Relocating to Area
Moving is a daunting and stressful experience. There are so many “things” you have to deal with when moving. And one of the biggest decisions you have to make is where are you going to live?
What are the challenges you face when buying a home when relocating?
1. Fast timeline
Usually you have to complete your home search and buying process much quicker than the average Buyer. And if you are not able to buy in the timeframe you need to then you could incur additional relocation costs for household goods storage or temporary housing.
2. Unfamiliarity with the area you are moving to
Most often you do not know much about the area. You need to take the time to get a tour of the different cities and neighborhoods in close proximity to where you will be working.
This is the most critical item when choosing and selecting a property to buy. It is important to choose the area and neighborhood first and then view and screen out properties to find what you like.
3. School information
If you have children, then you need to get as much information as you can about the schools you want your kids to attend. A lot of Relocating Buyers choose the schools first and then find a home in that school zone. It’s important to find out if the school(s) you want have openings for an in-year transfer or for the next school year.
4. Commuting Distances
You need to know traffic patterns and what is your accepted commuting times in the morning and evening.
5. Lifestyle and Recreation
You need to find a neighborhood or area that fits your lifestyle. And if you have a family and/or pets then this is also important.
6. Coordinating Timeline
As a Relocation Buyer you have many events to manage such as: Selling your existing home, interim housing, shipment of your household goods and then the closing and possession of your new home.
7. Buy Right and not Emotionally
A lot of Relocation Buyers get taken advantage of because they are in a hurry to buy and sometimes they lose their negotiating leverage by appearing too eager. It is recommended that a Relocation Buyer be represented by a Buyer’s Agent in order to secure the most favorable price and terms. In addition, at some point, in the future you will most likely list your property for sale in order to upgrade, downgrade or relocate out of the area so you need to make sure you are buying a property with value for appreciation and a timely sale in the future.
8. Finding a Buyer’s Agent who has experience with Relocation
A lot of Buyer’s don’t give this enough thought. It’s important you have a Buyer’s Agent who understands your special needs and who has the skills and expertise to help you. You need a Realtor who has the patience to explain the most basic parts of the process to the most complex. You want a Realtor who will show you homes that you like and want based on your needs and take the time and effort to tour you different cities and neighborhoods. You need a Realtor who has expertise and experience in the area you want to buy into. As a Relocation Buyer you require a high level of service from a Real Estate Agent so you need to find one who can deliver.
Questions you should ask a Real Estate Broker before you choose who you want to represent you—as a Relocation Buyer you have special needs:
How many transactions have you done in the past year?
How many Relocation Buyers have you helped in the past year?
What level of communication can I expect from you? Can I reach you when I need you? Are you email friendly? Do you work on Saturday and Sunday?
Do you have references or testimonials?
What kind of support staff do you have? How big is your office?
Which geographic areas do you have expertise in?
How long have you lived here?
What do you enjoy most about being a Real Estate Agent?
Tell me a little bit about yourself—where do you live?
Based on the responses to these questions and more that you will have you can choose the right Realtor for you.
Why work with a Buyer’s Agent to help me buy?
Most properties are sold through a real estate office. The Listing Agent who has listed a property for sale is acting as the agent of the seller, and is bringing experience, training and marketing expertise to bear to get the best possible deal for the seller. Why shouldn’t the buyer have experience, training and market knowledge available to get the best possible deal for the buyer? There are two sides to every transaction, the buyer’s and the seller’s. The Seller’s Agent has a legal (or fiduciary) responsibility to work solely on the behalf of the seller, and while the Seller’s Agent is obligated to deal fairly with the buyer, there should be no doubt in the buyer’s mind as to exactly who the Seller’s Agent should favor if questions or conflicts arise in the transaction.
Colorado addressed this issue recently by abolishing Dual Agency so a REALTOR® cannot be an Agent for two parties in the same transaction. Having one’s own REALTOR® who serves as a Buyer’s Agent can save the buyer from an endless round of time-consuming house hunting. The Buyer’s Agent can direct you to those specific properties, which have the particular features, which you need and want, in the buyer’s price range. Your Buyer’s Agent will have the market knowledge to be sure that you are offering the appropriate price for the property you wish to purchase. And in addition, a Buyer’s Agent, will seek the best terms possible for you as a Buyer and also help and negotiate the Home Inspection process for you.
What To Do First
Determine your “needs” and “wants.” “Needs” are those things that define the very bottom line in what you are willing to accept in a home. “Wants” are just that, the features that you want, beyond what you have defined as “needs.” A good idea is to sit down, take a deep breath, and then think about what you want in your new home. Make a free form list of what you need and want. Then go back through the list and prioritize it, this list will change over time so it’s a good idea to keep it handy. If you are having trouble coming up with a list then just focus on what are the three things you can’t live without?
And if you are buying a place with someone else, it is best that each of you put together your own list independently and then integrate the list. You won’t believe it, but sometimes couples have disagreements about issues and the home buying process is no exception. So, a little negotiating ends up happening between couples when buying a place or if you are buying a place with other parties.
What are some of the items to consider when buying a place? Square footage–size of the place, how many bedrooms, how many bathrooms? How old or new should the home be? What style of house—ranch, bi-level or tri-level? Fenced in yard? Updated kitchen? Do you need a 5-piece luxury bath for the master? How big should the closets be? Location? What type of area suits your lifestyle? What area do you want to live in? Schools are a consideration in certain areas so it’s important to research which school district fits your needs. What type of neighborhood do you want to be in?
New Construction or a Re-Sale? Buy or Build?
Homebuyers should consider whether they wish to buy or build a new home. While new homes have all the latest and greatest features, there are also other things to consider. Some pre-owned homes simply have that “homey” feeling. The cost of landscaping (usually considerable) is included in the price of the home, and some homebuyers aren’t willing to wait for a neighborhood to mature and trees to grow. Window coverings, particularly blinds and drapes, are usually included in a pre-owned home. Remember that in a new development, the landscaping will pretty sparse for the first few years. On the other hand, when everyone in the neighborhood is “new,” it can often be easier to make acquaintances.
Which is more expensive or the better buy, new or pre-owned? It’s a toss-up, and it’s a decision you will probably make based on you own particular circumstances! The prospective buyer should be aware when home buyers are in short supply, developers and builders often offer very nice incentives in financing, options and upgrades that may overcome a buyers reluctance to face the yard work and additional expense associated with a new house.
Looking at Houses
Once you and your Buyer’s Agent have agreed on what you want, and what your buying power is, it is time to get out and look at properties. Using the Multiple Listing Service (MLS) as a source, your Buyer’s Agent will find a number of properties which may be of interest to you and fit your buying criteria. Your Buyer’s Agent will make showing appointments for you. Occasionally, the seller’s showing times will not match your looking times. Usually, your Buyer’s Agent can work this out. When visiting a home, clean your feet, and give the property you are visiting the respect you would wish your property to receive! While it is permissible to look into built-in cabinets, cupboards and closets (part of the real estate, or real property), it is not appropriate to open drawers or doors in items of furniture, as these are the personal property of the seller.
While the exterior appearance (or curb appeal) is important, remember to look beyond the exterior cosmetic shortcomings of a property. After all, painting is easy! Many of today’s great looking houses may have been “dumpy” looking in the past. Your labor (often called sweat equity) has value, and may affect the price offered for a property.
What is recommended is focusing on the aspects of the house which can not be changed such as location, street, orientation of the house, lot, foundation, construction quality, and neighborhood because once you buy a house you can not change these characteristics of your house. And then look at the biggest and most expensive items next in terms of the state of the property—is the home in “move-in” condition? Or, does it need updating—roof, kitchen, bathrooms, carpet, etc.
After looking at only a few properties, confusion sets in! It is highly recommended that you take notes when visiting each property. Is the house in good shape? What type of cosmetic work needs to be done? Then, take out your prioritized list and reference it against each house you visit. Also, make a note about how you feel about each place. Some houses, you will walk in and right away you will know it is not for you. Make a note of the neighborhood. Look at the neighbor’s houses, how well maintained are the yards? Is it a renter’s neighborhood with tons of junk in the yards and lots of cars everywhere? There is no rule of thumb how many houses you will have to look at before you find the right one—you might find it the first day you go out or you might have to look at over 50 houses in order to find the one for you. (Note from Mario: My record so far is that I helped one couple buy a house and we viewed 110 houses over the course of 4 months before we found the one they were looking for.)
Factors that distinguish a Good real estate investment from a Bad one:
Buying Right: At or below market price, stable neighborhood, quick turnover time, least expensive home in neighborhood, good schools and infrastructure and low taxes and assessments.
Buying Wrong: Over market price, declining neighborhood, one-of-a-kind house, most expensive home in neighborhood, incomplete subdivision and stigmatized property.
What Will be Included with the House?
This depends on what is included or excluded. The MLS data sheet will itemize what items the seller wishes to include or exclude from the sale. Normally, anything permanently attached to the house by nails, bolts or screws are included with the house, but everything not part of the house (known as personal property) needs to be noted in the purchase offer.
The benefit of many inclusions is that they are financed as part of the purchase price of the house. If you are on a tight budget, the additional cost of buying drapes or a range/oven have to factored in to the purchase price. Have an idea what inclusions are important to you. Various items to consider as inclusions are as follows:
• dishwasher (portable units may be excluded, built-ins definitely included)
• garbage disposal (normally included)
• range/oven (normally included)
• microwave oven (usually included if built-in)
• window coverings, such as drapes, curtains, blinds, etc.
• ceiling fans
• shelving (normally included)
• clothes washer and/or dryer
• storage sheds
• garage work benches and/or cabinets
• garage door openers (normally included)
• wall mounted air conditioning units (normally included)
Freezers, window air conditioners, washers, dryers and refrigerators are common exclusions. Remember, any inclusion or exclusion may be a good bargaining negotiating point for the buyer or the seller.
We’ve Found the House!
Well, you had to get to this point sooner or later! When you have found the house you would like to purchase, there are a few more things to decide. First, determine what price will you offer for the property. Remember that the list price may be only a starting point in negotiations. The property may lack some feature you desire, and as a result, you may wish to offer less than the list price. In a very competitive market (seller’s market), it may be necessary to offer more than the list price to get a house you really have your heart set on. When sales are slow (a buyer’s market), the buyer can be more aggressive, offering less than the list price. On occasion, improvements such as new carpeting or painting are possible; even lending concessions from the buyer can be gained.
Your Buyer’s Agent will help you determine a reasonable price to offer for the property by doing research on “sold comparables” for similar sized houses in the same area. Also, your Buyer’s Agent will do their best to find out any information about the Seller’s motivations and situation which could aid you in the negotiation process. You and your Buyer’s Agent must also determine a closing date, an integral and necessary part of the offer. The offer will include the legal description of the property. This is not the address, but the description of the property as described in the County records.
Give thought to the loan terms, and how the loan terms will affect the closing costs, and the monthly payments. Decide when you wish to move in! If you believe that repairs, changes or upgrades need to be done to make the deal fair to you, note these items. You and your Buyer’s Agent will determine how much time you will give the sellers to respond to your offer.
Your offer to purchase may contain a contingency. A contingency is a provision placed in the offer (or the subsequent contract) that requires the completion of a particular act or event before the offer/contract is binding. A common contingency is the need for a buyer’s present property to be sold before the new property can be purchased. The most common contingency is the financing contingency, which makes the offer/contract conditional upon the loan being approved.
The offer must include when possession of the property will occur. Don’t assume that this is when the keys are handed over! Consider that the seller needs time to move out. It is not uncommon to give the seller 72 hours to move out. Consult with your Buyer’s Agent to determine appropriate possession terms.
One other point must be discussed here. What happens when the buyer or seller wants out of the contract for some reason not specified in the contract? If the seller elects to cancel the contract, the buyer has the choice of accepting this decision (perhaps with payment of damages) or enforcing completion of the contract (specific performance) and even collect damages. If the buyer is in default, the seller may elect specific performance or liquidated damages. The seller must make this decision when the contract is signed. Under specific performance, the seller has the choice of treating the contract as cancelled (the seller keeps the earnest money, and possibly damages), or the seller can elect to have the contract proceed (and can still pursue damages). Under liquidated damages, the seller keeps the earnest money, and may make no other claim on the failed buyer. Your Buyer’s Agent can explain the options in depth, and help make decisions on this issue.
Your Buyer’s Agent will then prepare the offer on Colorado Approved Legal Forms. Most likely your Buyer’s Agent is not a Lawyer, but has the right to execute these Legal Documents per the Colorado Real Estate Commission. Once the “Contract to Buy and Sell Real Estate” (offer) is completed your Buyer’s Agent will review the offer with you. You will then need to sign the offer, write an Earnest Money check and then your Buyer’s Agent will submit your offer along with Earnest Money check and the Lender Pre-Qualification Letter. Please, do remember that you are signing (executing, in legalese) legal documents, and it is your right to have legal counsel review the contract.
Making the Offer
Your Buyer’s Agent will call the Seller’s Agent or their office and make arrangements to deliver your offer to the Seller’s Agent. Your Buyer’s Agent will deliver the purchase offer to the selling agent, along with your earnest money check and the loan pre-qualification letter from your lender. The Seller’s Agent will present the purchase offer to the sellers. The sellers and their agent will review the offer and the sellers will decide whether to accept, reject or “counter” your offer. In your offer, you will have established a deadline by which time the seller must reply to your offer usually 24-48 hours.
In Colorado your offer is made by presenting to the seller with a tentative “contract to buy and sell real estate.” When the offer is signed by the seller, you have a contract. To be valid (and more importantly, enforceable), a contract must be in writing, within the law, include an offer and acceptance and something of value must be exchanged.
In Colorado real estate contracts you will see the term: “Time is of the essence”. This means that punctual performance is an essential requirement of the contract. If any party to the contract does not perform within a specified time period (the drop-dead date), that party is in default, provided the non-defaulting party has made a valid tender of performance.
What is Earnest Money?
Earnest money is a sum of money, usually 1-2% of the purchase price, which is presented with the purchase offer to show that you the buyer are serious. In Colorado, the earnest money is usually offered in the form of a personal check, made out to the selling broker’s office. If the offer is accepted, the money is deposited in the listing broker’s trust account, to be held until the closing. At the closing, the earnest money is credited toward the cash you must bring to the closing. If the offer is not accepted, then the earnest money check is returned to your Buyer’s Agent who then returns the check back to you.
What is a Counter Offer?
The seller may not agree with all the terms you have offered. The price, dates, earnest money, inclusions, etc. may not meet the seller’s desires or needs. On the other hand, the seller may not want to reject you offer out of hand. The seller may decide to make a counter offer (or counter), in the hope that you may agree to a slightly different set of terms. The seller’s agent will prepare the counter, the seller will sign the counter, and the seller’s agent will return the counter, attached to the original purchase offer (unsigned) to your agent. Your Buyer’s Agent will then submit the counter to you. If you agree and sign the counter, you have a deal to buy a house! If you don’t like the terms of the counter, you can submit another offer.
What Happens After the Offer is Accepted?
If the seller agrees to the terms of your purchase offer, the seller will sign the offer and the seller’s agent will return executed copies of the contract to your agent. Your purchase offer is now a purchase contract. The price agreed upon by the buyer and seller is known as the selling (or contract) price. Your Buyer’s Agent will notify you immediately, and will deliver a copy of the executed contract to you. Now it is time to again contact your lender, who will meet with you for the formal loan application. When making the loan application, expect to pay the loan application fee and the appraisal fee at that time. In the meantime, other things will begin to happen. Your contract will include a deadline for the buyer to make loan application.
Most Buyers will have to borrow the money to pay for a house. Usually, the buyer will put up some portion of the purchase price as a down payment, and borrow the balance of the purchase price from a bank, a mortgage company or from private sources.
One of the first things to do, as prospective homebuyer, is to contact a Lender or Mortgage Broker. It’s important to understand your financing situation so you know how much you can afford and the price range you are qualified to buy. Usually, a 15-20 minute meeting with a Lender will result in the buyer having a good idea of how much the buyer can afford to pay for a house. The Lender will usually provide the buyer a pre-qualification letter. This is useful item to include when submitting an offer for a property, as it indicates to the seller that you are a serious buyer. Be prepared to pay the lender a small sum for an in-file credit report. This initial meeting is not your loan application; that will usually not take place until you have made an offer on a property.
The most usual loans utilized are conventional, FHA and VA. Veterans of military service can take advantage of a VA loan. The main advantage of a VA loan is that it is available to veterans of military service, and requires little or no down payment. Some first time homebuyers utilize FHA loans. With an FHA loan, a home can be purchased with as little as a 3% down. Conventional loans generally have the most competitive interest rates, and are available with as little as 10% down payment, and 5% down loans are also available. There are so many different loan programs, which reinforces that meeting with a lender early in home buying process is strongly recommended.
The basic loan payment includes payment toward both the amount of the loan (known as the principal) and the interest and this basic amount is often called PI. Since the lender wants to be assured that property taxes are current, and fire and damage insurance is paid for, the lender will also collect money from the borrower to pay the taxes and insurance. When the term PITI is used, it means that the mortgage payment includes principal, interest, taxes and insurance. Low down payments on FHA and conventional loans usually also require a mortgage insurance premium (MIP) to be included in the loan payment.
Closing costs are usually less than 2.5% of the loan amount for government-
backed loans. Conventional loan closing costs can be estimated using 1.5% of the loan amount plus the front end fees (including loan origination fee). These can vary widely depending on the lender loan discount fee (points) being charged. A “point” equals 1% of the loan amount. Your lender will provide a good-faith estimate of these costs before loan closing. Ask your Lender for a “Good Faith Estimate.” In estimating closing costs, the following should be included:
•Appraisal Fee (normally paid at loan application)
•Credit Report Fee (normally paid at loan application)
•Loan Origination Fee
•Loan Discount Fee
•Interest Per Diem Adjustment
•Mortgagee™s Title Insurance Fee
•Homeowners Insurance Premium/Escrow
•Flood Insurance (if applicable)
•Loan Closing Fees
•Lender Funding Fee
•Inspection Cost (typically paid separate from closing)
What is Mortgage Insurance?
A lender is willing to loan money on a home mortgage because the loan is secured by the property. With a down payment of 20% or more of the purchase price, the lender has a low loan-to-value ratio (80%), and the lender can be assured that if the home buyer defaults on the loan, the lender will have a relatively easy time recouping the value of the loan amount (or principal). To give the lender this type of confidence in a low down payment transaction, mortgage insurance is utilized. Mortgage insurance is a type of insurance policy taken out by the buyer that insures the lender will not suffer such a loss. It is paid for by the borrower through the monthly mortgage insurance premium (MIP) usually included in the mortgage payment. (Yes, it is possible to pay the whole premium in advance, but there are good reasons why you may not wish to.) The need to pay MIP should go away when the value of the house is at some agreed-upon amount over the remaining mortgage principal.
The Title Commitment
The seller’s agent will immediately contact a title insurance company to request a current commitment for an owner’s title insurance policy, or title commitment. This title commitment will be sent to your REALTOR® by a date determined in the purchase contract. Your REALTOR® (or the title company) will deliver a copy to you for your review, and will discuss this document with you. If there are exceptions to the commitment, you may request copies or abstracts regarding these exceptions for your review. You will have a certain number of days to request these items, as specified in your purchase contract. You then have a certain deadline (also specified in the purchase contract) to give written rejection of the title documents. If you happen to learn of some title problem not recorded in public records, there is yet another deadline specified in the purchase contract, to reject the title work. If there are no problems, or the problems are resolved, the contract remains in force. If title issues are not resolved, by the appropriate deadlines, the contract is terminated.
Although the seller will pay for the title insurance policy, if the buyer is using a loan to purchase the property, the buyer must pay for the lender’s title insurance policy. These fees are paid at closing.
Sellers Property Disclosure
The seller will prepare and sign a seller’s property disclosure. This disclosure is intended to notify the buyer of the physical condition of the property, to the best of the seller’s knowledge. The contract will specify the deadline for delivery of the disclosure. You will be required to sign the disclosure, acknowledging that the disclosure has been provided to you. The seller’s property disclosure is not a substitute for professional inspection of the property.
Professional Home Inspection
While the title matters mentioned above are being taken care of, you should contact a professional home inspection company and arrange for an inspection of the property you intend to buy. Your Buyer’s Agent can provide the names of inspection professionals, and your Buyer’s Agent will arrange for the property to be available to you and the inspector. You can be present for the inspection and allow 2-4 hours for the inspection, depending on the size of the property or you can come and meet with the Inspector at the property at the conclusion of the Inspection for a visual and verbal report from the Inspector. The inspection will cover the structure, electrical and mechanical systems of the property, and much more including a Radon test of the basement if there is one. Before the actual inspection, the inspector should explain what the inspection covers, cost of the inspection, whether there is a written report and about how long the inspection will take. Pest (termite) inspections are not common in our part of Colorado, it being a common misconception that there are no termites in Colorado. This is not true. The home inspector will usually be on the lookout for insect or pest problems, but serious pest inspection is separate from the home inspection. Expect to pay the home inspector (by personal check) at the completion of the inspection.
Although a deadline for completion of inspection is not specified in the contract, what is specified is a deadline for notifying the seller of unsatisfactory conditions (the objection deadline) and a deadline for agreement resolving these issues (the resolution deadline). While your Buyer’s Agent will advise you regarding inspection issues and possible resolutions, you must make the final decisions. On occasion, the inspection is waived by the buyer. On a new home, a final walk through with the builder takes the place of home inspectors.
Radon is a radioactive gas. It comes from the natural decay of uranium that is found in nearly all soils. It typically moves up through the ground to the air above and into your home through cracks and other holes in the foundation. Your home traps radon inside, where it can build-up. Any home may have a radon problem … this means new homes, well-sealed homes and drafty homes, and homes with or without basements. Radon is estimated to cause many thousands of deaths each year. When you breathe air containing radon, you can get lung cancer. In fact, the Surgeon General has warned that radon is the second leading cause of lung cancer deaths.
If you smoke and your home has high radon levels, your risk of lung cancer is
especially high. Testing is the only way to know if you and your family are at risk from radon. The EPA and Surgeon General recommend testing all homes for radon. Testing is inexpensive and easy. There are also professional inspection companies that can do the testing.
If a radon problem does exist, there are simple and inexpensive ways to fix the problem. Even high levels of radon can be reduced to acceptable levels. The average indoor radon level is estimated to be about 1.3 pCi/L, and about 0.4 pCi/L of radon is normally found in the outside air. The U.S. Congress has set a long-term goal that indoor radon levels be no more than outdoor levels. While this goal is not yet technologically achievable in all cases, most homes today can be reduced to 2 pCi/L or below.
Information provided by the Environmental Protection Agency (E.P.A.)
If the home you are buying was built before 1978, it may contain lead-based paint.
About 75% pre-1978 buildings have lead-based paint.
•cause major health problems, especially in children under 7 years of age
•damage a child™s brain, nervous system, kidneys, hearing or coordination
•cause behavior problems, blindness and even death
•cause problems in pregnancy and affect a baby™s normal development
Lead poisoning means having high concentrations of lead in the body. Anyone
can get lead poisoning, but children under 7 are at the greatest risk, because their bodies are not fully grown and are easily damaged. Women of childbearing age are also at risk, because lead poisoning can cause miscarriages, premature births and the poison can be passed on to their unborn babies.
The lead hazards that children most often touch are lead dust, leaded soil, loose lead chips and chewable surfaces painted with lead-based paint. A child may be harmed when it puts into its mouth toys, pacifiers or hands that have leaded soil or lead dust on them.
If your home contains lead-based paint, contact a company that specializes in
lead-based paint abatement. Have professionals do the job correctly and safely.
Information provided by U.S. Department of Housing and Urban Development
Often, a home warranty is a good investment for the homebuyer. A home warranty is a sort of insurance policy for the repair of home systems both before and after the sale. The systems commonly covered are plumbing, water heaters, well pumps, electrical wiring and fans, built-in appliances (dishwasher, garbage disposals, trash compactors, range/oven, microwave oven) and heating system/ductwork. Washer/dryer and refrigerator coverage is optional at additional cost. While the cost of a home warranty is often paid by the seller or builder, it is often worthwhile for the buyer to purchase a warranty.
Surveys and Improvement Location Certificates
It is a rare lender who will not want a survey or improvement location certificate. After all, the lender would like to know if the property really exists! A survey will usually result in stakes or pins being placed on the property. More commonly, lenders will only require an improvement location certificate, which is a letter or legal sized sketch or scale drawing showing the property boundaries, location of the house, garage, sheds or other structures, concrete slabs, decks and driveways, certified by an engineering or surveying company. The buyer will pay the cost of the survey or improvement location certificate at closing.
Prior to loan approval by the lender, the property you wish to buy must undergo an appraisal. The object of the appraisal is to assure the lender that the property you wish to buy is actually worth the price you are paying, so that if the buyer defaults on the loan, a lender can have some assurance that the property has enough value to recoup the possible loss. Buyers who are not using a lender also elect to have a property appraised. The appraisal is specified in the contract, with an appraisal deadline. You, as the buyer, will pay (usually at the time of loan application) for the appraisal. On occasion, the property does not appraise at the contract price. Negotiation between the buyer and seller may result in reduction of the contract price, the buyer may have to come up with extra cash, or the whole transaction may fall apart. Use your Buyer’s Agent as an advisor if the property does not appraise at the selling price.
The appraisal is a key element of loan approval, as the lender is not likely to loan money on a property that does not appraise at the selling price. The decision to approve the loan is determined by the loan underwriter, the individual who is actually investigating your credit worthiness, the terms of the loan and the appraiser’s report. A loan approval deadline is part of the purchase contract. If loan approval is not received by the deadline specified in the contract, the contract will terminate.
Homeowner’s insurance is called fire and casualty insurance in some parts of the country. In general, such insurance will cover damage to the home and it’s contents. Usually, some form of liability insurance is included, in the event that someone may suffer personal injury on your property. The house and contents (your personal property) are usually insured against damage caused by fire, weather conditions or other catastrophe. The coverage is normally for a sum that is less than the price of the house, because the land is not replaced, and the land itself has a “permanent” value unaffected by the condition of the land. It is recommended that your coverage include replacement of all you personal property and valuables. Policies are available that accommodate the rising value of you property, and it’s replacement cost. Consult your insurance provider, lawyer and accountant to determine the amount of liability coverage you should carry. In most loan situations, the lender will collect 1/12 of your annual premium in your monthly payment, hold the money in escrow and pay the annual premium for you. The lender is thus assured that your property (and the lender’s!) is protected against loss.
Prior to completing the purchase, it is recommended you and your REALTOR® conduct a walk through of the property. This usually takes place in the 48 hours before closing. The purpose of this walk through is to examine the property, and see that the property is in the same condition as when the offer to purchase was made. For a new house, this takes the form of a meeting with the builder, or the builder’s designated employee, inspecting the property, and listing any defects. The builder will propose a plan to correct the defects, and the buyer must sign off on this plan.
If all has gone well, you will finally reach the closing. The closing is a meeting between the buyer and seller where the real estate transaction is completed, and ownership of the property actually changes. In Colorado, the title insurance provider will usually function as the closing agent, providing this service to the buyer and seller for a fee agreed to in the purchase contract. The closing agent will prepare all the documents necessary to complete, or close, the transaction. The closing agent will collect and disburse all moneys involved in the transaction.
The closing agent is usually selected by the seller’s agent, although the buyer may opt to select and specify a particular closing agent as a term of the purchase contract. There are two parts to the closing, if the buyer is borrowing the money to purchase the property. First, the real estate closing will deal with the transfer of the property from the seller to the buyer. The cost of the closing is normally shared equally by the buyer and seller. The real estate closing is followed by the loan closing, in which documents pertinent to the buyer’s loan to purchase the house are completed. The buyer will pay the entire fee for the loan closing. Both the buyer and seller will be provided with a copy of all documents involved in the transaction.
Be prepared to sign a lot of documents! The closing agent will explain all documents and money disbursements at the closing. The closing agent will prepare an individual settlement statement for both the seller and the buyer. This document will show the disbursement of all funds, and what funds the buyer or seller must provide at the closing. The settlement statement should be prepared 24 hours prior to closing, so that the buyer or seller will have adequate time to pick up funds. In most circumstances the buyer will usually have to bring cash to the closing. The “cash” is usually in the form of a cashier’s check, made out to the closing agent.
Transferring ownership of the property takes place when the seller signs the deed. The deed is the document which conveys the property from the seller to the buyer. In the loan closing, the main documents are the note and the deed of trust. The note is a legal document which the borrower signs, acknowledging that the borrower has borrowed the money required for the property purchase from the lender; the amount and terms of repayment are stated in this document. The loan is secured by a deed of trust, signed by the borrower. This legal document secures the loan by as offering the property as collateral. In Colorado this deed of trust is held by the Public Trustee, until such time as the loan is repaid and the lender informs the Public Trustee to release the deed of trust to the borrower. The deed, note and deed of trust are recorded as public records by the County Clerk.
Once all the documents are signed and moneys are disbursed, the seller hands the buyer the keys. Congratulations, you’ve bought a home! Remember that actual possession of the property is determined by the contract.
The closing agent will provide the buyer with copies of the closing documents. Keep these in a safe (and convenient) place. The closing documents will be needed to prepare you income taxes. In the event you can’t find the closing documents, remember that your Buyer’s Agent will also have copies (give the poor guy reasonable notice!). Also remember to keep all documents and receipts regarding the maintenance and upkeep on you home. These will likely be important for tax purposes in the far future.
Information about Mario Jannatpour:
I have lived in the Boulder/Louisville area since 1977. I went to Fairview High School and graduated in 1980. I attended the University of Colorado at Boulder and graduated in 1985 with a Bachelor of Arts in Political Science. I love living in Colorado and hope to stay in this area forever. Currently, my wife, daughter and I live in Louisville.
I specialize in helping Relocation Buyers and First Time Homebuyers. My Clients enjoy working with me because I help make the buying process more enjoyable for them. I do everything I can to get my Clients the best price possible and favorable terms of the contract. I am good at what I do because I have excellent negotiating skills and truly love helping people find and buy the house that they want.
When we work together I will show you the properties that you want to see based on what you tell me—I will listen to what is important to you. I can show you any property listing in the MLS (Multiple Listing Service). I can show you new homes and new home developments by area builders and I can show you for sale by owner properties. I will be your strong advocate during negotiations and provide you with all of the advice and research you’ll need to make well informed decisions. I commit to you my time and expertise in finding your new home by showing you all of the available properties that meet your wants and needs.
Hire Mario Jannatpour to be Your Realtor!