THE PURCHASE PROCESS

The Step-by-Step Process

The Initial Agreement and Deposit


An effective agreement is a legal arrangement between a potential purchaser and the property’s seller. Your contract is negotiated during the offer process and lists out items such as 

  • Purchase Price
  • Earnest Money Amount (Deposit)
  • Escrow Agent (Title Company or Real Estate Attorney)
  • Responsibility of Title Policy Expense
  • Survey Responsibility (and if Seller has a Current Survey to Provide)
  • Residential Service Contract Reimbursement (a home warranty or insurance contract, generally for one year, covering plumbing, electrical and mechanical systems of the home)
  • Closing Date
  • Speical Provisions
  • Amount of Seller Reimbursements for Buyer's Expenses
  • Termination Option and Option Fee Amount (The number of days that the buyer has to be released from the contract without additional penalty, also known as the "Option Period")


* Review and Sign the Seller's Disclosure (a required document that the seller lists out any deficiencies in the home/property)



The Closing Agent


Either a title company or an attorney will be selected as a closing agent, if you do not already have a preferred title company we will be able to give you a referral, and this agent will be named in the contract. The closing agent will hold the Earnest Money (deposit) in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to 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


You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.



Inspections


Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the timeframe that was agreed upon in the effective contract to purchase (Option Period). You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (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 three things may happen:

  1. Either each milestone is successfully closed bringing you one step closer to the close
  2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
  3. The inspections revealed undesirable circumstances and you can be released from the contract, relinquishing the Option Fee to the Seller for their time and consideration. 


Appraisal and Lending 


It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.



Association Approval


If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. 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


If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.

  • Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
  • Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
  • Insure your house NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.
  • We will be happy to recommend experienced knowledgeable insurance agents for every property type.