We at Absolute Safeguard Home Inspection Services Inc. have performed thousands of home inspections in western Pennsylvania for the past 19+ years. REALTORS refer both their home buyers and sellers to us. Home owners and home mortgage officers call us when they are in the midst of refinancing. Home owners with wells may call us for annual water testing.
From contract to closing, most real estate transactions generally follow a fairly consistent process and involve several parties. The REALTOR or REALTOR’S assistant should keep the transaction on track thereby making certain that all documentation is signed, money is escrowed, loan commitment is received, and that all parties are kept informed about the myriad of details. Below is a general outline that may be helpful to buyers.
Typically once you have decided to buy a home, you would first shop around for the right mortgage interest rate and set up a time to meet with a mortgage officer. You may want to request a preapproval letter from the mortgage officer and at this time you should have a clear idea of the price range and monthly payments you can actually afford. Another important advantage of having a preapproval letter is that it can be used to give your offer considerable clout in negotiating the price of a home. All other things being equal, if one buyer has a preapproval for the offer amount they are offering and the other buyer does not, the seller will most likely choose to negotiate with the offer accompanied by the preapproval letter.
Another item to ask your mortgage officer is a good faith estimate of the closing costs owed since that amount is considerable for most folks and should be factored into the buyer’s financial analysis.
This is the time to make certain that the liquid funds necessary to complete the transaction are freed up for use. These items include but may not be limited to:
• The good faith/earnest money offer deposit to accompany the offer • A portion of the down payment amount required by your lender at the signing of the Purchase and Sale Agreement which is usually equal to somewhere between 3-10% of the Purchase price of the house. • The closing costs, usually equal to about 3-4% or more of the purchase price or as required by your lender • The home inspection report • A Radon or Pest Inspection • Water or Septic dye testing required • Any other testing required as advised by your REALTOR®
Once you receive the preapproval letter you should proceed to select a REALTOR® of your choosing to represent you and then send an electronic copy of the preapproval letter to your REALTOR®.
Make an appointment to meet with your agent or at least talk over the phone. Your REALTOR® will in most cases require that a buyer/client sign a Buyer Agency Agreement before starting to work with you. After all, they want to know that you are committed to working with them and that they will be compensated, in most cases by the seller, for all of their professional effort and hard work on your behalf. A buyer Agency Agreement is the best way to establish a client/agency relationship in which the agent is now committed to working hard for you and representing your best fiduciary interest throughout your real estate purchasing process. Without a Buyer Agency Agreement, the REALTOR® is actually required to represent the seller when it comes time to negotiate the price and terms of an offer.
Once you have your preapproval letter and signed a buyer agency agreement with your REALTOR® the fun begins. It’s a good idea to meet with your agent, or discuss over the phone or Skype, what your home search criteria should be, what your must have’s will be and which features or benefits you are willing to trade off for others.The more you can inform your REALTOR® about your requirements, timing of your move and any other details of importance, the more likely you are to find your dream home. Based on the criteria discussed your agent will send you listings from the Multi-List, the largest data base currently available of homes for sale.
Buying a home is an educational process and you will soon learn what you absolutely cannot tolerate and which features you must have. For example, you may initially want a newer home located on 5 acres in the country. However, you may not find that exact home and lot at an affordable price. Most folks soon realize in their real estate search, that they must make trade-offs. For example, you may find a newer home, at the right price. However, it is located on a busy road, on a smaller lot – not the beautiful 5 acre lot you had in mind. In order to get the newer home on a 5 acre lot, you realize that you are required to come up with a much higher down-payment. The trade-off becomes the 5 acre lot you wanted. You realize that the newer home is an absolute “must have” item and that the 5 acre lot is of less importance to you than owning newer construction.
Another helpful tip is to take a drive by the home before actually requesting a showing. Often you can determine the address of the home and you may want to take a drive around the neighborhood where the home is located since a tiny thumbnail photograph does not always tell the whole story. You may be surprised to know how many buyers drive up to a home they thought looked fantastic in the Multi-List only to end up not getting out of the car once they arrive.
Again, as you move forward in your search, the more information you can give your REALTOR® the more productive and satisfying your search will be.
Once you have found your dream home you proceed to prepare to make an offer to purchase the home. The offer amount is usually based on your REALTOR’s estimate of the market value of the home using an analysis of recently sold comparable homes in the area. The offer contract is accompanied by a “good faith or earnest money deposit”.
The standard deposit amount to accompany the offer is usually about $1,000, sometimes more or less depending upon the price of the home and demand. After all, the seller would require some assurances that the buyer is serious, once they remove their home from the Multi List and lose all of that advertising exposure. A good faith offer deposit is one of the best assurances you can give the seller that you will not walk away and you are truly serious about making the purchase.
The offer contract establishes the intentions of the buyer. Some of the most important items stated in the agreement include the amount of time the seller has to accept or reject the offer, the intended date for signing the Purchase and Sale Agreement, the planned closing date, the amount of the offer, the amount of the Purchase and Sale Deposit monies, the amount of the mortgage, where the earnest monies will be escrowed and any terms and contingencies such as the mortgage contingency, and the home inspection contingency, radon, septic and water testing necessary and wood destroying insect inspection.
The offer is then submitted to the seller’s agent who presents it to the seller. The seller can do one of three things upon receipt of your offer; they can accept the offer as is. They can reject the offer without further explanation. Or, they can counter your offer with another offer.The seller and you, as the buyer, may go back and forth several times through your respective agents when negotiating, counter offering and generally ironing out the offer amount and terms, amount of deposit required, and/or closing date and timing preferences of the parties involved. There will most likely be some sort of a compromise.
Once your offer is accepted by the seller, the contract is now your guide and you may want to write on the calendar the dates and terms you promised on the offer contract.
Once your offer has been accepted you can start looking for a real estate attorney right away. Your REALTOR® should be able to refer you to an attorney who will handle such activities as the title search and the closing of your real estate transaction, which usually takes place at the registry of deeds in the town where the property is located.
Due diligence is another way of saying “Do your homework” on the home you are about to purchase and the home inspection expense is considered by most to be the best money spent in purchasing a home. In most areas of the U.S. the buyer has from 10-14 days from the date the offer is accepted in which to perform a home inspection and any other tests required such as wood-boring insect, water bacteriological, septic dye testing or a test for the presence of mold. Absolute Safeguard Home Inspection Services Inc will work with your agent, the seller, seller’s agent and you in setting up the home inspection appointment and required testing.
The inspector will issue a report to you with their findings. You may want to make arrangements to review this report with your REALTOR® as soon as you receive it. During the option period, the inspection and bank appraisal findings may give the buyer and buyer’s agent an opportunity to request adjustments based on these finding. Once all parties are in agreement the transaction moves to the next step.
Sign Purchase and Sale Agreement
The customary amount of the Purchase and Sale Deposit is usually an additional 3-5% and in some cases 10%.
Submit a Formal Home Mortgage Application
At this point buyer and seller have reached agreement on any inspection, repair and appraisal report issues and the file moves into “pending” status. Usually within 3 days of signing the Purchase and Sale Agreement, you would have begun the mortgage application process. Since you have already received a preapproval letter this step in essence is already in motion. Your mortgage officer can be your guide.
The lender and title company are working toward preparation of the documents for the title company. The title company prepares the deed and finalizes the loan documentation. Once the file reaches “clear to close” status the attorney/title company schedules the closing.
The timing for a mortgage commitment letter is a bit longer than the inspections and tests, usually about 3-4 weeks from the date the offer was signed unless it is a VA loan which can take slightly longer. It all depends on the mortgage company’s timetable. Your REALTOR® can help with coordinating the timing of the mortgage approval and request an extension if necessary.
Done about three weeks from the closing date.
Usually this is done the day before closing in order to make sure there haven’t been any significant changes to the property since last viewed.
The average time to closing is about 3 weeks to about 30 days from when the offer was accepted. This is where you and your attorney meet, you review the terms of your loan, sign the necessary documents, and you will receive the deed to the property. The deed is recorded in your name and the property is yours. You should receive the keys and be able to move in any time after you close on the property. Your attorney will advise you on the timing, location, details of your closing.