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The following section is intended to provide important information that every buyer should know when purchasing property; however, is not intended to replace our in-person level of service.
So, you think you are ready to purchase a piece of property? In the section below, we walk you step by step through the entire buying process. After reading through this, you will not only know if you are ready to buy, but you’ll also be armed with key information important to the successful buying transaction.
1. Organize your financials / pre-approval.
If you are independently wealthy then you may want to skip this section, however, the majority of buyers today will need to secure some kind of financing to acquire real estate. It is important to review your financial situation when thinking of buying a new home. You should get accustomed to pulling your credit report/score on a yearly basis, especially in the few years before you plan to make your first purchase. The reason for this is to make sure everything on your report is accurate because when you eventually approach a lender for financing, your credit score will be one of the most important factors in determining what programs you qualify for. Lastly, you should sit down with a lender to see how much you actually qualify for and what loan program is most appropriate for you. This process is referred to as pre-approval.
JSWPG has teamed with East West Mortgage Company to offer our clients a one stop shop for their entire buying process. Click here to view our financing section.
2. Find a property
You’re financially prepared for home ownership, so all you have to do is find the perfect home, butthis is much more easily said than done. To assist you with this important step, and through the entire process, you should employ a real estate professional that you trust. JSWPG is ready to assist you in finding your new home.
3. Make an offer
Now that you have found your potential new home and have your financing in order, it’s time to make an offer! This may seem like a daunting and complex task, but it is often a lot simpler than people think. Your broker will walk you through all the necessary paperwork, which consists of:
- Offer to Purchase
- Offer to Purchase Contingency Addendum
- Mortgage contingency
- Inspection contingency
- Radon contingency
- Pest inspection contingency
- Lead paint contingency addendum
- Condominium Documents Addendum
- Sewage Disposal System Contingency Addendum
- Property Transfer Notification Certification (For property built before 1978 – Lead Paint Law)
- Massachusetts Mandatory Licensee Consumer Relationship disclosure
There are three potential responses a seller can make. One, the offer can be accepted! Two, the offer can be rejected. Or, three (the most common response) the seller can make a counter offer. During the negotiation period you need to realize that there is more to an offer than just the price. Often the terms and conditions can be just as important as the price when a seller is determining how to respond. Your broker should walk you carefully through the negotiation process.
Lastly, make sure that all of the contingencies you’ve created are illustrated on the offer page or as additional addendums (i.e., mortgage contingency, inspections, condo document review, etc.)
4. Perform inspections / review documents Your offer has been accepted! So, now you can just sit back and wait for move in day right? Unfortunately no, the offer is actually the easiest step. Now you must fulfill all of the promises that were made in the offer. The first step is usually to perform a home inspection by a specified date. I STRESS AT THIS POINT TO PAY CLOSE ATTENTION TO ALL OF THE PROVISIONS AND THE ASSOCIATED DATES MADE IN THE OFFER. It is also very important to have identified an attorney to represent your interests at this point in the transaction.
Some of the customary requirements associated with the offer are:
- Perform a home inspection, pest inspection, lead paint, etc.
- Submit your mortgage application (there is usually a required date to have the application submitted by).
- Review the condominium documents.
Once you’ve performed the home inspection and the results were satisfactory, the next very important step is to agree upon a Purchase and Sale (P&S), sign the document, and make the second deposit (usually 5% of the purchase price minus the offer binder). The P&S is usually executed within 21 calendar days of the offer being accepted and is heavily negotiated between the buyer’s and seller’s attorneys.
Once you have the mutually agreed upon P&S, four original copies should be signed and each page of each copy should be initialed in one of the lower corners as acknowledgement of each page. The four originals are distributed to the buyer, seller, lender, and listing broker. Your broker often receives a copy of the original.
6. Mortgage commitment
Once the P&S is executed, there is usually one extremely important contingency left for you to fulfill; to secure any financing required in the offer and P&S. You will know you have been approved by the lender once the lender has issued a “Letter of commitment” which states that the funds are available for closing. There are numerous personal documents that the lender may require you to produce, such as pay stubs, bank statements, tax returns, etc. But, the most important document will be arranged by the lender, and that is the appraisal. The appraisal is used by the lender to confirm that the property is worth the amount you are paying for it and that the transaction is conducted by a licensed third party.
It is important to remember that there is usually a date by which you have to get the “Letter of commitment” from the bank. If you do not secure financing and don’t notify the seller before the commitment date, then you will most likely forfeit all deposits and could be responsible for additional financial damages.
7. Closing!!!
Finally, the passing of the papers. There are a few things that take place prior to the actual closing meeting. First, you should go over in detail with the closing attorney the HUD-1 or Uniform Closing Statement which details all of the credits/debits to both the buyer and seller. From this statement the amount that you must bring to the closing, in the form of certified check, will be determined. The key in that last statement is “certified check”. Cash or a personal check will not be accepted. The second important step is to perform a final walk-through which usually occurs the day prior or the day of the closing. Make sure that any work that was promised by the seller was completed and the property was left in the condition agreed upon.
You’ve completed all of the steps and you now sign the closing documents and receive the keys. Welcome to your new home!!!