Searching for property and making an offer are not even the first steps in buying real estate.
Financing Your Purchase
Before you start to seriously look at property you need to establish a budget and get pre-qualified or ideally pre-approved for a loan which means meeting with a lender if you are not a cash Buyer. Why? Because you don’t want to look at property you are not even ready to purchase. I always recommend a Buyer contact at least 3 different lenders starting with your personal banker and two mortgage brokers. Mortgage brokers often times have access to more loan products than the limited loan portfolio of an individual bank. Shopping for a loan is like shopping for a large appliance or a car. Different lenders have different fees and rates and it’s important to comparison shop. If you need a referral for a trusted lender in our area CONTACT ME.
What are my closing costs going to be?
Closing costs can include everything from loan fees and title insurance, escrow fees, homeowners insurance and tax impounds, inspection and appraisal fees, HOA dues and transfer fees when applicable, well and septic transfer fees when applicable, wire fees and more. Some fees are negotiable with the seller and some are not. A rule of thumb is to expect to pay approximately 2-3% % of the final sale price in closing costs when buying a property using conventional financing however every loan and transaction is different with many variables affecting your actual closing costs. Some of your closing costs can be wrapped into your mortgage. To get a more accurate estimate of your closing costs with no obligation, contact me for answers or ask your lender for a good faith estimate.
It is strongly advised to have a licensed certified home inspector inspect any property you plan to purchase, the cost of which can be anywhere from $250 and up depending on the size and age of the home. This is a general inspection of all the major systems of the property from the foundation to the roof and landscape and all the major mechanical systems like plumbing, electric, heating and cooling and more. Each home inspector should provide you an agreement for service outlining what they will inspect and how they will inspect it prior to the day of the inspection. I provide referrals for inspectors, just ask. It is also strongly advised that you obtain a termite inspection usually costing less than $75. If there is a well, a well inspection is advised usually costing less than $600. Other inspections are available like mold and radon tests. You also have the right to have other professionals investigate and give bids for items of concern found from the home inspection, like a roofer or plumber etc. The seller is usually responsible for the cost of having the septic system inspected and pumped if applicable prior to close of escrow.
After you agree on the price and general terms of your purchase you will have an inspection period to explore, investigate and discover all you want about a property at your expense as the Buyer. It’s typically 10 calendar days long but always negotiable. If you find anything you disapprove of during this due diligence period, you can almost always cancel the deal with no money out of pocket except for the cost of the inspection. You can also negotiate with the seller on the findings with either a price reduction or requesting the seller make repairs, or you can accept the property in its current condition.
If you are Buying real estate using a mortgage to finance the purchase, the lender will require an appraisal to establish value. This is typically a Buyer expense but is negotiable with the Seller. If the property does not appraise for at least the Purchase Price, the Buyer can cancel the contract. The Buyer can also elect to pay more cash to make up the difference between the contract price and the appraised value or ask the seller for a price reduction.
Getting a survey is optional although advised if it is unclear where the property boundaries are. Who pays for a survey is negotiable with the Seller. It’s important to recognize that, for example, a fence is not always the actual property boundary. Finding surveyor stamped property markers is a more reliable indicator of a boundary but not always the legal boundary which is why surveys can be important.
HOW DO I TAKE TITLE? (to PDF file)
THE TITLE COMMITMENT (to PDF file)
Close of Escrow
Escrow is both a verb and a noun. It is the process of the transaction from the consummation of the Purchase Contract to the end of the deal when you get possession of the property. The Escrow Company and Title Company are usually one and the same in Arizona. They are where the escrow officer is an objective third party that holds the money and provides research and insurance on the chain of title of the property. The escrow company also provides the Settlement Statement and all of the documents necessary to close the deal including the loan documents. Once inspections and the appraisal are done and your financing is in place you are ready to close the deal. Many documents need to be signed and notarized at the escrow office. Many plans need to be made. Utility accounts need to be established, movers organized. It’s a daunting process. Almost all of this can be done in advance of the close of escrow day. The deal is officially done when the deed of trust is recorded at the county office and the funds are dispersed. This is all done through the escrow company. Then you officially have possession of the property and deserve to celebrate!