What Buyers Need to Know

Making an Offer | Escrow | Closing Costs

Finding and purchasing a home that will meet your needs can be a large undertaking and often a stressful time. The best and smartest thing you can do is find a real estate professional to help make this transition as smooth as possible. Find an expert in your area, let them know what you are looking for and let them help you find your dream home.

Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. When you`re buying a home, education and research are two of your greatest allies. Additionally, choosing the correct agent is a great way to set yourself up for a much easier purchasing process.

A knowledgeable, licensed real estate professional can provide recommendations from satisfied customers and is well-versed in the type of property you`re seeking. They will also guide you through the entire home buying process and can help make the process run smoothly with less road bumps.

Things your real estate agent should be asking you:

Where do you want to live?
Are there particular neighborhoods or communities that you like?
What kind of house would you like (need)?
Are you looking for a particular style?
How many bedrooms and bathrooms do you want?
Is a home office a necessity?
Are you looking for a home with a garage or carport?
Do you entertain often?
Do you want a yard, pool, gated or guard gated community?
Have you determined your price range or consulted a lender to determine the best price range?

Making an Offer

Before the offer to purchase is created, it is very important that you have been at least pre-qualified or better yet pre-approved by a lender. This is one of the best negotiating tools a buyer can have. It shows the seller that you are financially able to purchase the home. After you have found the right home, it is time to prepare the offer.When you are buying a home, here are six questions you may want to ask that can offer additional insight about the prospective home before you make a final decision.

1) Why is the seller selling the house? This question may help you evaluate the "real value" of the property. Is there something about the house the seller does not like? If so, you may be able to adjust the purchase offer accordingly. 2) How much did the seller pay for the home? This question can, in some instances, help the buyer negotiate a better deal-maybe even get the seller to carry part of the loan. However, it is important to remember that the purchase price is influenced by several factors, like the current market value and any improvements the seller may have made to the home. The original purchase price might not have anything to do with the current value of the house.

3) What does the seller like most and least about the property? By asking the seller what he or she likes most and least about the property, you might get some interesting information. In a few cases, what a seller likes the most about a home might be something the buyer is looking to avoid. For example, if the seller describes his house as being in a "happening community," the buyer might consider this a negative factor because the area may be too noisy or busy for his or her taste.

4) Has the seller had any problems with the home in the past? It is also a good idea to ask the seller if he or she has had any problems with the home while living there. Has the seller had problems with a leakage from the upstairs bathroom in the past? If so, even if the leak has been corrected, the floor and walls around the bathroom might have been damaged. You should also check that these items were repaired properly. California requires its residential property sellers to disclose, in writing, details about the property they have on the market.

5) Are there any nuisances or problem neighbors? Use this answer to find out about any noisy neighbors, barking dogs, heavy airplane traffic or even planned changes to the community, such as a planned street widening. This may give insight on why the seller is really moving.

6) How are the public schools in the area? Because the value of a community is usually greatly influenced by the public schools in the area, finding out the seller`s perception can give you some insight about the quality of the area`s schools.

Knowing all you can about a prospective home, not only helps you decide if it`s the home of your dreams, but what offer to make as well. Your real estate professional can help you get your key questions answered and give you advice on how to evaluate your findings.

Escrow: Now What?

Congratulations, you are on your way to owning your very own home! Follow these suggestions, as well as your Realtor's advice, so that escrow and settlement will go as smooth as possible.

You will be asked for a down payment on the home you are purchasing. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month.

During this period of purchasing your home, you are going to need an escrow or settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period. The period that you are "in escrow" is often 30 days but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:

1) Inspection contingency: This should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract.

2) Financing contingency: Once the contract is signed, you have a period to secure funding. If, for any reason, you are unable to secure funding during the period granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract.

3) A requirement that the seller must provide marketable title. With your title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership.

4) Secure homeowners insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance is better done sooner than later. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.

5) Contact local utility companies to schedule to have service turned on when you close escrow.

6) Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. Take your time doing your walk through to make sure all is as it should be.

What Are Closing Costs?

You've found the perfect home, the seller has accepted your offer, your loan has been approved and you`re eager to move into your new home. But before you get the key, there`s one more step--the closing. Also called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a down payment and various closing costs. It`s the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for. As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:

Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.

Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.

Loan Origination Fee: This fee covers the lender`s loan-processing costs. The fee is typically one percent of the total mortgage.

Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.

Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.

PMI Premium: If you buy a home with a low-down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.

Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.

Escrow Accounts: The escrow holder collects the buyer`s down payment and the lender`s loan funds. At the closing, using all funds collected, the escrow holder pays the seller`s loans, liens, and vendor bills approved by parties. Then, and only then, will the seller`s calculated final net proceeds be released.

Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.

Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of your prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all the settlement costs.