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.
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.
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.
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.