Buying or selling a house can be a stressful and vulnerable time for every party involved in the closing. To make sure that the process goes smoothly, make sure that you are familiar with your rights and obligations as a buyer and as a seller ahead of time!
As a buyer, you are entitled to the following elements:
- You have the right to house-hunt without facing discrimination thanks to the Fair Housing Act which prohibits discrimination in the sale, rental, or financing of dwellings and other housing-related activities on the basis of race, sex, disability, color, religion, familial status, or national origin.
- You have the right to know about any potential health hazards linked to the property, including waste management, water supply, insulation, hazardous materials (such as lead paint). Disclosure agreements vary state by state: you can find which forms are requested from the buyers here.
- You have the right to made aware of the financial history of the property, including property taxes and any encumbrance on the title (such as liens, easements, or any other issues)
- You have the right to access any information that will help you get a fair deal on the property. This includes an objective appraisal, and market price analysis and comparison
- You have the right to have access to all the information regarding closing, including a copy of the purchase and sale agreement, a walk-through of the property before closing and access to the settlement statement at closing
As a seller, you are also protected by real estate laws and have the right to the following elements:
- You have the right to advertise the property for sale in a public listing or another similar forum, with the help of a real estate agent or not
- You have the right to set a price for your property that you deem reasonable, backed by truthful and accurate information
- You have the right to request a home inspection prior to closing
- You have the right to protect yourself by requiring that a deposit or a certain amount of the purchase price be placed in escrow before closing, and may request verification of financing or a mortgage loan before the sale is finalized
- Finally, you have the right to accept or refuse an offer, for example, if you find it to be too low, if you are worried about the potential buyer’s financing abilities, or simply if you changed your mind about selling the house in the first place. However, per the Fair Housing Act, you cannot refuse to sell your property to a specific buyer based on his or her race, color, sex, familial status, or national origin.
Shall any legal issues arise during the closing process from either the buyer or the seller, the best course of action would be to hire a real estate lawyer. He or she will be able not only to help you know your rights but also to provide legal representation and council if the dispute was to lead to a lawsuit or any other legal proceeding.
When you’re trying to buy a home in a competitive market, you might feel like it’s best to skip the home inspection. That seems like an easy way to make your offer seem more attractive to sellers, and it’ll also speed up the buying process. A win/win situation, right?
Wrong. Waiving inspections when buying a home is never a good idea. The home might look fine when you inspect it yourself with the naked eye, but you never know what’s behind the scenes. A lot of the biggest issues a home can have aren’t detectable if you aren’t an expert. No matter how much you want the home, it’s always best to have it inspected by an expert. Here are the risks of waiving inspections when buying a home.
Who Conducts Home Inspections?
Home inspections are much different than your own walks through the property. Home inspections are done by licensed professionals who know what to look for, and they know how to detect problems. They look into areas of the home you might not pay attention to when you’re walking through the home, from the HVAC to the foundation.
These home inspectors are held to a strict Code of Ethics and Standard of Practices created by the American Society of Home Inspectors (ASHI). You need a qualified opining on the quality of the home, not just aesthetically but foundational. The cost of inspecting a home is more than worth the peace of mind of knowing you won’t run into any surprises once you move into the space.
If you’re an experienced homeowner, you might think you can manage a home inspection on your own. However, professional inspectors are skilled in the elements of home construction, maintenance, and safety. They understand the most important signs of disrepair, and they aren’t likely to overlook anything. It’s best to leave the inspection to the pros.
What are the Risks?
What happens if your home isn’t inspected? While it’s easy to think it’s as simple as skipping the lengthy and costly inspection process, this isn’t the case. Whether you’re buying a new construction home or an existing property, you need to get the property looked at by a professional. If you don’t, you’ll find yourself facing the following.
- Not Insurable – Some home insurance companies won’t issue a policy if you don’t have a documented inspection. Without insurance, you won’t get final approval for your mortgage.
- Safety Concerns – Without an inspection, it’s impossible to know if your new home was safely constructed and currently safe to live in.
- Legal Out – When an inspector finds a large problem with a home, you’re legally allowed out of the agreement through a contingency clause without losing your deposit.
- Expensive Repairs – One of the most obvious risks is that you’re purchasing the home “as-is.” With that in mind, any repairs will need to come out of your pocket.
- Negotiation – Finally, any issues found during the home inspection can be used as a valuable negotiation tool. You can choose for the seller to fix these repairs before you agree to purchase the home, or you can even negotiate the selling price.
As you can see, if you skip your home inspection, you might find yourself facing an extreme case of buyers remorse. While your inspection might seem like an unnecessary extra step, especially if the home appears to be in good condition, it exists for your protection as the homebuyer.
Buying a home is one of the biggest investments you’ll ever make. You wouldn’t enter an investment blind, so don’t go into your new home blind. Use a qualified home inspector to ensure you know exactly what you’re getting into when you buy a home.
Buying a home comes with a lot of confusing steps that often intimidate new buyers. If this is your first time going through the home buying process, you might be concerned about escrow. The good news is that this is the home stretch of the process, and your home is closer than you think.
It feels like forever when you’re waiting for the keys to your new property, but the time will fly faster than you think. This article will define the escrow process so you know what to expect when buying a home.
What is Escrow?
In the world of home buying, escrow is the holding area where the money and contracts are secured until your home is closed. Before the title to your home is physically in your hands, it’s kept with an escrow officer. This officer is a third-party, and they’re usually from the closing company or title company (some states require this to be an attorney).
You’re probably asking why a third-party needs to be involved at all in your home buying process. Simply, it’s for the protection of the buyer and the seller. They make sure everything goes smoothly during the closing process. They protect things like your money and your contracts until it’s time to finish the process completely.
All of your documents will be filed with the escrow officer while you handle your closing. This might include things like home inspections or repairs that need to be done by either party. Finally, when all the conditions for selling are met, the money is transferred to the seller while the records or title is given to the buyer.
Why Escrow Protects Buyers and Sellers
While it might sound like a pain when you’re in the moment, escrow actually servers both the buyer and seller in a big way. The buyer benefits from the escrow by being able to make sure contingencies are met before their money is transferred to the seller. For instance, if the seller agreed to fix a problem with the plumbing, escrow will ensure these funds aren’t transferred until those repairs are complete.
It’s not just the buyer that benefits from the escrow process. Sellers also have the added peace of mind of knowing there’s a security deposit in case the buyer backs out at the last minute. This can be anywhere from 1-2% of the cost of the home which is held in escrow. If the buyer backs out without any real reason, this deposit is then given to the seller for the failure of the sale.
Think of the escrow process as a way to make sure the home sale is done correctly and with consideration for both parties. It also includes a third party who is able to check all documents, contracts and funds are secure and dealt with properly the first time.
Yes, it’s frustrating as both the buyer and the seller to wait for the completion of the escrow process. It’s time-consuming and costly, but it’s also a necessary part of buying a home. It’s there for the protection of both the current homeowner and the new one. It doesn’t affect your home buying process in any way except by making it more secure and reliable for everyone involved.
First-time buyers who are excited to finally close on their home need to make sure they’re familiar with all the costs upfront. It might come as a surprise that the mortgage and downpayment are only one side of the story. Closing costs are additional fees that are associated with the purchase of the home. These will need to be paid at the time of closing the transaction.
When exactly is the closing of the home? This is the time when the title of the property is actually transferred from the original seller to the new buyer. Closing costs can be paid by either the seller or the buyer, depending on the situation. This guide will further explain how to navigate the closing process as well as the average costs.
What are the typical closing costs?
First, let’s discuss what the closing costs actually are. There are several fees that make up the total closing costs, and you might not need to pay all of them. For instance, many states don’t require you to purchase a home with the help of an attorney, so attorney fees wouldn’t be necessary in that case. Check with your real estate agent for a better estimate of what you can expect to pay in your areas.
- Appraisal – You’ll need to pay an appraisal company to check the market value of your home before sale. This might also include specialized home exams for things like A/C or pest control.
- Attorney Fee – If you need an attorney to review your documents, you’ll need to pay their fees.
- Loan Fees – The fees associated with applying for your mortgage such as your application, underwriting, and credit report fees.
- Property Tax – Taxes on the cost of the property which will be due usually within 60 days of purchase to the lender.
- Private Mortgage Insurance (PMI) – If your downpayment is under 20%, you’ll likely need to purchase PMI. Usually, the first month of PMI needs to be paid at closing.
- Title Fees – If you need extensive property records, you’ll need to pay a fee to the title company for this research.
- Transfer Taxes – The tax you’ll need to pay on your home when passing the title from the seller to the buyer.
How much are closing costs when buying a home?
Now that you understand the most common costs that make up the closing costs, it’s time to talk averages. While there is no one-size-fits-all to closing costs, most home buyers pay between 2 to 5 percent of the purchase price on their home. That means if you’re buying a home that costs $150,000, you can expect to pay around $5000 in closing costs.
These costs also vary depending on the state. Arizona, for example, has some of the highest closing costs in the country with an average of just under $2,000 in closing costs for a $200,000 home purchase with a 20% down payment.
You can expect to pay more in closing costs if you make a lower down payment in most cases. However, many closing costs are negotiable. Your lender will include closing costs in their initial estimate, and you can also shop around for a different estimate. There are also programs based locally and nationally that help cover or lower closing costs, especially for first-time buyers.
Talk to your lender and your real estate agent about your closing costs before you approach your closing date. You might be eligible for discounts or programs that you didn’t know about. Either way, it’s important to know what to expect before you officially close on your home.
Starter homes are no longer really cheap and widely available. These small yet comparably affordable homes are getting scooped up left and right. Apartment-weary millennials and baby boomers looking to downsize now that the boomerangs seem to have permanently left the nest for good are driving the prices of starter homes that much higher. Some are beginning to question whether these diminutive living spaces are worth the money.
Should You pay for a Starter Home or Save for Something Better?
Every home-seeker will have to crunch the numbers and weigh the pros and cons of buying a home like a starter one or saving for something larger. Those who are single and those who have no intentions of starting a family in the short-term will likely find a starter home to be worth the money. However, it might not make sense for a newly-married couple to buy a starter home if they plan on starting a family in the upcoming years. Couples looking to add to their family would be better served saving for a larger home or taking out a larger mortgage for more spacious digs to accommodate their children.
Are Starter Homes Worth the Elevated Prices?
Even those who are single or in a relationship without plans to have a family are questioning whether starter homes are worth the lofty prices. Today’s starter homes are approaching the price tags of the family homes of yesteryear. Does it really makes sense to take out a substantial mortgage to finance such a small house? After all, there is no guarantee the real estate market will remain strong. If home prices dip, the investment could lose value and make it that much more difficult to segue to a larger home at the desired time and price.
You Can’t Time the Market to Perfection
There is no sense in trying to time the real estate market as it is unpredictable. If you have been waiting on the sidelines for a while, hoping the price of your “forever home” finally dips, beware that the wait could continue. There is no guarantee the forever home you have your eye on will stay the same price or decrease in price in due time. The market could continue to climb, making it that much more challenging to snag that forever home.
If you intend on transitioning to such a forever home within a year or a couple years of your move to the starter home, you should give serious consideration to skipping the starter home altogether. The moral of this story is few succeed in timing the market to make a seamless and profitable transition between starter and forever homes.
Consider a Happy Medium
Crunch the numbers on the starter home and forever home you have in mind. Once you have determined the exact price difference between the two homes, consider how many years it would to take to save that amount of money. If you can save up the difference between the two homes’ prices in a year or two, it might make sense to buy the forever home right now. If it would take half a decade or longer to save up the difference between the two homes, it makes more financial sense to opt for the starter home.