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CONGRATULATIONS! You have decided to
buy a new home. The Cronin Team will help you take this big financial step
by describing the home buying, home financing, and settlement process.
You probably started the home buying process in one of two ways: you saw
a home you were interested in buying or you consulted a lender to figure
out how much money you could borrow before you found a home (sometimes
called pre-qualifying). The next step is to sign an agreement of sale
with the seller, followed by applying for a loan to purchase your new
home. The final step is called ‘settlement’ or ‘closing,’ where the
legal title to the property is transferred to you.
At each of these steps you often have the opportunity to negotiate the
terms, conditions and costs to your advantage. The Cronin Team will highlight
such opportunities. You will also need to shop carefully to get the best
value for your money. There is no standard home buying process used in
all localities. Your actual experience may vary from those described
here. The Cronin Team will take you through the general steps to buying a home,
to eliminate, as much as possible, the mysteries of the settlement
process.
Here is some general information for you to review and then The Cronin
Team and
her team will be happy to ‘walk you through’ the process and to assist
you with any questions you may have.
Buying and Financing A Home
Role of the Real Estate Broker
Frequently, the first person you consult about buying a home is a real
estate agent or broker. The most common practice is for the seller to
hire the broker to find someone who will be willing to buy the home on
terms and conditions that are acceptable to the seller. Therefore, the
real estate broker you are dealing with may also represent the seller.
However, you can hire your own real estate broker, known as a buyer’s
broker, to represent your interests. Also, in some states, agents and
brokers are allowed to represent both buyer and seller.
Even if the real estate broker represents the seller, state real estate
licensing laws usually require that the broker treat you fairly. If you
have any questions concerning the behavior of an agent or broker, you
should contact your State’s Real Estate Commission or licensing
department.
Sometimes, the real estate broker will offer to help you obtain a
mortgage loan. He or she may also recommend that you deal with a
particular lender, title company, and attorney or settlement/closing
agent. You are not required to follow the real estate broker’s
recommendation. You should compare the costs and services offered by
other providers with those recommended by the real estate broker.
Selecting an Attorney
Before you sign an agreement of sale, you might consider asking an
attorney to look it over and tell you if it protects your interests. If
you have already signed your agreement of sale, you might still consider
having an attorney review it. An attorney can also help you prepare for
the settlement. In some areas attorneys act as settlement/closing agents
or as escrow agents to handle the settlement. An attorney who does this
will not solely represent your interests, since, as settlement/closing
agent, he or she may also be representing the seller, the lender and
others as well.
If choosing an attorney, you should shop around and ask what services
will be performed for what fee. Find out whether the attorney is
experienced in representing homebuyers. You may wish to ask the attorney
questions such as:
> What is the charge for negotiating the
agreement of sale, reviewing documents and giving advice concerning
those documents, for being present at the settlement, or for reviewing
instructions to the escrow agent or company?
> Will the attorney represent anyone other than you in the transaction?
: Will the attorney be paid by anyone other than you in the transaction?
Please note, in many areas of the country attorneys are not normally
involved in the home sale. For example, escrow agents or escrow
companies in western states handle the paperwork to transfer title
without any attorney involvement.
Terms of the Agreement of Sale
Here are some important points to consider before you sign an agreement
of sale. The real estate broker probably will give you a preprinted form
of agreement of sale. You may make changes or additions to the form
agreement, but the seller must agree to every change you make. You
should also agree with the seller on when you will move in and what
appliances and personal property will be sold with the home.
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Sales Price: For most home
purchasers, the sales price is the most important term. Recognize
that other non-monetary terms of the agreement are also important.
Title: ‘Title’ refers to the
legal ownership of your new home. The seller should provide title,
free and clear of all claims by others against your new home. Claims
by others against your new home are sometimes known as ‘liens’ or
‘encumbrances.’
Mortgage Clause: The agreement
of sale should provide that your deposit will be refunded if the
sale has to be canceled because you are unable to get a mortgage
loan. For example, your agreement of sale could allow the purchase
to be canceled if you cannot obtain mortgage financing at prevailing
interest rates.
Pests: Your lender may require a
certificate from a qualified inspector stating that the home is free
from termites and other pests and pest damage. You may want to
reserve the right to cancel the agreement or seek immediate
treatment and repairs by the seller if pest damage is found.
Home Inspection: It is a good
idea to have the home inspected. An inspection should determine the
condition of the plumbing, heating, cooling and electrical systems.
The structure should also be examined to assure it is sound and to
determine the condition of the roof, siding, windows and doors. The
lot should be graded away from the house so that water does not
drain toward the house and into the basement.
Most buyers prefer to pay for these inspections so that the
inspector is working for them, not the seller. You may wish to
include in your agreement of sale the right to cancel, if you are
not satisfied with the inspection results. In that case, you may
want to re-negotiate for a lower sale price or require the seller to
make repairs.
Lead-Based Paint Hazards in Housing Built
Before 1978: If you buy a home built before 1978, you
have certain rights concerning lead-based paint and lead poisoning
hazards. The seller or sales agent must give you the EPA pamphlet
‘Protect Your Family From Lead in Your Home’ or other EPA-approved
lead hazard information. The seller or sales agent must tell you
what the seller actually knows about the home’s lead-based paint or
lead-based paint hazards and give you any relevant records or
reports.
You have at least ten (10) days to do an inspection or risk
assessment for lead-based paint or lead-based paint hazards.
However, to have the right to cancel the sale based on the results
of an inspection or risk assessment, you will need to negotiate this
condition with the seller.
Finally, the seller must attach a disclosure form to the agreement
of sale, which will include a Lead Warning Statement. You, the
seller, and the sales agent will sign an acknowledgment that these
notification requirements have been satisfied.
Other Environmental Concerns.
Your city or state may have laws requiring buyers or sellers to test
for environmental hazards such as leaking underground oil tanks, the
presence of radon or asbestos, lead water pipes, and other such
hazards, and to take the steps to clean-up any such hazards. You may
negotiate who will pay for the costs of any required testing and/or
clean up.
Sharing of Expenses. You need to
agree with the seller about how expenses related to the property
such as taxes, water and sewer charges, condominium fees, and
utility bills, are to be divided on the date of settlement. Unless
you agree otherwise, you should only be responsible for the portion
of these expenses owed after the date of sale.
Settlement Agent/Escrow Agent.
Depending on local practices, you may have an option to select the
settlement agent or escrow agent or company. For states where an
escrow agent or company will handle the settlement, the buyer,
seller and lender will provide instructions.
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