Steps for Buying a New Home

STEP 1: The Offer

Buyer makes offer to purchase seller’s property. All offers must be submitted in writing.
Agreement of sale

1. The Agreement of Sale form approved by the Kent County Board of Realtors. This preprinted form is used by most major firms in our market area and may be completed with Realtor assistance.
2. Deposit. The earnest money or good faith deposit that accompanies the offer is negotiable. The buyer’s personal check is usually made payable to the listing broker who must by law deposit the check in a separate insured escrow trust account once the offer is presented and accepted.
3. Customary Provisions
1. Mortgage Loan Contingency. Any conditions regarding mortgage financing or loan assumption are written in the agreement of sale. Although "mortgage pre-approval" has become the norm, a mortgage contingent buyer is given five to six weeks to obtain a firm loan commitment. A buyer has a contractually agreed upon number of working days to make completed application for a mortgage loan after acceptance of offer by a seller.
2. Termite Inspection. Under the provisions of the Agreement of Sale, the seller at seller’s expense provides a report and inspection certification from a licensed exterminating company showing the absence of termites, wood-destroying insects and organisms. Most mortgage companies require this inspection. If infestation and/or damage are discovered, specific remedies are contained in the sales agreement.
3. Home Inspection. A buyer has the option to have (at his or her expense) a complete inspection of the structure including: roof, electrical, plumbing, heating and cooling system and built-in appliances. Other possible inspections include radon, well, on-site septic system and swimming pool, etc., where applicable.
4. Adjustment and Prorations. Unless otherwise provided, the following items are prorated and adjusted between the parties or paid at closing:
1. Taxes on real property are prorated on a fiscal year or calendar year basis, as appropriate, to the date of closing.
2. Sewer & Water rents, if any, for the property are prorated to the date of closing.
3. Accrued, but unpaid, interest and other charges to the seller, if any, are computed to the date of closing and paid by the seller. Taxes and other charges prepaid by the seller shall be credited to the seller at closing and paid by buyer. (Other charges to buyer may include FHA mortgage insurance premiums and private mortgage insurance premium.)
4. Homeowner association/maintenance association, annual fees.
5. Conveyance of Title. It is customary in our area for the seller to convey title by Special Warranty Deed at closing. The average time from execution of agreement of sale to settlement varies but is approximately 30-60 days.

STEP 2: The Deal

Offer to purchase is presented to seller and, if acceptable, is signed by seller and becomes a binding contract.

Buyer makes application for Mortgage, Title Insurance and Property Insurance. If buyer is pre-approved, skip to "B."

1. Mortgage Loan Procedure
1. Application The buyer completes an application with the loan officer, supplying necessary information such as past and present employment, credit history, assets and liabilities. Accurate names, addresses, all account numbers, and balances are important for expedient lender verification. The buyer generally pays an application fee at this time.
2. Processing Lender orders verification of all information supplied by borrower (buyer) and credit report. Lender orders appraisal of subject property. When loan package is complete, loan officer submits package to loan committee for review and approval.
2. Title Insurance Procedure The Buyer secures services of a Real Estate Attorney who then contracts with the title insurance company to insure the buyer’s and lender’s interest in the real estate being purchased. The Attorney performs a title search and examination of the title records and the title company issues a commitment, or report of title. The report is sent to the lender and the various parties or their representative before closing. The Attorney works with these parties to insure the conveyance of clear title; conducts settlement; receives and disburses funds as shown on the HUD-1 sheet prepared at settlement in accordance with the contract of sale and lender’s instructions; records documents and issues title insurance policies to buyer and to lender.
3. Hazard Insurance Buyer must arrange appropriate "Homeowners’" property insurance (which must be acceptable to the lender) for coverage of real estate and personal effects to begin the day of settlement. Normally, the mortgage company will require a "loss payee" clause. So be sure to ask for the needed wording.

STEP 3: The Money

Lender approves application, issues commitment to borrower and prepares for settlement.

Mortgage Commitment

1. Procedures Buyer should instruct the mortgage lending institution to provide the Realtor with a copy of the mortgage commitment document. Buyer typically acknowledges acceptance of this commitment and may be required to pay a commitment fee at this time.
2. Preparation for Settlement Lender prepares closing documents and submits closing instructions to buyer’s attorney.

STEP 4: The final walk-through

Buyer and Agent conduct pre-settlement inspection and complete arrangements for closing and moving

Preparation for closing by the buyer

1. Pre-settlement Inspection Approximately 48 hours, or less, prior to closing. The buyer may exercise the right of pre-settlement inspection of the property. A final walk-thru insures that your new home is in the same approximate condition as when you came to agreement and that all inclusions or exclusions have been handled.
2. Utilities The Buyer and Seller notify the utilities (gas, electric, water, cable, trash, etc.) to change the billing from the seller to the buyer, effective as of the date of closing, or occupancy, if occupancy precedes settlement.
3. Buyer verifies that all lender requirement are met
4. Buyer arranges to have certified funds for closing This means a cashier’s check for all amounts over $2,000. Bringing cash is discouraged.
5. Buyer must bring original hazard insurance policy ("Homeowner’s") and either a bill for the premium or a paid receipt to closing.

STEP 5: The Homestretch

The settlement takes place to complete the transfer of title, loan documentation, and cash settlement.

Closing

1. Location The settlement is usually held at the office of the buyer’s attorney or real estate company.
2. Procedures
1. The Attorney’s office prepares a HUD-1 settlement sheet in accordance with the contract of sale and lender’s instructions.
2. Buyer’s usual closing costs include cost of the loan (points, document preparation, inspection fees, tax service, creation of escrows and interim interest); title insurance, recording fees and transfer tax, legal fees and prorated adjustments for seller’s prepaid items.
3. Documents are executed. This includes the loan documents which buyer signs, deed which seller signs and the title affidavits and HUD-1 sheet which both sign.
4. The buyer pays the balance due on purchase price and closing expenses with either a personal check, cashier’s check or certified check. (Notice should be given early as to what is required.) Certified funds are usually required for payments over $2,000.00.
5. Allow one and a half hours to complete settlement.

Seller receives proceeds from sale of property and conveys title by Special Warranty Deed to buyer.

Attorney records pertinent documents in the public records at the county courthouse.

Buyer takes possession of property; leaves closing with copy of executed Deed, the original marked-up title insurance report evidencing his ownership interest; copies of his documents; and keys to the property.