The Process, Step-by-Step
The Initial Agreement and Deposit.
The initial agreement is a legal arrangement between a potential buyer and the property’s seller. The first offer submitted will likely receive a counter-offer from the seller and negotiations will take place. Once both parties accept the terms of the agreement, the buyer will open escrow with an earnest money deposit.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. All verbal agreements including counter-offers and addendums, should be converted into written agreements to be signed by both parties. We will assist you by drafting all the necessary paperwork for your purchase and making sure you have copies of everything.
- Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to meet the requirements of the contract. Doing this in a timely manner ensures a smooth flow of negotiations and avoids either party being in breach of contract. We will keep you constantly updated on the process, so you will always be prepared for the next step.
The Closing Agent
Either a title company or an attorney will be selected as the closing agent. The closing agent will hold the 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 closing date 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. There may also 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 time frame outlined in the agreement. You may elect to have additional inspectors who specialize in a specific area (eg. roof, HVAC, structure) inspect the property. If you are purchasing a commercial property, the lending institution will require an onsite environmental audit. We can recommend several different inspectors for both residential and commercial purchases.
Depending on the outcome of these inspections, one of two things may happen:
1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or
2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
Appraisal and Lending
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, and other factors. 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. When you are within two weeks of closing, confirm with your lender to be sure the loan will go through 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. Ensure the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out the forms completely and legibly so there is no delay in processing the application. If you are required to meet with the association for 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 approval letter be brought to closing, so it can be recorded in the county public records with the deed.
Property Insurance
If you are obtaining a loan, you will be required by your lender to purchase 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:
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- 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.