survey is unacceptable, or if no survey exists, it is typically the buyer’s responsibility to pay for a new survey.
Closing Day
Once all conditions of the contract have been fully satisfied, the closing date is scheduled. This involves all parties including the seller, the seller’s attorney, the buyer, the buyer’s attorney, the lender’s attorney, the title company representative, and usually one or both real estate agents. Once the closing date has been scheduled, you should immediately prepare for moving, contact all applicable utility companies, transfer any funds necessary for closing, and arrange for a homeowners insurance (the original and copies of the insurance policy, as well as proof of payment must be brought by you to the closing). Your attorney will advise you in a timely manner as to the amounts of any certified checks required at closing. You will also be asked to bring a number of blank personal checks to cover the assorted closing costs, as well as two forms of identification, one of which must be a photo I.D.
A final “Walk-Through” of the property is performed by you just prior to closing, usually just before the closing appointment, but not sooner than the previous day. Your real estate agent, or the seller’s agent will schedule this with you. The purpose of the “Walk-Through” is to confirm that no damage has been done to the home since the time of the home inspection, to confirm that the major systems and appliances are in working order, and to confirm that the home is “Vacant & Broom Clean”, as stipulated in every sales contract.
Posted by Phyllis Lerner, William Raveis Legends Realty+ in Closings, First Time Home Buyers, Insurance, Raveis Agents, Raveis.com
Tags: buyer representation, buying a home, closing on a home, contract for sale of home, making an offer on a house, prequalification, property inspection checklist, William Raveis