Unless you have enough cash to purchase a property outright, you'll need to borrow money. You should shop for a loan because different lenders may charge different fees or have different loan programs. The loan originator will tell you what information you'll need. Much of this can be done online and you can change the parameters until you find something that works for you in regards to purchase price, loan amount, cash needed to close, etc. Many times a potential buyer may be qualified to purchase an expensive property, but chooses not to, in order to keep the monthly payment down. We have seen a few online lenders that are pretty good, as well as local small brokers. Choose an experienced lender you feel is honest and upfront with you regarding the fees. You want to choose a lender that responds quickly. If you ask, we'll tell you our favorite.
House hunting
Now that you know how much you are qualified to spend on a house, we can really get to work. Tell me what you need or want and I'll set you up with an MLS (Multiple Listing Service) search. It will send you automatic emails of listings that meet your search parameters. The search parameters are easy to change once you get a better feel for the market. When you see something you like, take a drive by the house. How does the neighborhood look? How does the house look on the outside? If the house passes your outside test, send me a message with the address. I will set up an appointment for you and me to view the house. Depending upon your schedule, we can see many houses within a few hours time.
Just a few of the things that can go into an MLS search: price, area of town, number of bedrooms, bathrooms, garages, square footage, lot size, age of structure.
Think to the future . . . how long do you intend to live in the house? What is your lifestyle?
Are you planning to have children? Will you need more bedrooms or a larger yard? How about easy access from a master bedroom to a nursery? Where are the schools?
Are you planning to retire or to travel? How much maintenance can you keep up with if you're frequently away? Will physical limitations keep you from using stairs? Is there enough storage?
As of this writing, the standard way of compensating a real estate salesperson is changing from the seller paying as part of an agreement with the listing licensee, to the seller paying as part of a purchase negotiation. I'll update this as things transpire.
Make an offer
I can prepare a Comparative Market Analysis (CMA) of a prospective home. This will tell you, based upon other nearby and/or similar properties sale prices, what I think the house you're considering is worth. Once you decide to make an offer on a home, this is how it works . . .
While I prepare a contract and assorted documents for your signature, you must contact your loan originator and tell him or her to email me a Lender Letter, with the purchase price you are offering stated in the letter. Yes, you can ask them to prepare more than one letter with varying prices.
Write a check (or send a wire transfer) to Real Estate Brokers of Alaska for the amount of the earnest money. This check will be cashed and placed into a non-interest-bearing trust account. If the offer is accepted, the earnest money goes toward your costs in the transaction. If the offer is not accepted, your money remains in the trust account and can be applied to another offer or you may have it back. The procedures for getting it back may take several days. Earnest money is your promise to comply with the terms of an agreed contract. If you do not comply, then the seller may keep the earnest money. If the seller does not comply, then you should get the earnest money returned to you. The broker in charge at Real Estate Brokers of Alaska decides which party gets the earnest money in the case of non-compliance.
Sign the contract (Purchase & Sale Agreement). Some of the things listed in it are the purchase price, lender, loan type, title company, inspectors, inspection dates, appraisal date, recording date. We specify a deadline for the seller to respond. The Purchase & Sale Agreement is the alpha and the omega of the transaction. We will refer to it often.
You will also need to sign various disclosures related to the property, zoning, lead-based paint, and the brokers.
I take all these documents, make copies, and convey them to the seller's real estate licensee. Then, we wait.
Accepted offer
I don't mean to be vague, but there are so many variables to an accepted offer that it's difficult to cover everything here. When and how a seller responds, who the seller is in relation to the property (trustee, divorced, institution, etc.), the condition of the property, your financial strength or need; all of this goes into any counter offer and is part and parcel of the negotiation.
The thing to remember about a real estate transaction is that all parties want the same thing. Sellers want to sell and buyers want to buy. It's not meant to be adversarial like the legal system, nor should it ever be. We have a common goal: to transfer the deed from one party to another. The interesting and tricky part is settling on acceptable terms.
Once an offer is accepted by both parties, the clock starts ticking toward Recording.
Are you going to be here for closing? If it's possible that you will not, then get a notarized Power of Attorney (POA). Many of my pilot clients use a POA. They are written to be valid only for this transaction. The rules about where the margins on the paper fall (no kidding) and what constitutes a valid notarization seem to be inconsistent between real estate professionals, so I recommend that a couple weeks after the accepted offer, you go to the title company stated in your contract and tell them you'd like a POA for your transaction. They will prepare one and notarize it for you. Make sure you get a copy of it for yourself and one for me. The title company always needs the original, so you may as well let them do it the way they want. I bought a condo in 1982 and my sister was my POA and signed all my closing docs. Most people using POA's have their spouse do it. The only signature needed on the POA is the one giving the power, the other person does not need to sign the POA. If you are taking out a loan, your lender will also have to approve the POA.
Home inspection
A typical Purchase and Sale Agreement will list a deadline date for a home inspection to be completed by a licensed professional. You will hire and pay the inspector. You should try to attend the home inspection. A home inspector will point out items as he or she goes through the house, little things of interest that may not necessarily have to go into a report. I attend the home inspection to unlock the door for the inspector. I am not a party to the home inspection. Any questions regarding the inspection should be addressed to the inspector. Please remember that home inspectors cannot see inside walls or inside plumbing. They only comment upon what they examine with their eyes. Home ownership is filled with little surprises and sometimes big surprises. It's part and parcel of home ownership. Be aware of this.
A few days following the inspection, the home inspector will issue a report outlining their opinion of the condition of the property. The report usually is divided into two parts: issues noted that affect Health and Safety and other issues noted.
If your loan program does not require a home inspection, then the home inspection is for you only, not for your lender.
When you get the report, as long as you're not purchasing the property as-is, we will talk about a request for repairs. We will compile a list of "fix its" based on the home inspection report and submit this list to the seller. Normally all Health and Safety items make the list, and maybe a few in the other category. If you'd prefer the seller not make repairs, but instead pay some of your closing costs or change the purchase price, that may be possible.
We will probably want to have a mechanical inspection done, too. This inspection is performed by a licensed technician who inspects the heating system and the water heater. He or she gives you a report, too.
What is a Home Warranty? A home warranty provides coverage for homeowners when their home's mechanical systems or appliances break down due to normal wear and tear. The plan covers the cost of repairing the system or appliance, less the applicable deductible.
Repairs amendment
After you and I have discussed which repairs you will require, or if you're going to ask for a different change in terms, I'll prepare an amendment to the Purchase and Sale Agreement. Once you and the seller agree to terms and each sign the amendment, repairs will commence.
Appraisal
The contract will stipulate who pays for the appraisal, the buyer or the seller. It is a negotiable item. If it is a buyer cost, you will need to pay your lender by the date set in the contract (and I'll tell you when). The appraisal is ordered by your lender and the lender owns the appraisal report.
The appraiser sets the value of the property. He or she uses several different methods to determine value. One method includes the use of comparable properties and what they've recently sold for, another is the cost to replace the property.
Our desire is that the value set by the appraiser matches or exceeds the sales price. If the appraisal comes in below the sales price, then we must either renegotiate the contract or you must come up with enough cash to cover the deficiency or you may back out of the deal. In a hot market, we may stipulate that you will pay more than the appraised value, and how much more, in the offer.
The appraisal is usually the last step before the loan package goes to underwriting and then we close.
Closing
Closing is not to be confused with Recording. Closing occurs when your lender is ready to loan the money while adhering to the dates specified in the Purchase & Sale Agreement. By federal law, your lender must issue a Closing Disclosure (CD) for you to sign at least three business days (including Saturday, in this instance only) prior to recording. It's okay for an electronic signature to be used for this. Once the CD is signed, the lender will send their documents to the escrow (title) department and escrow will permit you to make a closing appointment. It's quite the daisy chain of events and is the reason that we do not often know when closing will happen until a day or two before it happens. Try to be flexible or to let us know when you absolutely cannot have a closing appointment. It will take about 45 minutes to an hour and it must be done in person with "wet" signatures (either here or sending it back here by express-type mail service or using a POA that is here). The seller may close in a different location on a different day than you. Once you sign all the loan documents at closing, the lender sends the money to the title company, and then the title company records the sale at the recorders office. This is usually the next business day after closing. If you close on a Friday, the transaction records on Monday (unless it's a holiday). You cannot move into your new home until recording. Recording is the date listed in the contract, so in order to comply with the contract we need to make sure and close at least one business day before recording.
We have seen hiccups in getting a cashier's check or wire transfer of funds for closing, especially if the sums are very large. Please call your bank, or whoever you will get the cashier's check from, and walk them through exactly what you plan to do. There are surprise waiting periods for certain transfers. Like what, you ask? Well, we heard about buyers that planned to transfer $100K from an investment account into their bank account a couple days before closing, but when they went to do it, they found out there was a $10K per day limit. Oops.
DO NOT accept wiring instructions that come to you in an email unless you're speaking to the title/escrow company on the phone at the same time and can verify that those instructions actually come from them. This is a real and legitimate concern, that scammers are preying on house-buyers with false wiring instructions and "poof" your money is gone. Lots of money. Use the phone and speak in person to the title/escrow person.
Important note about utilities . . . contact the appropriate utility at least two days before recording and set up an account to get the utility service transferred into your name.
Real Estate Brokers of Alaska
1577 C Street, Ste. 101
Anchorage, Ak 99501
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