Buying a House: What’s Involved
Home Inspection
Once an offer has been accepted, the Buyer moves into high gear to get the property inspected quickly in order to remove any contingencies and secure the deal. Until all of the contingencies have been removed, the sale is in the balance from the Seller’s perspective.
If any problems or defects surface as a result of property inspections, the Buyer might request the Seller to correct the problem/defect, or they may suggest an adjustment in the agreed upon price to compensate for the Buyer having to rectify the defect. If neither option is acceptable to the Seller, the Buyer can typically revoke their offer within a specified timeframe and receive their earnest money deposit back or go ahead at the agreed price and with the defects in place.
Mortgage
The buyer should have the necessary funds to finance the purchase. Typically this will be in the form of a pre-approved loan commitment from a lender. A pre-approval takes into account the credit score of the applicant(s) and should be based upon a review of the applicant(s) income and assets. (Tip: Since many purchases fail due to an inability to secure adequate financing, it is worthwhile seeking a reputable mortgage broker or lender in your local area to undertake the pre-approval process. You want to be able to meet with your loan officer in person and look them in the eye. When you are a real person to them and not just another number on a piece of paper, any problems that arise are more likely to be resolved quickly and effectively).
Price Negotiation
To get an offer accepted the buyer will want to accentuate the positive aspects of the property and the Offer. The Buyer’s Agent may introduce the offer to the seller by describing the buyer in a positive light and by presenting all of the positive aspects of the offer to the seller. If the offer is close to being acceptable the seller may wish to counter offer, and so begin negotiating the deal. (In reality, subtle negotiations typically begin well before an offer is placed).
The price may be just one aspect that requires negotiation; frequently the other terms of an offer can prove more contentious to either buyer or seller. The role of the Broker is to find common ground between Buyer and Seller such that both parties feel they can come away with a win-win transaction. The Buyer gets the home they want and the Seller gets to move on, both at an acceptable price. If the Broker is unable to bring the negotiations to a successful conclusion, the Buyer will go back to Step Three and continue from there.
Property Appraisal
Before you buy any commercial real estate, always check its value to make sure you are not over paying. Our Commercial Property Valuation Reports will save you time and money by telling you what the property is worth, in the eyes of lending institutions, so that the property cashflows and so you can actually get a loan on the property.
Title Insurance
In order to provide the Buyer with a final Loan Commitment the bank will request a title search to be undertaken by a title company (a firm of attorneys specializing in researching real estate title and providing evidence of unencumbered property title). Clear Title on the property will show that the Seller has a legal right to sell the property without any liens upon it. A Title search does not verify the details of the property as described by the Seller or the Seller’s Agent are accurate. Upon receipt of Clear Title the bank’s attorneys will schedule the date and time of the closing with Buyer and Seller. Note: Although a Title search may not reveal any encumbrances upon the Title, it does not mean none exists. Title insurance protects the new owner and the lender from any claims upon the title that might surface after the Title is transferred to the new owner.
Purchase and Sale Agrement
Once an offer is agreed, and while the Buyer is carrying out inspections, the attorneys will typically agree upon wording for a Purchase and Sale Agreement. This document conforms to the language of the Offer To Purchase with respect to any remaining terms and conditions, and spells out in more detail the contract between Buyer and Seller. While a Purchase and Sale Agreement may be signed at any time prior to closing the sale, it is commonly signed shortly after the Offer to Purchase has been agreed and after the inspections have been completed. At this time the Buyer will be expected to place a substantial deposit behind the offer (at least 5%). This money is "at risk" should the buyer fail to meet their obligations under the Agreement (regardless of whose fault it may be).
Closing Costs
At the closing the Buyer may need to sign a significant number of papers for the Lender as well as the Deed. The Buyer will also need to show a photo ID and have a banker’s check for the balance of the purchase price and closing costs (Purchase price plus closing costs less the amount held in escrow and the amount of the bank loan).
The closing attorney will record the sale with the Registry of Deeds for the Town/City and the Buyer gets the keys to a new home. (The seller’s existing loan, if any, is paid off so as to release the lender’s lien upon the title and the seller is paid the balance of the purchase price less any Broker commissions and legal fees).
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