Initial Agreement and Deposit
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller. Some important tips to keep in mind to streamline the process:
- Keep written records of everything. This includes verbal agreements, counter-offers, and addendums. We can assist drafting all written records and provide copies for each party.
- Keep up with the schedule. You and the seller will be given a timeline to seal every stage of the real estate closing contract.
The Closing Agent
Once both parties have agreed upon a contract and signed all documents, either a title company or an attorney will act as the escrow, or closing agent, and you will put down your deposit. The escrow is a neutral third party that will hold, receive, and distribute all funds associated with your transaction until the closing date of the property. They will research the complete history of the property to ensure that the title is clear of encumbrances by the date of closing and that new encumbrances are added correctly to the title. Before escrow can be closed and you can officially purchase the property, all contingencies agreed upon in the Purchase Agreement must be met.
How to Hold Title
There are several types of ways to hold title, or ownership, of a property. Each title method has different implications on ownership transfer, collateralization, financing, and taxation. We recommend speaking with an attorney or tax advisor about the pros and cons of each method, so you can determine the best option for your property. We would be happy to connect you with trusted attorneys and tax advisors in the area.
As part of the contingencies outlined in the Purchase Agreement, you will schedule a licensed property inspector to come to the home within the time frame agreed upon by both parties. Inspectors will determine the condition of the property and alert you of any problems. You may wish to have multiple inspectors look at the property who specialize in certain areas (ie. roof or plumbing inspectors). If you are purchasing a commercial property, you might be required to complete an environmental audit or soil test on site for the lending institute. If the inspections reveal issues to the property not specified in the purchase agreement, you may request a renegotiation of the terms of contract (usually the price). Once you are satisfied with the inspections and terms of the purchase agreement, the contingencies will be removed.
Appraisals and Lending
Keep in contact with your lender so you are notified when new documents are required to approve your loan. If the Purchase Agreement is conditional upon financing, the lending institute will require a home appraisal by a third party licensed appraiser. The appraiser will confirm the investment in your property is accurate. Appraisers are experts in determining the value of property based on a variety of factors including building costs, square footage, operating income, and more. Double check with your lender two weeks prior to closing to confirm the loan will be approved on time.
Some properties might require an association’s certificate of approval prior to purchase. If so, make sure to request all rules, regulations, and necessary documents from the seller. In the Purchase Agreement, you and the seller will agree on a time frame for you to submit paperwork or set up any appointments required for the association’s approval. Once accepted, your closing agent will request the original copy of the approval letter, so it can be recorded with the deed in the county record books during the property closing.
Basic property insurance plans will protect you from damages to your property including fire, theft, and certain weather events like wind or hail. While most states do not require a property owner to have coverage, most mortgage lenders will. Depending on your intentions for the property, you will be required to either purchase homeowners insurance if you plan to live in the home, or landlord insurance if you wish to rent out the property as an investment initiative.
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Get Your Financials in Order
Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability. Large purchases or loans can affect your credit and balance sheet in a way that can limit your buying options.
Your credit score will hold a significant impact on the type of property you can buy, your interest rate and overall property price. We can work with one of our preferred lenders to get an updated credit to know exactly where it stands. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and TransUnion. We are happy to recommend seasoned, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.
Organize Your Finances
When it’s time to make an offer, you’ll want to know you’re fully prepared to close the deal. In order to avoid delays, bidding wars, or conflicts, preparing your financials is crucial.
- Bank accounts
- Recent pay stubs
- Check Your Credit Rating
- Financial statements
- Tax returns for two years
- Credit cards
- Auto and other loans
- Copies of leases for investment properties
- 401K statements, life insurance, stocks, bonds, and mutual account information
PrequalifyPre-qualifying for a loan will help you with:
- Finding the ideal price range you can afford
- Determining what your monthly payment will be
- Understanding the different loans you qualify for
- Estimating the down payment and closing costs
Don’t Max Out Your Budget
Just because you’ve been approved for a max amount, doesn't mean you should spend it all on the home's sale price. You will want to set some of that aside for closing costs, taxes and potential home repairs or remodeling.
Get to Know the Area
Make sure the neighborhood works for you and your family - are you close to schools and is shopping conveniently located?
Don’t Skip the Home Inspection
Inspections are worth their weight in gold and will draw attention to problems you may not otherwise see, giving you peace of mind and letting you make more informed decisions about your purchase.
Getting pre-approved by a lender lets the seller know you are serious and ready to purchase a home and that you are not just window shopping.
Know what you can live with and what you cannot live without and also those things that can be taken care of with a simple remodel. If you need a 4 bedroom home, don't buy one with 2 that requires a massive addition which can break your budget.Look at the Age of Appliances and Other Systems
Appliances are some of the most expensive portions of the home and you should pay particular attention to their age and whether they have required service. Other systems to have inspected are your HVAC, hot water heater, and your septic & well, if applicable. You may be able to get the seller to add a home warranty when buying.Check For HOA Requirements
Most neighborhoods have HOAs that govern what you can and can't do - be sure you know what the rules are for your neighborhood.
- Never sign a real estate contract without understanding all the details-consult us first.
- Arrange all the recommended inspections, valuations, etc.
- Advise on long term property management
- Handle ALL details that arise during the home buying process
- Provide buyer tips to help with the purchase
- We will negotiate the contract in YOUR best interest.