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Whether it’s your first home or your a seasoned buyer, purchasing a property is probably one of the biggest financial decisions you’ll ever make. It’s important that each step of the process, from deciding to buy to completing the purchase, be made carefully.

Motivation to Buy

It’s important to understand why you’ve decided to buy. This will be helpful in determining which properties and their locations would be appropriate for your needs. Are ready to start paying your own mortgage instead of your landlord’s? Is it time for an upgrade? Do you want to live closer to work or family? Are you interested in a vacation home or an income property? Clearly defining the reasons behind your decision to buy is crucial to finding the perfect property to achieve your goals.

Financial Growth

Over time, it is not uncommon to experience an increase in income. This is often the motivation for choosing to purchase real estate. Whether you are interested in an income property, expanding your investment portfolio or finally purchasing your dream home, property ownership is an excellent investment. Owning real estate also carries lower risk than many other investments when building equity or generating a return on your investment.

Before you begin your search for your ideal property, you will want to make all the preparations necessary to ensure a smooth transaction.

Build Your Green File

To secure financing to purchase property, you will need to compile various financial documents. In real estate, this is called a “green file” and should contain all the following documents to be presented to prospective lenders.

Financial statements
Bank accounts
Investments
Credit cards
Auto loans
Recent pay stubs
Tax returns for two years
Copies of leases for investment properties
401K statements, life insurance, stocks, bonds, and mutual account information.

Know Your Credit Rating

Your credit score has a huge impact on the type of mortgage you can obtain and what type of property you can purchase. An experienced lender will research your credit rating with the three top reporting agencies, Equifax, Experian and TransUnion. They provide your credit score and make you aware of any issues on your credit report that you may need to address. Understanding your credit rating and mortgage potential will allow us to present you with properties that not only fulfill your needs but fit your budget. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.

Control Your Finances

When purchasing real estate, it’s important to approach your purchase from a position of financial stability. Focus on paying down any existing debt and accumulating funds for additional expenses such as inspections, surveys, insurance, etc.

Now is not a good time to make sudden career changes or large purchases. If you are considering any major changes, you should consult with your lender first. One large credit card purchase or a new auto loan payment can significantly lower the amount of financing you can secure and ultimately the amount of real estate you can afford.

Get Pre-Approved

When securing financing, buyers often confuse the terms pre-qualified and pre-approved. While obtaining a pre-qualification letter from a lender can be helpful, it may not be enough when presenting an offer. A buyer who only has a pre-qualification letter could easily lose out to one who went the extra mile and got pre-approved.

A pre-approval letter provides many benefits.  It will allow you and potential sellers to know exactly how much real estate you can afford. This will put you in a more favorable position when making an offer on a property you want to purchase. Also, a pre-approval can make the funding process more efficient. This is when your green file comes in handy.

Purchasing a property involves multiple important financial decisions, understanding complex issues and completing excessive paperwork. It can be overwhelming for an inexperienced buyer. A real estate professional can guide you through the entire process. They often have access to property listings before they hit the general market, which could be beneficial. There are a few key factors to consider when choosing a professional real estate agent.

Experience

Be Selective. Interview a few agents that are familiar with the area in which you are interested before choosing one. You want to hire a full-time agent with a proven track record in completing transactions similar to yours. Ask for references and a list of properties they have handled successfully.

Education

Education is also an important factor when choosing an agent. It should go well beyond simply obtaining their real estate license. A good agent will continually strive to improve and gain knowledge of the latest real estate trends. Ask about their education and credentials. Choose an agent who continues to further their industry knowledge and stands out among their peers.

Commitment

When choosing an agent to guide you with the purchase of a property, you want to work with someone who listens attentively to your needs and concerns. Ask about their availability. Will you be able to contact them on evenings and weekend if necessary? Make sure the agent you choose will be dedicated and provide the time and attention necessary to find the right property for you.

Once you’ve taken care of all the necessary preparations, it time to find your ideal property. Your agent will provide you with a selection of properties are in your price range and have the amenities you want. You can also do some research on your own.

Take a Drive

Explore the neighborhoods that interest you. Are they well kept? Convenient to shopping, restaurants, and entertainment? If you have children, are there parks and recreation areas? How is the school system rated? Riding through various neighborhoods will allow you to get a feel for what it would be like to live there. You’ll also see what’s for sale and have a better idea of the type of properties available in each area

Narrow Your Search

Select the properties that appeal to you the most and have your agent schedule appointment for you to view them. Compiling a list of things you want to ask before the visit can help avoid forgotten questions and make the visit more informative and productive. Be sure to include a question about the property’s potential long-term resale value. Selling may be the last thing on your mind when shopping for a property, but this information could be an important factor in the future.

Make an Offer

Once you’ve decided on a property you want to purchase, it’s time to make an offer. Based on the ‘comps’ in the neighborhood, how motivated the seller is and how many other buyers are interested, your agent will help you make an offer that the seller is more likely to accept. An experienced agent will research the potential expenses associated with the property and help your draft the offer in a way that provides the opportunity for a second offer if necessary.

Initial Agreement and Deposit

An effective agreement is a legal arrangement between a potential buyer and the seller. Laws vary from state to state, but in order to be a legally binding agreement, the agreement may require consideration. This consideration is the initial and any additional deposit provided by the buyer. It must be held in the escrow account of the closing agent pending the fulfillment of conditions or contingencies in the effective agreement.

Tips to Streamline the Process

Keep written records of everything. It’s important to transcribe all verbal agreements including counter-offers and addendums and convert them to written agreements to be signed by both parties. We will assist you in drafting all the paperwork involved in purchasing your property and provide you with copies of all documents.

Stick to the schedule. Once you’ve made an offer, you and the seller will be given a timeline to mark every stage of closing the real estate contract. Meeting each requirement on time will keep the process moving forward smoothly and ensure that all parties involved are not in breach of their agreements. We will constantly keep you updated, allowing you to be thoroughly prepared for each step.

Closing Agent

Either an attorney or the title company will be designated as the closing agent. It is their responsibility to examine and ensure a clear title to real estate being sold. After thoroughly researching the recorded history of your property, they will certify that your title is free and clear of encumbrances (eg. mortgages, leases, liens, or restrictions) by the date of closing. They will also certify that all new encumbrances are duly included in the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.

How to Hold Title

In the overall process of purchasing property, the manner in which you take title may seem like a trivial detail. The truth is that it can significantly affect your rights as an owner during your lifetime and upon your death.

It is recommended that you consult an attorney or tax advisor about the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon the death of the title holder.

Inspections and Appraisals

Inspections must be conducted within the agreed upon timeframe specified in the effective contract to purchase. Most buyers will hire a licensed property inspector to perform an overall inspection of the property. You may prefer to hire several different inspectors in an effort to obtain professional evaluations of specific areas of the property (eg. roof, HVAC, structure).

If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.

Depending on the outcome of these inspections, one of two things may happen. If all requirements are met and all inspections are satisfactory, any contingencies will be removed, bringing you one step closer to closing. If any documents or inspections are found to unsatisfactory, you will want to request a renegotiation of the terms in the contract.

Should a renegotiation be necessary, our team of professionals will respond objectively and fairly to the seller while acting in your best interest. We have extensive experience with all types of real estate transactions and guarantee our expertise and total commitment to every client, regardless of the situation.

Appraisal and Lending

When an agreement is conditional upon financing, your property will be appraised by a licensed appraiser. Appraisers are specialists in determining property values, based on a combination of factors including square footage, building costs, recent sales of comparable properties, operating income, etc. This is done to determine the true value of the property and allow the lending institution to confirm their investment is accurate.

It is imperative that you keep in close communication with your lender. They will keep you informed of any additional documents needed to approve your application and fund your loan. Two weeks prior to closing, double check with your lender to be sure the loan will go through smoothly and on time.

Association Approval

If the property you intend to purchase is part of a community association, your purchase will be conditional upon association approval. Once you have an effective agreement, immediately request the rules, regulations, and other important documents from the seller. Submit all application documents and processing fees to the appropriate association member by the required time. Make sure that all the information is filled out completely and legibly to prevent any delay in processing your application. If an interview is required, make an appointment as soon as possible. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing so that it can be recorded with the deed in the county public records.

Property Insurance

When obtaining a loan, your lender will require you to purchase a certain amount of insurance on the property. The insurance value depends on the lending institution and the purchase price of the property. Shopping around for insurance can provide significant savings.  There are also other ways to reduce your insurance costs.

Consider choosing a higher deductible. An increase of even a few hundred dollars can make a big difference in your premium. Be sure to ask your insurance agent about any discounts they offer. Many companies offer discounts for safety features such as dead-bolt locks, alarm systems, storm shutter or fire retardant roofing materials. Long-term customers and those 55 and over are also often offered discounts.

Also, only insure the house and not the land it sits on. The land will still be there after a disaster. If you include the value of the land when purchasing homeowners insurance, it will cost you more than it should. We would be happy to recommend knowledge and experienced insurance agents who can guide you in purchasing the correct amount of insurance.

Closing Day

The closing date has finally arrived and the process of buying your property is almost complete. There are still a few loose ends to tie up before congratulations are in order.

Final Walk-Through Inspection

The final inspection takes place either the day before or the day of the closing. As the buyer, this your final opportunity to review the property before signing the closing documents. The purpose of the walk-through is to verify that everything is working properly and nothing has been changed or altered since the buyer’s previous visits. At this time, you will also make sure that nothing has been left behind by the seller that wasn’t previously agreed upon.

Services and Utilities

All utilities and service accounts should be opened in your name once closing is complete. This can be arranged in advance or taken care of immediately after closing. We will provide a list of useful numbers for the activation of home services and utilities after the closing occurs.

Prepare for the Unexpected

In most cases, by the time closing day arrives, everything is in place to successfully complete the purchase of your property. Occasionally, an unforeseen issue can pop up at the last minute. You may discover something broken during the walk-through or some other minor detail. Whatever the problem, there’s no need to worry. We have encountered these issues before and are thoroughly equipped to handle them quickly and efficiently.

Closing

The settlement statement summarizes and details the financial transactions enacted in the process. The closing agent will provide all the parties involved with a copy of this statement. You, the seller and the closing agent will sign the statement, certifying it’s accuracy. When obtaining financing, you will have to sign all pertinent documentation required by the lending institution

Should you be unable to attend the scheduled closing, usually arrangements can be made for you to participate remotely. This will depend on the circumstances and how far in advance notice of your absence is received.

The funds to complete the purchase can be wired electronically into the closing agent’s escrow account or be issued in a certified bank check in the amount specified on the settlement statement. The seller should arrange to have all keys and any other important property information for you at closing.

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