1. Before we write an offer, I will ask you if you have been pre-approved by a lender or if I can recommend a lender to you. It is important that you speak to a lender for many reasons. You will want ot know the best financing options available to you, how much house you want to buy and search for and what kind of monthly payments you feel comfortable with. In addition, contracts have changed with the effect that several loopholes that allowed the Buyer to withdraw from a contract for financial issues, no longer exist. For example, a Buyer is deemed to have obtained financing within an agreed time unless the Buyer notifies the Seller that financing has not been obtained.
2. When writing an offer to purchase a property, you will generally need to include a check, known as earnest money. Earnest money is not required for a legal contract but it represents your sincerity in the attempt to purchase. If the offer becomes a valid contract, you will be credited with the earnest money at the time of closing. Normally, I will ask you to make out the earnest money check to a title company where it is kept in a trust account. Under certain circumstances, earnest money may be returned or it may be forfeited. I will advise you how to avoid forfeiture. Depending on the market situation and on the desirability of the property, I might advise you to put down more earnest money. In addition to the sales price, remember that the earnest money, the title insurance payment, the option fee and option period, some closing costs, pre-paids and repair costs are some of the items we will negotiate about.
3. You have the opportunity to buy the right to an option period for a certain number of days in exchange for a certain amount of money, which gives you the right to terminate the contract for whatever reason within the option period. The option money is paid at the time we make an offer and made out and transmitted to the Seller. If we do not ask for an option period or if you do not deliver the option check to me, you are deemed to have a contract without an option to terminate. I will advise you to have the property inspected during the option period for a general inspection, probably a termite inspection and perhaps a foundation or septic inspection, or a lead inspection. You will pay for the inspection at the time of the inspection. If there are inspection issues, you will probably call in repairmen (I can make recommendations) to get estimates for possible repairs. I may talk to the lender about having a preview appraisal done. All this has to be performed during the option period so that you can decide at the end of the option period, if you want to proceed with the purchase of the home, or if you want to terminate the contract. If you terminate within the option period, you loose the option fee. If you continue with the contract, the option money will be applied to your closing costs. This option makes it possible for the Buyer to terminate the contract irrespective of whether repair problems exist or not. The option fee and option period are negotiable items. If you terminate within the option period, your earnest money will be returned to you.
4. Once the offer has been accepted by the Seller and becomes a valid contract, you will need to show proof that you have arranged financing. When working with me, I will strongly urge you to have spoken with a lender (unless you pay cash) at the time we submit an offer, especially in today’s market. Normally, you will have to contact a lender to process the loan unless you pay cash. Under the contract, you will have a certain number of days to apply for the loan and get the loan approved. If necessary, I will make recommendations not only for a reputable lender but someone who is knowledgeable about the type of loan most appropriate for your circumstances, and whom I think will work well with you. I will have talked with you about lenders at our first meeting.
5. The loan officer will ask you to fill out an application. You will probably have to pay a credit report fee. Be prepared to account for the source of funds of your down payment and for closing costs. Bring tax returns, profit or loss statements if necessary, proof of alimony or child support, and any documentation relating to your income or credit history. There are literally hundreds of loan programs available – be sure to ask the lender about a loan most appropriate for your situation. Always ask if there is a pre-payment penalty. Always ask the lender to give you a Good Faith Estimate, showing your closing costs, prepaids and monthly payments under the loan. We will check this estimate against the HUD statement a day before or at closing.
6. Escrow will be opened at a title company. As soon as we have a valid contract, I have to turn over the earnest money to a title company. An escrow is an arrangement in which a disinterested third party (Title Company) holds legal documents and funds on behalf of buyer and seller, and distributes them according to the Buyer’s and Seller’s instructions.
7. You will be asked to name an insurance company, as a policy will be necessary prior to closing. If necessary, I can make recommendations.
8. You will be given the title commitment, a copy of the commitment for the property you wish to purchase, and a survey. You and I will review these documents and you will have a certain period to make objections. Sometimes I will recommend that an attorney review these documents. The attorney fee you pay to the title company at closing is for the title company’s attorney and not for your attorney.
9. I will make sure that the title company provides you with an estimate of the dollar amount you will need to close. This amount has to be in the form of a cashier’s check. Funds can be wired and I will give you wiring instructions. Always bring your drivers license or photo ID to the title company at closing.
10. Before moving in, be sure utility, telephone, gas companies have been notified. I will coordinate this with the Seller’s agent so that utilities are not turned off.
11. I will schedule a closing time convenient for you. You will have to sign numerous papers at closing at the title company (unless you pay cash) that the closing officer will carefully explain to you. I will be present at closing. You may choose to close through a representative with a real estate power of attorney, or long distance with overnite mail-outs. After all monies are received and documents signed, you will have to wait for funding at which time possession takes place. Funding can occur immediately but could also take time. Once documents have been recorded, title to the property (ownership) has changed hands.
Please call me if you have any questions about the buying process.
ELISABETH DOUGLAS
SELLING AUSTIN WITH ART! ™
512-789-7507