What do I need to know when dealing with a real estate broker?
The most important thing to understand when dealing with a real estate broker is that in most cases, the broker is representing the seller's interest. They are required to have you sign a disclosure to advise you whose interest they are representing, and you should read this disclosure carefully, so that you know who is actually being represented. This is usually a "selling broker" who has found properties on the Multiple Listing Service. They then find buyers to bring to the seller, and their commission is paid by the seller. This aspect is beneficial to you, since you do not have to pay any part of their commission. However, if you want a broker who is only loyal to your interests, you will need to find a "buyer's broker" and enter into a Buyer's Broker contract with that person. They may charge you a fee, or work out an arrangement with the seller to pay their commission.
If a broker asks you to sign a binder, make sure that your attorney reviews the binder, or any contract documents, before signing. There may be legally binding language that you will be bound by, and if you sign it without the benefit of a lawyer, you may not be able to have that language amended at a later time.
If you decide to give a binder check, this is technically supposed to bind the seller to your deal. If you then find another house, you may not be able to get a refund of your binder.
Finally, if a broker tries to recommend that you use their preferred attorney or mortgage broker, I would suggest that you do your own research, or get a recommendation from a friend. You want your lawyer or lender to be independent and loyal only to you.
What do I need to do before signing the Contract of Sale?
If you are planning to have a formal inspection of the premises, it should be done before the Contract of Sale is signed. A Contract of Sale, unless it specifies otherwise, will state that the premises are being sold in their "as is" condition (except that plumbing, heating and electrical systems will be in working order at closing, and the roof free of leaks). Although a buyer may not be successful in renegotiating price based upon an Engineer's Report, if there are major problems not encompassed in the purchase price, it couldn't hurt to ask the seller to make repairs or give a credit. Once you receive their response, you can decide if you still wish to proceed. In a buyer's market, the seller may not wish to lose the buyer. At a minimum, an inspection is needed to make sure the premises are structurally sound, or whether there are major problems you would not want to deal with. If the house is undervalued, or it is a seller's market, you must be willing to lose the deal if the seller then finds another buyer who is willing to take the house "as is" in the meantime.
You also need to meet with your lender or mortgage broker to make sure that you will have enough money at closing to purchase the premises. Closing costs include a title search, title insurance, termite inspection costs, mortgage recording, mortgage tax, deed recording, bank points, bank legal fees, bank processing charges, appraisal fee, application fee, bank attorney fees, and other miscellaneous fees deducted from your mortgage by the bank. In addition, you may have to pay the seller adjustments for real estate taxes already paid, but for a period of time after the closing. The bank will pick up an escrow for future real estate taxes, and may ask the title company to pick up the next quarter taxes if they are coming due. You will also have to pay "per diem" or a daily interest amount from the date of the closing to the end of the month. Your mortgage broker or lender is required to give you a "Good Faith Estimate of Closing Costs", which should be reviewed with your attorney before signing the Contract of Sale.
You need to know how much of a down payment you are going to make, and how much of a mortgage you need to take. Once you receive a commitment in the amount of the mortgage indicated in the contract, you are bound to proceed to closing. If you default on the contract after receiving your mortgage commitment, then you will forfeit your down payment. Hence, it is best to try to negotiate to put down as small a down payment as possible. However, some sellers will insist on ten percent or close to it.
What needs to be done after the Contract of Sale is signed?
After the contract is signed by all parties, you will need to give a copy to your lender or mortgage broker so that the mortgage application can be processed. Your contract will require that a prompt application be made, so it is important not to delay making the application to your lender to avoid breaching the contract. A termite inspection will need to be done within approximately ten days from the date of the contract. If termites are found, the seller has the option to treat any infestation and repair any damage, and provide a one-year guaranty, or to cancel the contract. As a practical matter, sellers will not allow a contract to be cancelled, and will provide the one-year guaranty.
When is a title report ordered?
I arrange for a title report to be ordered shortly after the Contract of Sale is signed, so that any issues can be addressed as soon as possible, and not delay the closing.
Will I need to have a Survey done?
I recommend that, unless there is a very recent Survey, that a new Survey be ordered for each purchase. A Survey will tell you if there are any title problems, which need to be known before closing. Title insurance will "except" any issues that would have been shown on an accurate Survey. This means that if there is a fence that encroaches onto your property, and a new Survey would have shown this, it is not something that is covered by title insurance. A survey costs approximately $500 and is well worth the cost.
Are there any title issues that I need to be concerned about?
If the Seller does not have a Certificate of Occupancy or Certificate of Completion for buildings or add-ons to the premises, they will need to be obtained by the seller, or money held in escrow at the closing until they are procured. The seller has the option to cancel the contract, but this usually does not occur. You may also negotiate with the Seller to take the premises without the Certificate(s), but you will need to be aware that your lending institution may require that they be obtained as a prerequisite for the mortgage, and that you will be faced with the issue when you sell. You may also receive violations from the municipality for the illegal structure(s).
All title issues are resolved between the attorneys and the title company at or prior to closing. For example, the Seller will be required to pay off any mortgages, judgments or liens against the property at or prior to closing.
What needs to be done to get ready for the closing?
A walk-through of the premises needs to be done approximately twenty-four hours before the closing. You need to check the appliances, the plumbing, heating, lighting, the ceilings for any leaks, and for any damage done by the move-out, or any major change in condition from when you first saw the premises. Any problems need to be reported to your attorney as soon as possible. If you do not tell your attorney at or before the closing, once you receive the Deed, then your opportunity will be gone. If there is a post-closing escrow agreement, and the sellers are remaining in the premises, then you will have another opportunity to advise of any problems. However, do not depend upon this and fail to do the inspection prior to closing.
You need to go over your closing costs with your attorney, including the title bill, what is being deducted from your mortgage, and the amount you will need to bring, in the form of a certified check, to pay the seller the balance owed, after deducting the down payment.
What happens at the closing?
I will represent your interests at the closing, including a review of all mortgage documents that you will sign, to make sure that the interest rate and terms are what you were promised. All title issues are resolved, and transfer documents signed by all parties. You will be given keys to the premises, unless the seller is remaining in accordance with a post-closing escrow agreement. In that event, money will be held in escrow with the seller's attorney, and if the sellers do not vacate within the specified time, they will have to pay an agreed-upon daily penalty until they vacate. Adjustments will be as of the date of your possession, and you will receive your daily mortgage interest amount as well.
What happens after the closing?
You will receive a closing statement outlining the monetary transactions at the closing, along with a copy of pertinent closing documents. You will receive a title policy from the title company. Any post-closing escrow agreements will be monitored until they are completed by the appropriate party.
