Step 2: During the Transaction


Let’s Adhere to the Plan

Write an Offer
Inspections
Start the Loan Approval Process
Appraisal
Title Search and Survey
Title Insurance
Underwriting and Full Loan Approval


LET’S ADHERE TO THE PLAN

A successful real estate transaction hinges on numerous details involving deadlines that must be met so that you can move into your ideal home as soon as possible.

BE SURE TO MARK THESE IMPORTANT DEADLINES:

• Loan Application (Application fee is due at this time)
• Inspections
• Written notice of Request for Repairs
• Negotiation of inspection repair items complete
• Insurance (You are required to arrange for insurance coverage and to inform your mortgage company of your agent’s name and phone number)
• Loan approval
• Closing Date

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WRITE AN OFFER

Once you have found the home you wish to purchase, you will need to determine what offer you are willing to make for the home. It is important to remember that the more competition there is for the home, the higher the offer should be – sometimes even exceeding the asking price. Be realistic and don’t play games. Make offers you want the other party to sign!

The offer is written using a previously written and formatted document that is approved by the local real estate board. Once accepted by the property seller, your offer becomes a legal contract. For this reason, it is important to understand what is written on the contract offer. If you are interested in seeing and reading the contract documents in advance, please let me know. If you have questions or concerns about the contract, you are encouraged to consult a real estate attorney.

There are many terms to an offer including the purchase price, payment method, deposit, settlement date, inspection and other contingencies and disclosures. When you write an offer you should be prepared to pay an earnest money deposit that represents your intention to purchase the property. I will review all of the terms with you. Any and all of these terms can be negotiated between you and the seller.

Once prepared, I will provide the listing agent with your written offer, a copy of your preapproval information, if necessary, and a copy of your earnest money deposit. After I present your offer to the listing agent it will either be accepted, rejected, or the seller will make a counter-offer. This is when you and I together will negotiate terms of the contract if necessary until you achieve a contract.

Once accepted, the contract and all terms are initialed and signed by all parties. The date of the final signature and delivery of the contract becomes an important date. This ratification date is that from which most deadlines will be determined. I will help you through this process.

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INSPECTIONS

If you are purchasing a resale property, we highly recommend that you have a professional home inspector conduct a thorough inspection. The inspection will include the following:

• Appliances
• Plumbing
• Electrical
• Air conditioning and heating
• Roof and Attic
• Foundation

The inspection is not designed to criticize every minor problem or defect in the home. It is intended to report on major damage or serious problems that require immediate repair.

Should serious problems be indicated, the inspector will recommend that a structural engineer or other professional inspect it as well.

Your home cannot “pass or fail” an inspection, and your inspector will not tell you hether he/she thinks the home is worth the money you are offering. The inspector’s job is to make you aware of repairs that are recommended or necessary.

The seller may be willing to negotiate completion of repairs or a credit for completion of repairs, or you may decide that the home will take too much work and money. A professional inspection will help you make an informed decision. In addition to the overall inspection, you may wish to have separate tests conducted for termites or the presence of radon gas.

In choosing a home inspector, consider one that has been certified as a qualified and experienced member by a trade association. We have a number of highly qualified inspectors we recommend that can be found in your buyer folder.

I recommend being present at the inspection. This is to your advantage. You will be able to clearly understand the inspection report and know exactly which areas need attention. Plus, you can get answers to many questions, tips for maintenance, and other general information that will help you once you move into your new home. Most important, you will see the home through the eyes of an objective third party.

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LOAN APPROVAL PROCESS

During and following your inspections, you will begin the steps necessary to obtain loan approval. This includes the following:

1. Signing your loan application
2. Providing all supporting documentation if you haven’t already including,

o Pay stubs
o Tax Returns
o Bank statements
o Investment statements
o Child support information
o Alimony decree
o Social security documentation
o Disability documentation
o Pension information
o Student loan deferment

3. Locking in your Interest Rate
4. Completing the property appraisal (this will be ordered and conducted for you)
5. Obtaining homeowners insurance
6. Completing title work (done for you by the title service)
7. Completing a survey (ordered and conducted for you)

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APPRAISAL

An appraiser is called to perform an appraisal of the home that you are purchasing to determine that the purchase price is valid and fits within the current market. They are hired on behalf of the mortgage lender to determine that they are not financing a loan that is more than the determined value of the home.

The appraiser will schedule an appointment to see the home on their own time. You do not need to be present during the appraisal. The appraiser will take photos and measurements both inside and outside. They will use the information that they record to prepare a report and determine appraised value.

In addition, the appraiser will conduct a high-level inspection to determine that the condition of the home is safe enough to finance. If there are any safety concerns such as peeling paint, broken glass or loose railings, the appraiser will require that they are repaired prior to obtaining financing. These are called “lender required repairs”.

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TITLE SEARCH & SURVEY

Between the time of your inspections and the time you take ownership of the home, the Title Company will manage the completion of the following tasks (servicers who are independent of title companies perform some or all of these functions).

Property Taxes – What property taxes are owed or have already been paid? The Title Company contacts the various assessor-collectors to determine what is owed and arrange payment accordingly.
Title Search – Copies of documents are gathered from various public records for the history of the property: deeds, deeds of trust, various assessments and matters of probate, heirs, divorce, and bankruptcy are addressed.
Examination – Verification of the legal owner and debts owed.
Document Preparation – Appropriate forms are prepared for conveyance and settlement.
Settlement – An Escrow Officer oversees the closing of the transaction: seller signs the deed, you sign a new mortgage, the old loan is paid off and the new loan is established. Seller, agents, attorneys, surveyors, Title Company, and other service providers for the parties are paid. Title insurance policies will then be issued to you and your lender.

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TITLE INSURANCE

There are two types of title insurance:

• Coverage that protects the lender for the amount of the mortgage
• Coverage that protects your equity and ownership of the property

Both you and your lender will want the security offered by title insurance. Why?

Title agents search public records to determine who has owned any piece of property, but these records may not reflect irregularities that are almost impossible to find. Here are some examples: an unauthorized seller forges the deed to the property; an unknown, but rightful heir to the property shows up after the sale to claim ownership; conflicts arise over a will from a deceased owner; or a land survey showing the boundaries of your property is incorrect.

For a one-time charge at closing, title insurance will safeguard you against problems including those events an exhaustive search will not reveal.

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UNDERWRITING AND FULL LOAN APPROVAL

Once all of the pertinent information is gathered and submitted from all sources, it will be forwarded to an Underwriter. This professional is responsible for determining if the  documentation supports the lender providing you full loan approval. If additional information is needed, it will be requested of you. This can occur multiple times until the Underwriter is satisfied and your loan is approved.

After completion of your financial documentation, appraisal and all title work, the mortgagee will provide you full loan approval. As long as you have been forthcoming regarding all of your income and debts, you have selected a home within your mortgage parameters and your title work regarding the history of the property and the boundaries is clean, you will achieve loan approval without issue. Congratulations!

 


Next up: PREPARING FOR HOME OWNERSHIP