Real Estate Agent
Once you’ve ratified a contract on your new home you’ll begin moving through the closing process and taking care of removing contingencies. Your agent will guide you through this process and handle all the details to make sure everything goes as smoothly as possible. Here’s a quick overview of the most important steps moving forward:
1. Title/Settlement Company
Part of the offer and negotiation process is determining which settlement companies the buyers and the sellers will each use to handle their side of the transaction. The Title Company will act as a 3rd party intermediary that will act on behalf of their client and will hold or provide the necessary instruments in the sale, such as escrow or closing funds and the deed of trust.
Within the contract, the buyers also agree to submit a negotiable amount of earnest money that will be held in escrow (usually by Title Company). This “skin in the game” shows the sellers that you’re serious about purchasing their property and are putting this money up to give them assurances that you’ll abide by the terms of the contract. This earnest money deposit is not an additional cost to you – it’s credited back to you at settlement or used to pay part of your closing costs.
Another responsibility of the Title Company is to complete a thorough title search of the home being purchased. This search is used to determine that the title is clear of encumbrances and that the seller is actually able to transfer ownership rights at settlement. A “clear title” allows the title company to provide title insurance at closing to protect you, the buyer, in case anything was missed or comes up in the future. This insurance protects you, and your investment, in perpetuity.
Our agents work with experienced title companies that will handle all of the details from start to finish. We also employ two full-time closing managers that work directly with the title company to make sure everything goes smoothly. Your home purchase is always in great hands with our affiliates and supporting team members!
When negotiating the contract, one of the main terms is the home inspection contingency. We always recommend that our clients have a professional home inspection performed on a property before buying, but this contingency does offer two options during negotiations:
- Home Inspection with Option to Negotiate Repairs
- Home Inspection with Option to Void
The “option to negotiate” allows the buyers to perform their inspections and then request repairs that are negotiated between both parties. The “option to void” is more of a pass/fail approach, telling the sellers you won’t request any repairs to be done but still have the option to void the contract. Both options protect the buyers and allow them to back out of the contract if issues are found that make them uncomfortable moving forward.
We always start with a general home inspection that will evaluate the home’s major systems (HVAC, plumbing, electrical, etc.) as well as the structure and any maintenance items necessary. Additional inspections may also be suggested by your Realtor depending on the property, condition and age. Some of these inspections may include radon, sewer, septic, chimney, pool, or a boundary survey just to name a few. Your agent will give you guidance to help determine exactly what parts of the home you should take a closer look at.
Once our inspections have been completed, we’ll have a good scope of any defects or repairs necessary for the property. If we have the “option to negotiate”, we’ll send a list of repair requests (or ask for a credit) and negotiate with the sellers until an acceptable agreement is reached. Even if we only have the “option to void”, some major issues or deal breakers might still be negotiable, especially if the sellers would need to address them for the next potential buyers. Again, your agent will guide you through this part of the process and help negotiate the best solution.
One big thing to remember, especially for first time homebuyers, is just because a home has some issues it doesn’t mean it’s not a good investment. Your agent is a professional problem solver that will help you find ways to address and overcome any issues that might arise while also protecting you throughout the process.
3. Appraisal and Financing
Once you have a home under contract, both you and your agent will work closely with the lender to make sure everything goes smoothly with the financing side of your purchase. During contract negotiations, we’ll agree to do the appraisal and have our financing in place within a certain amount of time. Your lender will make sure that we stay on track and hit the required deadlines.
Even if you’ve already submitted documents for your pre-approval, the lender will start requesting additional documentation to build out the loan file. They can provide you with a list of items upfront that you’re going to need and it’s always a good idea to get your paperwork in order ahead of time – there will be a LOT going on at this point. The quicker you can get the lender any of their requests, the smoother the process is going to be.
Once we give them the green light, the lender will order a 3rd party appraisal for the property. The appraiser’s job is to look at the property (condition, size, beds/baths, upgrades, etc) and compare it to similar properties that sold recently. This information then allows them to give their estimate of the market value of the property. The bank uses the appraisal to confirm that they are lending on an asset that is safe and not being overvalued.
Most of the time the appraisal comes back at the sales price, or maybe slightly above, depending on the current market. However, sometimes the appraisal does come in below the sales price especially in a hot market with appreciating values. If this happens, the financing contingency protects the buyers and allows them to take this information to sellers and negotiate an agreeable resolution. If you want to dive in deeper on your options in the case of a low appraisal, we suggest watching this video.
Once the appraisal is complete, and you have final loan approval, you’re almost ready to purchase your new home!