STEP 1: Find, Interview and Choose One Agent to Work With.
The first step in the home buying process is to find, interview and choose one agent to work with. Especially if you are a first time home buyer or you didn’t have a great experience with a previous purchase, finding the right agent at the beginning will give you a better chance of having a great experience this time. The right agent can guide you through the process and refer you to the right professionals to help with the process. Some buyers go-it-alone and a few make out OK but the majority end up buying the wrong home, paying too much, ending up with a “money-pit” or worse.
The most expensive mistake home and condo buyers in Florida make, is not using the right agent. This results from home and condo buyers not understanding the relationship between themselves and the real estate licensee they are considering using or are using. The presumption in Florida is that the real estate licensee is a “transaction broker”. Nearly all real estate companies in Florida operate this way. It reduces their liabilities and responsibilities to buyers and sellers. The real estate licensee is not an agent! The real estate licensee doesn’t owe you “undivided loyalty”! The real estate licensee is legally a salesperson! This is similar to buying a used car! You are a customer of a salesperson!
If you want the "undivided loyalty" of the licensee you must sign a “Single Agent Disclosure” notice with the real estate licensee whereby the licensee, and the real estate company they are licensed with, agrees to be your agent and to provide you with full fiduciary duties, including undivided loyalty. However, if the real estate company policy is transaction broker, the licensee won’t be able to sign a single agent notice with you or represent you. If you are already working with a real estate licensee or have one in mind to work with, ask them what their company policy is. If it is transaction broker, understand: you are not being represented; you are not a client; the licensee is not your agent; you probably will end up either buying the wrong home, paying too much or not having the proper inspections done to ensure the best outcome.
Having your own “real” agent is obviously the best alternative. A single agent has the legal obligation to negotiate for the best price and terms for you. A transaction broker does not have that obligation. Their only obligation is to facilitate the transaction. They loyalty is to themselves and the deal, not to you. Why does this matter? Because a real estate licensee who has agreed to be a single agent fully representing you is taking on legal responsibilities that require that licensee (single agent) to look out for your best interest at all times and in every situation. Isn’t that what you want? Don’t you want someone looking out for you and not merely trying to sell you something regardless of whether it is right for you or not?
And, let’s face it. You are bringing the money to the table that pays the listing agent AND the buyer’s agent. You are paying for two agents. You might as well make sure that one really does represent you. As a buyer, you should seek out only those buyer agents who will guarantee to work for you at all times and in every situation as a “Single Agent” and never downgrade their relationship with you to that of a “Transaction Broker”. This is probably the most important aspect of buying a home. You want a real estate licensee who is “your real agent” and who is working for you as “their client”.
Exclusive Buyer Agency: The only way you can make sure that you are fully represented no matter which property you are interested in is by hiring a true “exclusive buyer agent”. These are agents who never represent sellers or take listings and who are with a company that never represents sellers or take listings. These agents and firms are few, but they are available. My firm, Homebuyer Advisors LLC, only represents buyers and never represents sellers or takes listings. We represent home buyers only as Single Agents at all times and thus will always legally be your agent and you will always legally be our client. We will always be 100% Loyal to you, 100% of the time! Call me for more information about true, real buyer agent services - Tom: 754-800-5750.
STEP 2: Determine Your Credit Status and Ability to Buy.
Many times home buyers wait until they have a property under contract or until they apply for a mortgage to have their credit reports pulled. If any errors or problems arise, sometimes great delays and heartaches result. It sometimes can take 4 to 6 months to get inaccurate information removed from your credit reports and even longer to get your credit scores to readjust and increase to where you can qualify for a mortgage. In the meantime the seller probably isn’t going to wait and you may have already spent money on inspections. You may have to start the process of searching for the perfect home again.
Getting a copy of your credit reports and credit scores early in the process is an absolute must. The credit score used by most lenders is your FICO score, a number based on a formula developed by the Fair Isaac Corporation, which looks at a summary of all your credit accounts and payment history. Other credit scores are called “consumer scores” and generally are not accurate. You should focus on your official FICO Scores. The higher your score, the better. FICO scores range from approximately 300 to 850 and Fair Isaac calculates them for each of the three big credit-reporting agencies: TransUnion, Equifax and Experian. For more information about credit and credit scores go to: myfico.com. So what can you do to get and keep a higher score? First, never have any late payments. Second, don’t have a sudden surge of credit activity and credit inquiries. Third, don’t “tap out” your credit usage. Using more than 20% of a credit line seems to negatively impact a credit score.
The FACT ACT. A federal law (The Fair and Accurate Credit Transactions Act) has gone into effect whereby the three credit reporting agencies must provide you with one free report per 12 months. The official web site is annualcreditreport.com. The free reports, however, don’t include your credit scores. You have to buy your credit scores. If you are applying for a car loan that score is different than the score if you are applying for a mortgage loan, which are different from the consumer score. Each uses a different scoring method to obtain the three digit score. Most mortgage companies use the official FICO score and thus you should also. The other scores are misleading and could cause you to think your credit is great when there may be issues that would cause your “official” FICO score to be lower. The best deal is a one time, $59.85, 3 bureau report with 19 different FICO credit scores which are used by various lending institutions depending on the type of loan applied for. This is offered directly by the Fair Isaac Corporation. If you visit the individual credit repositories (Equifax, Experian, TransUnion) directly they have lots of offers for credit monitoring, credit reports and credit scores. You don’t need any of these. Use the AnnualCreditReport.com website to obtain your credit reports once a year and a couple of times per year buy your FICO credit scores direct from Fair Isaac Corporation as noted above.
Mortgage lenders pull credit information from all three credit reporting agencies as part of a mortgage application. You should also. Married couples should obtain individual reports rather than joint reports, as it is easier to challenge inaccurate information for each of you as individuals. It is also easier to challenge information on reports obtained from the credit reporting agencies separately rather than from a report, which combines information from two or all three agencies. When you have your reports, review them, note inaccurate or unknown information, report back to the respective credit reporting agency and ask them to “validate” the inaccurate items. Several attempts may be necessary to obtain an accurate report from each. The credit reporting agencies are good at using delaying tactics. Keep at it. Stick to your guns. Seventy-nine percent (79%) of the credit reports contain mistakes of some kind. We think it makes good sense to check out your credit and credit scores early in the process. I've been helping home buyers improve their credit and credit scores for free for over 30 years. Give me a call if you have any questions about credit or need help improving your credit. - Tom, 754-800-5750.
STEP 3: Determine the Price Range You Can Afford Given Your Resources.
Home buyers need to understand mortgage options and search out and choose the best mortgage program given their personal resources. This isn’t an easy task and is best left to a mortgage professional. A mortgage professional will be able to review your resources: the three “C’s’’ of homebuying: Cash, Cash Flow (Income less expenses), and Credit. Based on these they will be able to determine the right mortgage program for you as well as the amount of a mortgage that you can be approved for. It is important for you to know how much you can qualify for and/or be comfortable borrowing to determine the price range that you should be looking in. This also will help you determine if your goals are in fact in line with reality.
Many different mortgage programs are available. There are government-backed programs such as FHA, VA (Veterans Administration), and RHCDS (Rural Housing and Community Development Service, formerly known as Farmers Home Administration), and perhaps specialty state government backed programs. In all these programs, the government provides a guarantee to the bank as an inducement for banks to lend money with lower down payments. The government is not lending the money directly to you. The lender is. The government entity is merely guaranteeing the loan.
Other mortgage programs fall under the category of conventional loans. There are many variations of these loans, each with its own unique qualifying requirements. Included are special CRA mortgages. CRA stands for Community Reinvestment Act. Federally chartered banks and lending institutions must “reinvest” a certain portion of their funds into low to moderate-income mortgages in their area of operation. These loans often have lower interest rates, lower down payments, down payment and closing cost grants, and more liberal qualifying requirements than other loans.
Meet with a bank loan officer or a mortgage broker and get pre-approved. A true mortgage pre-approval is an actual mortgage commitment subject to the buyer getting a home under contract and it appraising for at least the purchase price. A seller is taking their home off the market for typically 45 to 60 days, during which time the buyer applies for their mortgage financing commitment. They don’t want to hear 45 days into the deal that you can’t get a mortgage. You get pre-approved to make you a better buyer in the eyes of the seller, thus giving you greater leverage in negotiating for the best price and terms as well as knowing that you can afford and obtain mortgage financing. Between 40% and 50% of all home sales in the Southeast Florida area are cash, with no mortgage contingency. Seller’s expect a cash offer or one where the buyer is “well-qualified” and that means an actual mortgage pre-approval or commitment.
As of October, 2015, new rules went into effect for mortgage processing and real estate closings, including how a good faith estimate and a closing statement are presented under the relatively new CFPB, the Consumer Financial Protection Bureau. A mortgage guide and other financial information about buying a home and getting a mortgage are available at the CFPB website.
If you have any questions about the mortgage process or need a referral to a mortgage professional please call Tom at 754-800-5750.
STEP 4: Determine Your Needs and Wants.
Once a buyer has a clear understanding of financing options and the price range they can afford given their resources, the next item of business is to have a clear idea of their needs and wants. Too many buyers just go out looking at homes without a clear understanding of what they really are looking for. We recommend that you sit down and list the specifics of what you need and what you think you want as well as features that would be considered pluses and those that would be considered minuses. If more than one person is involved in the purchase we suggest that each of you do your own list and then come together to compare and combine them into one list. Everyone involved needs to agree on the basics in order to reduce the stress when looking.
Start with the basics: How many bedrooms? How many bathrooms? How many car garage? What style of home? What general location? What age of home? Then go into more specific options that you would like, such as: Swimming pool, Fenced yard, Fireplace, Finished Basement, Air Conditioning, Hardwood Floors, Porch and/or Deck, Waterfront Location. Another idea is to list “why” a particular feature is important to you. For example, you may desire three bedrooms. Yet, one so-called bedroom is intended to be used as a den or office. So perhaps a two bedroom home with a separate den-office would meet your needs.
It is also important that you separate “needs” from “wants”. For example, you may want a two and a half car garage but really only need a one and a half car garage. The two and a half car garage would be a real plus, but if the home with a one and a half car garage meets your other needs it may end up being the home you most desire. After all, you might be able to expand the garage into a two and a half car garage within your budget. A caution is in order.You need to keep your options as open as possible. If you restrict your search to the absolute ideal home you may not have many to choose from and you may become very frustrated and stressed out with the process. Buyers need to stay flexible in order to have a sufficient number of homes to look at. Search only on the very minimum of features that you consider absolute musts. Stay flexible on the rest. The ideal home probably doesn’t exist out there. Yet, there are many homes that will come close if you remain flexible.
Another caution is in order: Not Setting Realistic Goals. It is very easy to get carried away with what you think you want. However, it is most important to remain in touch with reality. Most people end up owning several homes over their lifetime. Sometimes a particular home is currently out of reach for buyers at a particular time. It is important to understand that the home you purchase probably isn’t the last home that you will ever own. It is better to buy wisely and within your means than to be “house poor” as the saying goes.
Once you are comfortable with financing options and have a good understanding of what you are willing to pay, and have a good idea in mind with respect to features and options that you would at least like as a minimum, your next step is to see if these are in line with one another. Do this by checking out homes for sale online. Go to www.realtor.com for a comprehensive database of listed property. Other websites such as Zillow or Trulia, don’t have updated listings and often times have other properties showing that aren’t even for sale. Also, many local real estate company websites aren’t kept updated or don’t have all the listings online. They often keep their own listings with pending sales as showing as available as a way to convert a buyer from one listing to another. Realtor.com is the most up-to-date online source for currently available homes for sale and the perfect place to start getting an idea of what the market is like. The other option is to contact a real estate agent who has access to the local MLS’s and who can provide a customized MLS search which brings new listings as they happen daily directly to your email inbox. This is data taken right from the local database that is available for the members of the MLS. Call us directly to set this up – Tom – 754-800-5750 or toll-free at 800-383-8322.
The bottom line: Do the homes in your price range appear to have the features and options that you want?If not, then you may need to reconsider your home buying decision. You may need to wait for another year to build up more money for a larger down payment or to pay off some more debt so that you can afford a larger monthly payment, or adjust your features list and consider a home “less ideal”. Save yourself a lot of time, effort, and heartache. Make sure that your needs are in line with your financial abilities. Be realistic, you will feel much better about your home buying adventure. Our Professional Exclusive Buyer Agents at Homebuyer Advisors LLC are available to discuss your home buying needs and to help with your home or condo search. Please call us at 754-800-5750
STEP 5: The Home Search.
A mistake most home or condo buyers make is not becoming familiar with the market for homes or condos in the area being considered. It is vital that you know the market. You must develop a "gut-feel" for value. How do you do that? See lots of homes for sale. Don’t buy the first home you see, although sometimes it ends up being the best of the bunch. The only way to be sure about the home you decide to purchase is to get out and see other homes similar to it. Also, only by seeing lots of homes will you know what to offer for the home you decide to buy.
Open houses are a great way to get a feel for what is available. If your price range is up to $250,000, still go through homes up to $300,000. Sometimes you might come across a home that compares to some you saw priced at $300,000 but they are asking only $245,000. It could very well mean that there is a very motivated seller who has priced their home to sell. A word of caution: The agent (or seller) who is holding the open house has a goal in mind. They want to find a buyer who falls in love with the home. They may ask you personal questions designed to help them “sell” you this particular home. DON’T give them personal information that could be used against you. Don’t let them know how interested you are in the home, how much of a mortgage you qualify for, the price range of homes you are considering, where you work, or how much you make. To do so is like playing poker with a mirror behind you such that others can clearly see your cards. Keep your cards close to your vest.
Also, understand that these agents aren’t holding the open house to sell that home, although on occasion it does help sell it. They are holding the open house in order to meet buyers and to get them to work with them in buying a home. This is not the way to find an agent. As noted in a previous section, you need to work with a real agent who will properly and legally represent you. The agents at the open houses will ask for your name and contact information and may refuse to show the home to you unless you do give that to them. We encourage our buyer clients to attend as many open houses as they can but we arm them with a unique business card to give to the open house real estate licensee. We instruct our buyer clients to sign in with their name but to put our name in the contact area of the sign-in sheet and to hand them our business card that has a special message on the backside that stops the aggressive followup practiced by most of these real estate people.
Another issue is not looking at or considering “all” homes available that meet your requirements. Make sure that the real estate licensee you are working with shows you “everything” that is available within your specifications right from the very beginning including both listed property and “for sale by owner” property and that they are willing to show you perhaps 10, 15, 20 or more homes that appear to best meet your needs. Seeing as many homes as possible gives you a better chance of finding and buying the right home for you at the right price. Most licensees are focused on selling you one of their listings or one of their company listings. They also may not want to show you more than 6 or 7 homes, at which time they expect you to buy one. And, they may steer you towards certain listings where they are offered a higher commission and away from those that may offer a lower than usual commission. They also probably won’t show you “for-sale-by-owner” property. They might be uncomfortable or aren’t experienced working with for-sale-by-owners except when calling them for a listing. So, make sure that you consider enough homes and don’t look just at 3 or 4 or so and pick one of these, unless of course you find the perfect home at the right price.
You need a true agent helping you to see all the homes available that meet your needs. All agents at Homebuyer Advisors LLC are prepared to show you as many homes or condos it takes for you to find the right one for you. Call us now at 754-800-5750 to discuss your home buying needs and our services in more detail. We will work as a team with you to find homes or condos to consider. We will have you drive by them to check our the neighborhood and curb appeal. We will then set up showings of those you potentially see yourself living in. Our initial inspection is to “eliminate” listings that don’t make the grade. We will then re-inspect the ones that seem right for you. At that point, if you are ready and one home stands out above the rest, we will start the purchase offer and negotiation stage.
STEP 6: The Purchase Offer.
Before writing a purchase offer one must have a negotiating strategy in mind before making an offer. Also, price isn’t everything. Buyers need to look at the larger picture and also prepare for writing an offer. The right true buyer agent acting in the buyer’s best interest as a single agent will be able to guide the buyer through this process. What price should you offer? What other terms should you consider? What closing date? What contingencies? Should you ask the seller to make certain repairs, ask for a repair credit, or offer a lower price and handle repairs yourself? What did the seller pay for the property? What improvements has the seller done since they have owned the property and what is the value of these?
What are other homes similar to this one selling for in the area? Take a look at the comparable sales of similar property in the same general or similar area. If you are working through a transaction broker they are only legally allowed to provide raw data. They may not interpret the data or suggest an offering price. If you are working through a true single agent buyer agent they have the legal obligation to not only supply you with the raw data but to also interpret it for you and to suggest an offering price and negotiating strategy. A CMA or comparable market analysis is a place to start. What is this home really worth? What defects or potential defects are there in the home? What deferred maintenance is there? How is the neighborhood? Crime? Noise? Smells? Ease of access?
What about low-balling? If the seller senses that you are in fact low-balling, they won’t take your offer serious and in fact may not counter it at all. They also may be so put off by your actions that they won’t even consider a reasonable offer from you later. So how does one arrive at a starting point? Rules of thumb such as starting at 10% off list price don’t work really. Some homes are overpriced by 15 to 20%, while others are priced on the money or maybe below market value. TIP:Set the maximum price that you would consider paying for the property. Than start at a price below that maximum price that is still supported by facts, such as property condition and selling prices of other homes, but that still allows for some negotiation room with the seller. However, be aware that sometimes when a home is priced right and there are other competing buyers, a full price or over full price offer may be necessary.
Also take into consideration the strength of yourself and your offer. For example, being pre-approved for a mortgage, able to close quickly or able to delay closing and allow the seller to rent-back for a period of time. Consider the seller’s motivation to sell. Is the home vacant or soon to be? Have the sellers purchased another home or do they have another home under contract subject to selling the home you are interested in? Has the property been on the market for an extended period of time including expired listings with the current agent or other previous agents? Are the owners divorcing? Has there been a death in the family that is forcing the sale? Is the property in foreclosure? Other negotiating considerations include: What is the likely counter offer from the seller? What will your next counter offer be? What can you give up in the negotiating that isn’t as important to you as it is to the seller?
How much deposit should I put up? Often this is determined by local custom. If a buyer is paying cash and not getting a mortgage the deposit is generally required to be higher to eliminate the risk that the buyer will walk away from the deal. If the buyer is getting an FHA or VA mortgage with little or no money down the buyer may not have the money for a big deposit and perhaps $500 to $1000 is sufficient. Sometimes the amount of the deposit is a major negotiation advantage to show the buyer is serious by putting up a larger than custom amount.
Successful negotiating is a complex process. You need to be very aware of the nuances of negotiating in order to get the best price and terms. That is one of the strengths of a true professional buyer agent. They negotiate on behalf of their buyer clients every day. They have developed the experience and special techniques to consistently help their buyer clients achieve success in the home buying process. TIP:Before you sign a purchase and sale offer or contract, do your homework. Develop a strategy. Seek assistance. Don’t be afraid to walk away if the seller refuses to meet your price and terms. A deal sometimes can still be consummated several months down the line at your price and terms, once the seller softens up a bit and no other offers come in. Be patient and you will be rewarded with a great deal on a home.
Include Contingencies for Property and Mechanical Systems Inspections. Don’t skip a home inspection to save money. You could have someone who is knowledgeable with regard to building structural components and mechanical systems, go through the home with you prior to writing a purchase offer. Then you have additional information available to help in determining your negotiating strategy. Such a person could be a relative, a contractor, or your real estate agent. The point is to get additional information in the form of personal opinions without it costing you money at that stage. Make sure that the person you are relying on is in fact knowledgeable with regard to property evaluation. This however is no substitute for a professional home inspection. A word of caution:In regard to using the real estate licensee’s opinion, if the licensee is a transaction broker, then keep in mind that they are a salesperson and not your agent. Only rely on the opinion of a true agent who you have signed a "single agent disclosure" notice with and only if that agent has the experience, knowledge, and background such that the agent’s opinion will be of value to you.
Once your Offer to Purchase is signed, it is prudent to pay for a professional property [Inspector] inspection. Property inspectors are available in most areas. The best ones to use are those who issue reports, which meet or exceed the internationally accepted standards of the American Society of Home Inspectors (ASHI). Such an inspection is general in nature and depending on the home you are buying, you also may want to consider additional inspections and tests such as: (click on the links for more information)
Radon Testing Lead Paint Testing Mold Testing Furnace Cleaning and Inspection Chimney Cleaning and Inspection
Pest Inspections Swimming Pool Inspection Well Testing Septic Inspection
TIP:It is important that any offer to purchase contract contain a contingency clause that states that the offer is subject to whatever testing you desire to do and that the results of said testing and inspections must be satisfactory to you or you may cancel the contract and receive your deposit back. Know the property you are purchasing. Have the appropriate inspections and testing done as part of the deal. Further negotiating may be in order in the event that such testing and inspections indicate the need for a repair or replacement. Making the offer contingent upon testing and inspections gives you the leverage to be able to re-negotiate with the seller, as you would then have the option to cancel the contract and receive your deposit back if they won’t make a repair or give you a repair credit for legitimate problems. Florida has a property disclosure form but it isn't mandatory for a seller to fill one out or sign it or give it to a buyer prior to making an offer, as it is in many other states. A property condition disclosure asks pertinent questions pertaining to the condition of the property. It still is prudent to ask for one as a contingency in the contract.
Include Other Contingencies in the Offer to Purchase - An Offer to Purchase contract written from the buyer’s perspective should have numerous contingencies in it to protect the buyer. Depending on the buyer’s circumstances, the offer to purchase should be subject to: Engineer/property inspection, Other structural and mechanical system inspections, Obtaining financing and mortgage commitment, Bank appraisal equal to or greater than purchase price, Receipt and approval of a property condition disclosure completed and signed by seller, if applicable, Receipt and approval of home owner association or condo documents, if applicable, Sale of a property owned by the buyer or pre-closing possession by the buyer, if applicable.
Part of the negotiating process should include the buyer asking for certain contingencies and changes or additions to the so-called standard language. Contracts are between buyers and sellers. Each has the right to add or change language, as they deem appropriate. Many buyers (and agents as well) don’t know what language to change or add or what contingencies to ask for. And relying on attorneys to include proper contingencies may not result in the best solution either. Attorneys know legal matters; they generally aren’t real estate experts. They may not know what a property is worth, what the condition of the property is, or what contingencies are appropriate in a particular situation. In my opinion, having a professional, knowledgeable true buyer’s agent helping you may be the only way to make sure you are protected. All agents at Homebuyer Advisors LLC are experienced negotiators. As single agents it is our legal duty to look out for your best interest throughout the entire home buying process. To find out more call us now at 754-800-5750.
STEP 7: Removing Contingencies.
OK, you and your professional agent worked as a team to develop a negotiating strategy and an offer to purchase was written, signed and presented to the seller. Your agent negotiated on your behalf and finally after several back and forth negotiations you have your ideal home or condo under contract at a price and on the terms that makes sense to you. So now you start packing and planning your move, right? Well, not exactly. There is a lot that has to happen before an actual closing will take place. If any of the following were contingencies in the contract they will have a time frame associated with them. Each contingency must either be met by a certain date and removed, waived or rejected and the contract cancelled.
Attorney Approval: If the offer was subject to attorney approvals, there is no contract until these approvals are obtained or waived. It is not customary to make offers subject to attorney approvals in the Southeast Florida area. This is probably due to the majority of real estate transactions being done through transaction brokers who have no legal duty to look out for the buyer. We believe in having an experienced real estate attorney working with our buyer clients and we recommend making your offer subject to attorney approval even if it isn’t customary.
Mortgage Application: The next step is to meet with your mortgage professional and apply for the mortgage. You will need to gather a lot if information for the mortgage person including: pay stubs, income tax returns for 2 years, bank statements for 2 months, personal ID’s and more. You should have already started this process with a mortgage professional before even looking at homes. If you did it is a matter of updating the information and now providing them with a contract for the purchase of a home or condo and pay an application fee.
Bank Appraisal: Sometimes it is a good thing to make an offer subject to the bank appraisal being equal to or greater than the purchase price or you can cancel the contract and get your deposit back. If you are applying for an FHA or VA loan there is a required addendum that states that. If you are getting a conventional mortgage loan, that contingency isn’t there. You have to add it. What is the issue? The mortgage you will get is based on the lower of the purchased price or bank appraisal. If the bank appraisal comes in say $10,000 below what the purchase price is, the mortgage will be based on the appraisal amount and not the purchase price and you will have to come up with additional down payment. If you have the money the bank will issue a mortgage commitment based on the appraisal and you will be paying a higher price for the property than you should be. If you have the appraisal contingency clause in the contract you might be able to renegotiate the price down to the appraised price under the threat of cancelling the contract.
Property Condition Disclosure: Whether or not the contract was subject to the receipt and approval of a property condition disclosure, it still is good to get one to review. This also is good to provide to your home inspector so that he or she can see if there is anything in particular they should focus on. Also, take notes when you went through the home or condo and notice things that don’t look right or that might need some additional scrutiny. These items should also be brought to the attention of your home inspector.
Home Inspections: It is also time to set up and conduct any home inspections that you intend to do. Make sure you are using a professional home inspector who is not beholden to the real estate agent. You want a fair and balanced report on the current condition of the property and not one that is deliberately faulty in favor of the seller. This is your time to get to know the home or condo that you are buying. It is your home inspection. You need to be there. You need to ask lots of questions. You need to follow the inspector around the home and ask what it is they are checking for. You need to share any concerns you have about the condition of the home with the inspector so that he can address them. This is not the time to remain silent, nor is it time to panic. All homes have repair and deferred maintenance issues. Focus on the major problems in negotiating repairs with the seller.
Property Insurance Considerations: It is important that you immediately meet with a professional insurance broker to discuss the property insurance. The insurance company will want a 4-point insurance inspection, which often times can be handled at the time of the home inspection and by the same person. You also need to know if flood insurance is going to be required and what it will cost as well as hurricane insurance and its cost. In fact, sometimes it is best to meet with an insurance professional before you even start looking for homes so that you have a basic understanding of what it entails. You also may want to make the offer subject to obtaining insurance at a cost that is satisfactory to you.
Home Owner or Condo Association Documents: If you are buying a condo or a single family home that is subject to a home owner association, there are complications that can trip up a purchase. First of all, a copy of the current documents must be obtained and the contract should have been made subject to your receipt and approval of same or you may cancel the contract and get your deposit back. You need to review these documents for restrictions that may inhibit your use of the property. For example there may be a restriction against pets. Some may not allow pets and others may allow pets but only if they are under a certain weight. Other projects restrict occupancy to age 55+. This is a legal restriction. You also will need to apply for acceptance by the entity which can sometimes take 3 to 4 weeks or longer and we need to know if the home owner association or condo fees are up to date. There also may be a prohibition about renting the property.
Monitoring is a Must: This is a busy time for you as you try to meet time deadlines and get all the “i’s” dotted and “t’s” crossed. Having a real buyer agent helping you through this and keeping track of all the steps involved will relieve you of a lot of pressure. It is there legal obligation (if they are a "single agent") to stay on top of the transaction and usher it along. They act like a conductor keeping in touch with all the participants and keeping the deal on track and on time. Call us to schedule a home buying consultation to discuss how we can help you save money, time and aggravation while finding and buying your ideal home or condo - 754-800-5750.
STEP 8: Preparing for Closing (Also known as Settlement or Transfer).
One of the major mistakes home and condo buyers make is not preparing for and foreseeing problems at and leading up to closing. As we saw in the previous post about removing contingencies, there is much to be done leading up to a closing date be set as well as after one is set. As mentioned, someone has to monitor and follow-up with all the parties to make sure that all time frames are met. Someone needs to make sure that everyone is doing their job and moving the transaction to closing. A professional true buyer agent will take on that role and keep in touch with all parties involved in the transaction to make sure it goes smoothly.
The closing date indicated in a purchase and sale contract is a target date. Too many buyers, and sellers for that matter, assume that the closing will in fact take place on that date. However, there are times when this just won’t happen. Someone needs to make sure: That the appraisal gets done on time. That the home appraises for at least the purchase price. That the appraiser and lender are requiring no repairs. If there are repairs required to be made before closing, that an agreement is made between yourself and the seller as to who will do the repairs and who will pay for the repairs. That the repairs actually get done and are re-inspected in a timely manner. That a written mortgage commitment gets issued on time. Also, that any contingencies of the mortgage commitment are taken care of. A “clean” commitment has no contingencies that are not 100% sure can be cleared before or at closing. That the seller’s attorney has located the abstract of title, sent it out for re-dating, if that is applicable for your area, and ordered the survey, if that is applicable for your area. Check this with your buyer agent or your attorney. That the documents have been obtained from the Condo or Home Owner Association and they are satisfactory. That you have met with and obtained all the property insurances that you need. That your attorney has reviewed the title documents and has cleared up any title defects. Sometimes there may be property encroachments or unpaid taxes on the property. These have to be taken care of or the bank won’t lend you the money. Your attorney then orders title insurance and delivers the title package to your lender’s attorney. Then the attorneys and the bank determine an actual closing time. That the closing attorney has checked with the lender to make sure the closing documents are expected on time. There is a new time frame starting in October, 2015 that requires a mortgage borrower to have three days to review a closing statement before a closing can physically take place. In the past the closing documents were often getting done at the closing and not before. This new regulation has the potential to delay closings.
Sound Confusing? You bet. And nearly every step of the way has to be monitored in order to have a closing on or near the anticipated closing date in the contract. Lots of disappointments result because no one was monitoring the entire process. Most buyers don’t have a clue as to what is involved and therefore buyers should not be expected to bug everyone. Of course if no one else is, the buyer may have to or face not closing on time. It isn’t good enough to call an attorney or the lender and have them say it is under control and don’t worry. Be sure you have one professional who is keeping track of the process. Your real estate agent should do this. Ask him or her what services are provided after your Purchase and Sales Agreement is signed. The better real estate agents understand the process and monitor it closely. Make sure that your agent agrees to do this in advance. Otherwise you could be greatly disappointed.
Preparing for the Actual Closing (also referred to as settlement): Usually the buyer needs to get their insurance binder, pay one full year’s premium in advance, get a receipt for the payment, and have copies faxed to their attorney before a closing can be set. If the property is in a flood zone, special insurance may be required. The buyer needs to call the utility companies to transfer service into their name. This includes phone and cable, as well as gas, electric, refuse collection, water, propane or fuel oil deliveries. Next comes the final walk-through inspection. This takes place shortly before closing and is a final opportunity for the buyer to see the home that they are buying. The Purpose of the Final Walk-Through Inspection: to make sure that the home is still in the condition that it was when you entered into the contract to buy it; to check for water leaks; damage from movers; yard damage from storms; or other adverse changes; to make sure any personal property such as appliances or window treatments, that are included in the sale, are in fact still there; to check that any available instruction booklets for appliances and mechanical systems are there; to make sure that remote garage door openers are there; to check that a set of keys will be at closing for you; and to make sure the utility meters get read and the meter reads called in.
Review of the preliminary closing statement. As mentioned above, you now have 3 days minimum before the actual closing to review the closing statement. Usually, the buyer’s attorney compares closing costs and adjustments with the seller’s and lender’s attorneys and then a preliminary closing statement is prepared which is shared with you. The amount should be close to the preliminary closing estimate that the lender gave you. Someone needs to review the preliminary closing statement and compare it to the lender’s estimate to determine the accuracy of the numbers. Provide your attorney with a copy of your estimate and have him or her compare the numbers. If there are major discrepancies, call your lender.
Preparation for the closing. Know what items need to be brought to closing. You will need to bring: a cashier’s check payable as per your attorney’s instructions for the total amount you are told to bring; your driver’s licenses so the lender can verify that you are you; the original insurance binder and paid receipt may or may not be needed, but bring it anyway; and perhaps your mortgage commitment and lender good faith estimate in case you need to refer to them. The closing attorney has the final packet from the lender. The seller or his/her agent or attorney brings the new deed, proof of paid taxes and water bill (if municipal water), proof of paid condo or HOA fee (if a condo or Home Owner Association involved), and keys to the home.
Closings are generally conducted in person but may also be conducted through a title company. The closing can take place at the lender or their attorney’s office, the office of the seller or buyer attorney or at the office of a title insurance company. The buyer and their attorney must be there in order to review and sign the mortgage documents. Often the seller doesn’t show up as they can sign a deed and the closing documents a head of time. The buyer’s agent should attend to make sure that the closing goes smoothly and to answer any questions that might come up. All licensees/true agents at Homebuyer Advisors LLC are experienced in monitoring and following up to make sure our buyer clients close on time and with minimal problems or issues. Call us now for a free home buyer consultation or to answer any home buying questions you might have. 754-800-5750
STEP 9: After the Closing.
You have now had a successful closing and got the keys to your new home. Now What? You still have a few things to check on before you physically move in. Here are some suggestions: Check on your new home as soon as possible after the closing to make sure it is O.K. and nothing has changed since your re-inspection: If it has, call your Attorney immediately. Your Attorney may be able to hold up the recording of the sale in order to put pressure on the seller to correct any problems. But only if you do this as soon as you leave the closing. If a day or two goes by the deed and mortgage will be recorded and the seller will have their money and you will probably be out of luck. The purchase and sale contract “merges” into the closing documents. Once the closing takes place it is difficult to go back and complain about something.
Change the locks on your new home at your earliest convenience: There is no telling who might have a duplicate key – real estate agents, the neighbor, some distant relative, a former boyfriend or girlfriend of the seller. Play it safe and change the locks. The best way to do this is to have a locksmith come to the property and re-key the existing locks.
Follow-up with Utilities to be sure meters are read and billing is proper: Sometimes the reads that are taken are in error. You should write down the reading or better yet take a photo of the meter with your cell phone which will also note the date and time in the event the reads are wrong on your first bill. You also could find that the utilities are turned off. You must contact them before your move-in date or they might get turned off as the prior owner cancelled and they didn't get your new order for service.
Finalize your move and previous rental arrangement: If you were renting, make sure you clean out your previous apartment and leave it in a condition as required by your lease. Make sure you turn your keys over to the landlord or their representative and perhaps get a receipt for them as well as a statement from them that the condition of the apartment is satisfactory and that you will be getting your full deposit back.
Make sure your mail is forwarded: It takes a week or more for the forwarding to take place. Put a temporary hold on your mail effective the day you no longer live there so that the mail is held until the forwarding takes place.
Move-in and Enjoy: You just went through a long and sometimes confusing process. If you used the right agent, as noted above, your home purchase should have been an enjoyable adventure and not a terrifying walk through a jungle without a guide. All of us here at Homebuyer Advisors LLC genuinely what to help you with your home purchase. We are experienced and take on the added responsibility and legal liability of being your true buyer agent. It will make a difference. Working with your own buyer agent who is looking out for your best interest at all times and in every situation vs. trying to buy through a salesperson will save you time, money and aggravation. Call us: 754-800-5750 Additional information can be found at:
Real estate is local and the home buying process may vary between local areas. This is a general outline of the home buying process in Florida, which you can use as a guideline. Feel free to call Tom Wemett, the Author of this section, with any questions you might have - 754-800-5750.
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