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For (first time) Home Buyers… Understanding the Process: After You Make Your Offer (option period, inspections, etc…)

Working With Your Realtor

Identify the Property to be Purchased.    Sounds simple; however, the trick lies in matching up what you are looking for with regard to area, price,  amenities and layout, (not to mention bedrooms, baths and square feet) with what the market has to offer  in all of those areas.  Sometimes you can’t get exactly what you want, where you want it, for the price  you are willing to pay. Your realtor can help you narrow those things down, while keeping in mind all the amenities you would like as well as the area, school district, # beds/baths, etc….

Making the Offer.       Once you’ve identified which home, or homes, you would like to purchase (yes I said homes, a not too  common, but practical negotiating strategy is to submit offers on more than one home at the same time). The offer is put together.  The realtor will provide you with the sales information of competing properties in the  to come up with an offer amount.  You should also receive any disclosures, previous  inspections, etcetera from the seller.  After reviewing all the information available we will discuss  the different strategies you can use to get the property that you want.  Price isn’t always the key term in a transaction; however, it is probably the term that most people put emphasis on. Once that strategy is determined, your realtor will handle all the paperwork.  Once you’ve signed the offer, it will be submitted to the seller’s agent.  While no money is required to make an offer it is good to have checks ready for the amounts offered for the earnest money deposit and the termination option fee as they are usually required to be delivered to the title company or seller’s agent almost immediately after an agreement has been made.

Responding to Counter-Offers.   Not all offers are accepted on the first try.  In fact most offers are countered by the seller.  With a counter-offer you should get a better idea of what terms are most important to the seller.

At this point you have three options:

  1. Accept the counter-offer
  2. Reject the counter-offer and move on to another property
  3. Counter the counter-offer.

While it is not uncommon to counter a seller’s counter-offer, this “going back and forth” normally  only lasts a couple of rounds as one or both parties are stuck on something that the other will not  budge on, or both parties are moving towards a compromise slowly.

Once the Property is Under Contract.     Now that you have a property “under contract” or an “executed contract” all the timelines within the contract begin.  Starting with the deposit of earnest monies and delivery of termination option fees.  You will be well aware of the timelines of the contract during the “Making the Offer”   stage, so you will be ready to take care of the things you need to, within the time allowed.

Payment of Earnest Money and Termination Option Fee.    The dollar amounts related to the Earnest Money and Termination Option Fee, commonly referred to as the Option Fee will vary based on the offer strategy chosen, and the outcome of the final agreement. The Earnest Money deposit is typically delivered to the title company and the option fee to the seller’s agent, or seller.  The Earnest Money, if any, is used to show or guarantee your  “good faith” in abiding by the terms of the contract.  Typically if you breach the contract,  the seller retains the Earnest Money.  However, you may terminate the contract within the terms of  the contract and receive a full refund of the Earnest Money, less any fees charged by the Title Company, if any, if you have negotiated a Termination Option Period.

The Termination Option Fee, if any, is  essentially buying the right to terminate the contract.  The “option fee” is a negotiated   amount of money for a negotiated number of days, the “option period.”  During the option  period you should be doing your due diligence such as getting an inspection, checking on the  insurability of the property, finalizing your financing with your lender, checking on the rules and regulations of the homeowners’ association, if any, and anything else that once discovered would affect your desire to purchase the property.  The opportunity exists to ask the seller for an extension of this time period; however the seller is not required to grant an extension, so your preparedness is  very important with regard to the option period.  Typically if you purchase the property in which an option  fee was paid, you will be refunded that money at closing, and if you terminate the contract, the option fee  will not be refunded to you.

A note about condominiums, townhomes, and houses located within a Mandatory Homeowners’ Association.    Condominium communities are created with legal documents, during the buying process the buyer is to  receive copies of those legal documents, the rules and regulations of the association, and the Condominium Resale Certificate.  The resale certificate is a list of questions answered by the president of the  Homeowners’ Association, or their managing agent.  It should also include a copy of the operating budget,  and insurance summary.  Mandatory Homeowners’ Association for townhomes and houses provide similar information.   A separate timeline exists in the contract for the receipt of this information from the HOA, so the receipt  of this information is not required during the Option Period.  Within this separate timeline, the buyer  still has the right to terminate the contract, even though the option period has expired.

Repair Issues.    On occasion, after the inspection is complete, repair issues will arise, either due to buyer or lender  wants/needs.  If this is the case, an amendment can be prepared to essentially renegotiate the original  contract asking the seller to compensate the buyer either with repairs or monetarily to resolve the issue.   Again, the seller is not obligated to comply with the request, so it is best that the “renegotiating” take place during the option period so you still have the right to terminate the contract if you do not feel  you were getting what you were paying for.

Waiting for Closing.     The majority of the items related to the contract are now complete, and you are waiting for closing.  The closing date was negotiated in the contract, typically 30 to 45 days out from the date the offer was submitted, however it can vary depending on the situations of the parties involved.  While you are waiting  for the closing you may be revisiting the home for measurements for new items to be purchased, changes you  will be making to the home or getting estimates for work to be done after closing.  You are also working  with your lender on obtaining your financing and the title company is working on your file preparing for the closing. Amendments will be drawn up to extend closing dates, based on inspections, appraisals, financing… You are hardly ever locked down, without your realtor writing amendments for closing dates, if something comes up….

At Closing.       At closing, an escrow officer of the title company puts together a settlement statement which details all the  money involved in the transaction.  The numbers come from the contract, which was previously agreed upon,  the lender handling the financing of the property, if any, and the title company who is facilitating the transfer of ownership between the seller and yourself.  The settlement statement should be very close to the  Good Faith Estimate (GFE) received from your lender, so there should not be any surprises related to the numbers involved in the transaction.  After reviewing the settlement statement the escrow officer guides you through the necessary loan documents from your lender, such as your Note and Deed of Trust along with disclosure  documents from the title company.  At closing you will need to bring any money due from you in certified funds,  along with a valid, government issued identification.

When do I get keys? A common question, but really this question was answered a long time ago and the  answer lies within the contract.  Typically, you receive keys after Closing and Funding.  Closing was the  previous step where you (and the seller) went to the title company and signed all the necessary documents for the transfer of ownership and loan documents.  Funding takes place when all the money (down payment,  closing costs, and loan amounts) are received by the title company and are ready for disbursement.  Typically,   you are responsible for getting the down payment and closing costs to the title company, and the lender is  responsible for getting the loan amounts to the title company.  Many lenders are out-of-state and have different    procedures on getting their money to the title company.  However, funding is dependant upon their getting their money to the title company.  So, if the date that you receive keys to your new home is of major importance,  bring this up during the “Making an Offer” stage so that a plan is put into place to get you the keys  when you want them.  This step is dependant on the performance of the lender, so choose your lender wisely.

 

So, there you have it…. If you didn’t catch that, at least pay attention to this. It is good to have a realtor to educate you on all of this information and keep the process in order and in a timely fashion. It is also very important to have a good lender, which can be hard to do in this economy!

My Mom and I have discovered the most amazing Lender in the world…. That’s where it all starts. You’ve got to get your financing in line before you know how much you can spend on a home.

If you have questions and are considering getting your finances in order, Steve Miller is an excellent loan officer who is extremely efficient and gets things done in record time! My Mom and I have referred most of our clients to him lately. He has helped all types of borrowers, from those who have questions and need guidance for their first-time home buying experience, to FHA loan clients, all the way to our multi-million dollar clients who would like to get their financing questions and loans taken care of. I am almost hesitant to give out his contact info, because it seems he is one of our best kept secrets… But, it is the right thing to do, plus, if you are working with us, we would recommend you to get in touch with him anyway!

Here is his contact info:

Steve Miller:

Senior Loan Officer 817-735-4320

817-735-1008 (fax) smiller@4trustmtg.com

He will be happy to help you. It is good to talk to your lender early, as they  he can at least advise you on what kind of loan you are going to want to take out, how much you can spend, what your credit looks like and get you a good interest rate.

 

For any more RE questions, please call me or email me at 214-364-2295 or bbesserer@briggsfreeman.com

It can be a long and tedious process and your realtor is here to educate you on all of this and make sure everything happens in a timely manner and in your favor!!! If you are working with my Mom and me… all the things I just talked about in this email will be a breeze. This is just the process and a way to manage client/customer expectations.

Thanks!

Bonnie Besserer

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