Decide to buy
Purchasing a property is likely the biggest financial decision you will ever make. Whether this is your first purchase or you are an experienced buyer, the process requires careful consideration.
What’s your motivation?
Are you tired of paying rent? Have you decided to pay your own mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear reason for buying will help you choose the right property.
Looking for an investment?
Property ownership is a good choice, whether you’re looking for your dream home, a rental property or an addition to your investment portfolio. Owning real estate is one of the least risky ways to build equity and obtain a greater return on your initial investment.
Before you start shopping for your property, it’s a good idea to get a few things in order first:
Build your green file
A green file contains all your important financial documents needed to secure financing for your property, such as:
Recent pay stubs
Tax returns for two years
Copies of leases for investment properties
401k statements, life insurance, stocks, bonds and mutual account information.
Check your credit rating
Your credit score will have a huge impact on what type of property you can buy, and at what price. Start by checking with an experienced lending institution to determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies: Equifax, Experian and Trans Union. We can recommend experienced, knowledgeable lenders in the residential, construction, commercial and investment real estate fields.
Be careful with your finances
Now is not the time to make sudden career changes or large purchases. Approach your property purchase from a position of financial stability.
Choose a real estate agent
Buying property requires making many important financial decisions, understanding complex issues and completing a mountain of paperwork. It helps to have an expert in your corner when undertaking such a large purchase. We can guide you through this process and provide you with access to property listings before they hit the general market.
Consider these 7 questions when interviewing your real estate professional:
- Are they a full-time agent with experience completing transactions similar to yours?
- Are they familiar with the area in which you are interested?
- How much time will the agent give you? Are they available nights and weekends?
- What are their credentials and education? A good agent will continually strive to improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
- Does the agent return your calls promptly? Time is money when attempting to buy a property.
- Can they provide a list of properties they have sold or a list of references?
- Do they listen attentively to your needs and concerns? Pick an agent, with whom you feel comfortable.
Time to shop
Once the preliminaries are out of the way, it’s time to find the right property for you.
Take a drive
Get to know the neighborhoods, complexes or subdivisions that interest you. Drive around and get a feel for what it would be like to own a property there. Pay attention to the properties available in those areas.
Narrow your search
Select a few properties that interest you most and ask your real estate agent to make appointments to visit them. Be sure to get your real estate agent’s opinion about the potential long term resale value of the properties you are considering.
Time to buy
Once you find the perfect property, your real estate agent can help you make a solid offer the seller will accept. A good agent will investigate the potential costs and expenses associated with the new property, and will draft your offer in a way that gives you the advantage over another offer.
Escrow Inspection and Appraisal
The process, step-by-step
The initial agreement and deposit
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. Transcribe all verbal agreements, including counter-offers and addendums, into written agreements signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure you have copies of everything.
- Stick to the schedule. Now that you have determined your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. We will keep you constantly updated, so you will always be prepared for the next step.
The closing agent
Either a title company or an attorney will be selected as a closing agent. The closing agent holds the deposit in escrow and researches the complete recorded history of the property to ensure the title is free and clear of encumbrances by closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions that limit various activities such as building or parking restrictions. There also may be recorded easements and encroachments that 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 have different legal, estate and tax implications, especially when selling or upon death of the title holder.
Once your offer is accepted by the seller, you will need to request an inspection by a licensed property inspector within the timeframe documented in the effective contract to purchase. If you wish to obtain professional opinions from inspectors who specialize in a specific area (e.g., roof, HVAC, structure), you are free to do so. If you are purchasing a commercial property, you’ll need to conduct an environmental audit for the lending institution. We can recommend several different inspectors.
Depending on the outcome of these inspections, one of two things may happen:
1.Each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the closing date, or
2.After reviewing the property and inspection reports, you may request a renegotiation of the terms of contract (usually the price).
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, the property will be examined 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 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.
If the purchase 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. Complete all information fully and legibly so there’s no delay in processing the application. If you are required to meet with the association for approval, 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 it can be recorded with the deed in the county public records.
If you’re obtaining a loan, your lender will require you to purchase a certain amount of insurance on the property, depending on the lender and the purchase price. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around. You could 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 like deadbolt locks, smoke detectors, alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also receive discounts.
Insure your house, NOT the land under it. After a disaster, the land is still there. If you don’t subtract the value of the land when deciding how much homeowners insurance to buy, you will pay more than you should.
We will be happy to recommend experienced knowledgeable insurance agents for every property type.
If you’ve made it this far, it’s almost time for congratulations — but not quite yet! You still need to tie up these loose ends:
Final walk-through inspection
More of a formality than anything else, the final inspection takes place the day before or the day of the closing. You will visit the property to verify that all is in working order, everything is the same as when you last viewed the property, and that there are no extra items left behind.
Activate home services and utilities
Remember to set up your electricity, gas, water, cable, internet, etc. We’ll provide a list of useful numbers after closing.
Be prepared for anything
We’re ready to assist you should an unforeseen glitch pop up at this last stage. If something goes wrong, don’t panic. We’ve likely encountered the problem before and know how to handle it efficiently and in a stress-free manner.
The closing agent will furnish all parties with a settlement statement, which summarizes the financial transactions taking place. You and the seller(s) sign this statement, and then the closing agent endorses it to certify the accuracy. If you’re obtaining financing, you will need to sign all pertinent documentation required by the lending institution. If you can’t attend the scheduled closing, arrangements can be made depending on the circumstances and the advance notice. If you owe funds at closing, you can have the balance wired electronically into the closing agent’s escrow account or bring a certified bank check for the amount specified on the settlement statement. The seller should turn over all property keys and any other important information to the purchaser at closing.