Real Estate Purchases- Purchases Through a Real Estate Agent
How Much to Pay. Your realtor should give you a list of comparable sales or “comps” for you to decide how much to pay for the house. Some information is available on the internet that this is pretty easy to figure out. Very few sellers will allow the contract to be contingent on an appraisal. So you must be sure that you are not overpaying for the house before you put in an offer.
Home Inspection Right Away. All Buyers should do home inspections. The inspection must be done within 5 business days of signing the contract AND the notice of any problems must be sent within that time. (Inspections are rarely resolved in the 5 day period.) The Buyer should consult a qualified inspector and schedule a time immediately with the inspector. In the summer it can be hard to get inspectors. The Buyer should try to be reasonable in asking for repairs. If there were 4 offers on a house and it was on the market for 24 hours, the Seller will not be hugely motivated to make repairs. On the other hand, if undisclosed problems are found, the Buyer can cancel the deal and get all his money back. I suggest a cash credit from the Seller for most items. Buyers tend to be dissatisfied with the repairs done by the Seller (especially if done by the Seller himself).
I hesitate to recommend home inspectors because some Buyers discover the inevitable defects in a home after closing and want to sue the inspector (and me for recommending the inspector). But in the interests of simplifying the closing process and making it less stressful for you, I can suggest the following:
- Michael Allan and Assoc., 847-382-6065
For a listing of home inspectors by zip code try the American Society of Home Inspectors web site at http://www.ashi.com/
Mortgage Company Selection is Key. The single biggest influence on the ease of closing from a Buyer’s perspective is the choice of the Buyer’s mortgage company. Generally, selecting an out-of- state mortgage broker, a mortgage company out of the newspaper based on a low rate quoted, or a mortgage company over the internet, for their low rate, is not a good idea. It works best to select a local lender with a local office. Almost all lenders are mortgage brokers now, meaning they process the file but the funds come from an underlying lender. A reliable local mortgage broker or a good national lender like Wells Fargo is the way to go. Dealing with a 1-800 number and a changing cast of people when you are trying to close is not a good thing.
The good faith estimate law makes the lender give you a confusing form that makes little sense. Title charges along on a buy are about $2000 now. The lender will charge an “origination fee” that is basically all of the lenders garbage can fees rolled into one. Under the new law this cannot change at closing. This is usually $500 to $1000. More than that and you are overpaying.
Fees called “funding fee,” or “administrative fee” are junk fees and you should not pay them. The mortgage business is too competitive to overpay such fees. I suggest locking in one’s mortgage rate at the time of application, as long as the closing is within 60 days. Trying to “time” the rate is just to hard and adds too much stress. It is often a good idea to ask your mortgage company to waive your tax and insurance escrow so you can pay them on your own. They generally charge 1/4% of the loan amount but some charge nothing. I will be happy to give you referrals to good local lenders if you need a referral.
Contingent on Sale or Not? For most people, it’s best to have a contingency on the closing of your current home, although in the past few years very few people use them. For years, all Buyers who had a property to sell would sign a contract on their purchase with a contingency on them selling and closing on their sale. Now there are many programs that allow Buyers to close on a purchase without closing on the sale, so contingencies are less popular. There is a trade-off to having a home-sale contingency: The Seller keeps the property on the market and can accept other offers. When the real estate market is active, Buyers try to freeze out other Buyers, so they make non-contingent offers. This works fine in an active real estate market. But, things can change quickly.