The first step to buying a home is of course finding the home. You will most likely view more than a couple homes before putting in your first offer. The details of the offer will be worked out with you and your agent and will include important items (fee’s, contingencies, duration of offer). When you submit an offer there is always a good chance of a counter offer. Now lets assume you put in your first offer and it gets accepted. What now?
After your offer is accepted the sellers side will most likely open escrow (the buyer’s agent can open escrow as well). An easy definition of escrow would be the following… “a third party intermediary who holds and allocates funds, including taxes and insurance in a mortgage transaction.” The first thing that will happen is the agent will take the finalized agreement and the earnest money deposit check and deposit both into the escrow account. After this happens, escrow is deemed open.
The purpose of an escrow is to enable a buyer and seller to deal with each other without risk. Before the home can be transfered to the buyer, he/she must deposit the complete purchase price into escrow. Usually the buyer will have a loan that will be directly deposited into escrow from the lender. On the other side of the transaction the seller will deposit his deed and other documents with the escrow holder. When all conditions are met escrow disburses the items held.
When escrow is opened the buyer will have a contingency period to get certain important items taken care of (home inspection, appraisal, and other inspections agreed upon) . The buyer has 17 days to remove contingencies and perform all inspections unless otherwise noted on the purchase agreement. If the buyer waits until after the 17 days and then gets an inspection he/she would not be able to cancel the contract without forfeiting their deposit. This deposit is usually 1-3% of the homes purchase price. One thing a good buyers agent always does is to schedule an inspection ASAP. The agent should be present during the inspection as well. It is also a good idea for the buyer to be there. Each buyers agent usually has a list of great inspectors and will always try to use the best. Personally, I only use one inspector in my area. He spends 3x longer than any other inspector I have used and is incredibly thorough (same price).
Another important contingency that a buyer might overlook is the appraisal. It is the lender who orders the appraisal. The appraisal can drag out the deal because if the appraiser finds any issues with the house (a water stain on the ceiling) he will call that out in his report and the lender will most likely require a repair before the property can close. A water stain on the roof can be a major DRAG! The lender will most likely require a 2 year roofing certificate stating that the roof does not leak and is in good condition. You can contact an metal roofing oldsmar fly company also for a new installation so that there would be proof of renovation activity. In our current economy issues like this are coming up more and more as lenders are tightening up.
Yet another big contingency is the LOAN! (Click here to read my blog post on loans) You want to make sure you get started on the loan before you even start looking for a house. You need to get pre-approved, and not just pre qualified (two completely different things). As soon as escrow opens your agent should make sure your lender gets the necessary information to move ahead with the loan. Your agent should be talking to your lender to make sure things proceed efficiently throughout the process. The last thing you want to do is to remove your loan contingency before you have the official approval and rate lock. The approval can be pushed back by issues that come up like a bad appraisal. I can write for a very long time on the lending process, so for the sake of simplifying the buying process I will have to avoid the details. There are many variables that can come into play.
A lot of buyers ask me about the title of their potential property. They are mainly concerned about liens, unpaid taxes, easements, covenants, etc etc… THIS IS WHERE THE TITLE COMPANY COMES IN! In case of California, or when we buy houses Portland, the title of the property is researched by a title company. Their job is to find any problems with title as well as to report all the details about the title. The title report will include the current owner(s), the legal description, any liens or unpaid taxes, any easements, covenants, conditions, and restrictions. The title policy will be issued at close of escrow. A title insurance policy covers the buyer against loss through defects in the title. During escrow a preliminary title report will be given to the buyer for their approval.
The most time consuming part of any real estate deal is usually the loan. When the buyers loan is approved the lender will send loan documents to escrow. These documents will then be signed by the buyer. The loan documents are usually sent to escrow a week prior to closing. The next step is for the seller to sign the deed. This generally happens a few days before closing. Right before closing the buyer will deliver the rest of the down payment for the loan to the escrow holder (the buyer should make sure all funds are ready to transfer).
After everything is recieved by the escrow holder and the lender has funded, escrow will close. The deed will then record. In some counties you can fund and record on the same day, however in most you will have to record the following day after funding. Once the deed has recorded the buyer is now the new owner of the property.