Welcome to Your Real Estate Purchase Journey: Navigating the Legal Landscape with Confidence
Purchasing a home can feel daunting, but understanding the journey ahead can provide clarity and confidence. At our firm, we break down the process into clear, manageable stages, ensuring you are well-informed and prepared every step of the way. Here's a roadmap of what to expect:
This outline is a guideline of what to expect during a typical real estate purchase. It was written to help answer some common questions and to help you understand how the process works, so you can feel less stressed in this exciting transition in your life. Please read this outline thoroughly and reference it often throughout the transaction, as it is for your benefit. If there is anything out of the ordinary with your contract, we will make sure to discuss this with you as well.
There is a tentative closing date listed in the contract. Please note that a variety of factors can influence the closing date – inspection issues, title issues, home sale contingency issues, lender issuing a final clear to close etc., so the closing date is TENTATIVE and subject to change. Please plan your housing and moving arrangements accordingly. Be flexible.
Please also note that each due date listed in the Contract will be pushed back an amount of days that corresponds with the end of attorney review. For example, if the Contract is signed on October 1, and the Contract states that the initial deposit is due October 5 (five days after the Contract was signed), but attorney review does not end until October 5, the initial deposit will be due on October 10 (five days after the end of attorney review, which is the date you have a firm contract).
IMPORTANT NOTES:
You MUST give out [email protected] as an email to anyone you work with – your realtor, your lender, your inspectors, etc. and instruct them that ALL correspondence must be directed to Marianne if it is to be seen and attended to in a timely manner.
THE CLOSING DATE IS NOT FINAL AND IS SUBJECT TO CHANGE. We do our best to close on the date in the contract, but sometimes issues arise on either side (inspection issues, title issues, etc.) that take time to sort out. Please plan your housing situation accordingly, such as looking for alternate short-term housing in the event you have a lease that is expiring.
CLOSING WILL MOST LIKELY BE HELD AT THE TITLE COMPANY'S OFFICE. IF SO, WE WILL NOT BE PHYSICALLY IN ATTENDANCE BUT ARE AVAILABLE BY PHONE IF NEED BE.
After the contract is signed, it enters the Attorney Review period, during which time the attorneys review the contract to make sure it is satisfactory to our respective clients. The attorney review period addresses issues like how the deposits are to be paid and to whom, the amount of time buyers have to perform inspections and what they can inspect, for what reasons the contract may be cancelled, our clients' rights in this transaction, and any other items specific to the deal.
Our changes are considered to be incorporated into the contract, and once we reach an agreement, the rest of the process starts to move forward. A new contract is not signed afterwards, though subsequent addenda may be needed for various items like a change in closing date.
**Please note: The contract states that there are three days for the attorney review period. That is a little misleading. There are three days to BEGIN the attorney review period (which can be extended). Once begun, the attorney review period usually takes several days to a week, depending on how complicated the deal is.
Now that we are out of attorney review, the real work beings. This is a long section, as a lot of steps need to be started all at once.
Deposit:
Once attorney review is concluded, you need to pay your deposit (usually within 5 days for the initial deposit and 10 days for the additional deposit). We will clarify due dates and to whom the deposit is payable.
If the contract is cancelled for a valid reason – for any reason during attorney review, structural issues brought up in inspections that the seller is unwilling or unable to cure, your mortgage commitment is withdrawn through no fault of your own (such as being UNEXPECTEDLY laid off at work), there are title issues the seller cannot cure, etc., you will receive your deposit monies back.
If you breach the contract – you try to cancel for frivolous reasons after inspections, you do not apply for your mortgage, or you made some sort of a material misrepresentation (a lie), etc., then the seller can hold your deposit until it is determined whether or not you have caused them damages. For example, if another contract comes in $5,000 below yours, they have at least $5,000 in damages, potentially more, since there will also be extra carrying costs on the house.
Please do not quit your job, make a major purchase, open a new credit card, or do anything to change your financial situation for the worse or harm your credit score during this process, at least not without approval from your lender.
Inspections:
You should order your inspections when we are close to ending attorney review. Inspection reports are typically due within fourteen days of signing the Contract (or the end of attorney review).
There are several inspections you can order, but typically they are as follows:
a. General Home Inspection
b. Radon Inspection
c. Wood Destroying Inspection (WDI) inspection
d. Tank Sweep
e. OPRA Request
f. Level 2 Fireplace Inspection (if applicable)
g. Septic inspection (if applicable)
h. Swimming pool inspection (if applicable)
i. Private well test (only in specific cases if you are buying a property "as-is." Usually this is the seller's responsibility.)
Typically, one home inspector will do a, b, and c as one package. All buyers should order these.
A tank sweep is to find old underground storage tanks (USTs). It used to be common practice to have oil tanks buried in the yard. Then when that practice stopped, tanks were decommissioned and left in place. You want to find these tanks and have them removed and the soil tested prior to closing. Cleaning contaminated soil can be expensive. It is typically considered the seller's responsibility to remove oil tanks, at their own cost, with some exceptions. You may not need this in all cases – for example, if you are buying a condo in a new development, but you want to consider it if you are buying an older house or a single-family home.
OPRA request – this is to find if there are any open permits for work performed by the seller. It is the seller's responsibility to close out any open permits, so the earlier they are discovered, the better. Your realtor can help you obtain this from the municipality, and you should do so as soon as possible. Unfortunately, this is not a fail-safe, because it is only going to pick up permits that were opened and never closed. We will not find out if there was work done without permits until (and unless) the seller does their Certificate of Occupancy inspections, which are not required in all municipalities, though sometimes your home inspector or the Fire Marshal will pick up on some items. The seller DOES have to get a Smoke/CO certificate in all municipalities (unless an agreement is in place whereby the buyer is obtaining them, common with purchases from foreclosures), which is why the Fire Marshal would be at the property.
When you receive your inspection reports, you should look through them for any structural or safety defects. You can ask to have these remedied. Structural defects could include (but are not limited to) the following:
Faulty wiring, mold, asbestos, broken windows (though windows are a grey area), lack of hand railings, roof damage, water penetration, cracked foundation, etc.
You cannot ask for cosmetic repairs or upgrades, and anything you ask for has to be something that was revealed in inspections, not something you obviously would have seen when you saw the house before putting in an offer. For example, you cannot ask for the floors to be refinished, #1 because you saw that before putting in your offer, and #2 because that is cosmetic. Sellers typically do not entertain upgrades or repairs to items that were up to code at the time they were built, even if the code has changed. For example, GFCI outlets are now required near water sources and outside for safety; however, this is an upgrade, so some sellers will not want to do it (but some will, because it is minor). Also, age alone typically does not qualify a system for repair as long as it is in good working order at closing.
Look through your inspection reports and note any structural or safety item that you would like addressed. Let us know if you would like the item fixed or if you would accept a credit. Give us the page numbers where you found the items.
You are permitted to obtain estimates if there are significant repairs and you do not know what they would be worth. You are also permitted to obtain secondary inspections based on issues brought up during the home inspection (example - a mold inspection as a follow-up to the home inspector pointing out suspected mold).
Example repair request:
Page 27 – Basement steps missing handrails. Please have the seller install handrails leading to the basement. If the seller will not install handrails, we would like a $250 credit towards this item, but we would take $100.
Note the following:
IF THERE IS A SEPTIC SYSTEM: You are responsible for testing the system, but typically the seller is responsible for repairing/replacing it.
IF THERE IS A PRIVATE WELL: The seller is responsible for testing the system and remediating any issues - unless otherwise agreed to.
IF THERE IS PEST INFESTATION: The seller is responsible for curing this if your WDI (wood destroying insect) inspection reveals pests (termites, carpenter bees, etc.).
IF THERE IS RADON IN EXCESS OF 4 PICOCURIES PER LITER: The seller is responsible for radon remediation if your Radon test reveals radon levels above the acceptable level.
Mortgage Application:
While all of this is going on, you also need to being applying for your mortgage. You will also have to supply a mortgage commitment before the close, typically within thirty (30) days of the end of attorney review. Please act diligently in supplying your lender with all needed documentation. Please also apply for the type and amount of mortgage that is specified in the mortgage contingency. If there is a discrepancy, bring that to our attention as soon as possible.
Insurance:
If you are financing your purchase with a mortgage, your lender will require you to obtain homeowner's insurance. If you are not financing your purchase with a mortgage, we still advise that you obtain insurance. You should speak to an insurance company prior to the closing and set up your insurance so that it takes effect the day of closing. If you are not going to be occupying the property immediately, you still should have the insurance take effect the day of the closing. This can help avoid many potential issues with property damage claims if it is unclear who is responsible for the damage due to your delay in occupying the property. If you are buying a condo or townhouse, please check with the homeowner's association (HOA) as to what type of insurance they require to make sure you are properly covered.
Stage 04: Order and Review Title Work
We will order title work on your behalf. After completing their search, the title company will return to us a document called the Title Binder or Title Commitment. This contains a lot of useful information for the seller, for us, and for the lender, if there is one.
Along with the title work, we sometimes order a survey if required by the lender or title company or if you requested one. We will order it with or without permanent corner markers, according to how you answer in your Buyer's Questionnaire.
Payment for title insurance, title settlement services, and the survey (if applicable) are due at closing.
The main information contained in the binder is as follows:
1. Closing Protection Letter (CPL). This is something lenders need from the title company.
2. Basic Title information – in whom title is currently vested, date of previous deed, name of prior owner, who the buyers are, block and lot, municipality, etc.
3. Flood zone search. If the property is in a flood zone, you need flood insurance.
4. Tax search, including water and sewer. Everyone pays their prorated share of the taxes at closing.
5. Deed search. This includes other recorded documents like mortgages and easements.
6. Legal description. This is based on the old survey. Once your survey is in (if you are ordering one), they will send out an endorsement with the updated legal description.
7. Judgment and Lien Search. The title company searches the sellers' names and spouse's maiden name (if one changed last names) if they were married within the last 20 years. If the sellers provided their title policy from when they purchased the property, the judgment search will only go back 20 years. If the sellers did not provide this, the search will go back 60 years, and, if the prior owners have judgments against them, the sellers will have to clear them somehow. This is important for you to note because you will receive a title policy after the closing, and eventually you will be a seller. You do not want to be in the position of losing your title insurance policy and judgments appearing against the prior owners. If there are judgments against the sellers (or prior owners), they have to clear them prior to closing or at closing.
NOTE: Sometimes this can delay closing. You do have to give the sellers a chance to cure before cancelling the contract. If it takes more than a reasonable amount of time, there are ways to cancel the contract, but they do have a right to cure their title defects. This is one of the reasons we recommend securing alternate temporary housing arrangements if needed.
In the same way the sellers have to clear title in order to sell you the house, if you are getting a mortgage, you have to clear title for the lender. The lender wants to be the number one priority for payment when you sell the house or if you get foreclosed on. If there is a judgment against you already, that creditor has priority over the lender in terms of getting paid. This is not acceptable to the lender, so you will have to clear title also. If you are not getting a mortgage, this search will not be done against you, but it will eventually when you sell.
There may be results that appear in this judgment search because a person has a similar name to your own. This happens especially often with common names, such as Smith or White. You will have to review these results and sign off that none apply to you, but rather to someone with a similar name. Usually you can tell for various reasons – an address appears that you never lived at, or there is a Social Security Number or birthdate listed that is not yours, or it is a child support judgment and you never had children. You sign a sworn statement at closing called a Mortgagor's (or Buyer's) Affidavit of Title, stating that these judgments are not against you, and the lender accepts this. (This is also what you receive from the seller). You do not want to make a misrepresentation here – if any judgments are against you, we must take care of them.
Stage 05: Walkthrough and Closing
On the day of closing or sometimes the evening before, you will do a walkthrough with your realtor to make sure that there are no issues that have arisen since the time of inspections.
Prior to the closing (usually several days beforehand for the first draft and a day or so beforehand for the final version), you will receive a document called the closing disclosure (CD). This shows the final amount you need to bring to closing. The title company typically requests a wire and will send funds. WIRE FRAUD IS ON THE RISE. BEFORE SENDING ANY WIRES, PLEASE CALL THE TITLE COMPANY TO VERIFY THE INSTRUCTIONS. No one will call you asking for your bank account information, and no one will call you to change the wire instructions over the phone. If you receive any suspicious calls, do not send the wire but instead call us to verify what you should do.
As noted in Stage 1, closing will most likely take place at the title company's office. Title company's started holding closings in this manner during the pandemic and then found that it worked better, since the title company directs the actual closing itself. If closing is at the title company's office, we will not personally be in attendance but will be available by phone if need be.
Stage 06: Closure
If there were any mistakes on the HUD statement discovered after the fact (usually during an agreed-upon term like 30-60 days) both parties agreed in attorney review to fix those mistakes. This happens VERY RARELY, but an example is if for whatever reason your mortgage payoff was wrong and you need to pay a little extra, you agree to provide the additional funds.
You will receive your original deed, title insurance policy, and, sometimes, a small refund for excess recording costs from the title company several weeks after closing. The deed is recorded and becomes part of the public record. However, the title policy does not. Make sure to keep the title policy somewhere safe, and, preferably fireproof. We also recommend saving a PDF and backing it up somewhere.
If you pay off your mortgage before you sell the house, make sure to keep and back up any documentation regarding the fact that you paid it off. Also keep any documentation regarding the assignment of your mortgage to another lender while you are paying your mortgage. Lenders often transfer your mortgage out to another company.
When you pay off your mortgage, the lender is supposed to record a discharge. Sometimes they do not follow up with this on their end. For this reason, you want to make sure that you get at least a copy of the recorded discharge after you pay off your loan, to ensure that it was done. This is done through the county clerk's office.
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By breaking down the process of purchasing a home into these stages, we strive to provide transparency and support, ensuring you are never in the dark about what comes next. Our goal is to navigate this journey together, with your interests at the forefront.