The Inspection Objection is one of the big deadlines during the contract period. Another item to examine is title insurance.
Unlike other types of insurance, which offer protection against future events, title insurance protects you against events in the past. The title company will do a title search to make sure that the current owners of the land actually have the right to transfer the property to you. The title company will examine all of the past sales on that property and public records to see if anyone else could make a claim on the property. For instance, if a contractor had done work on the home in the past but was not paid, he might put a lien on the property to try to collect when the property was next sold. Or, if a previous owner was not of sound mind when signing closing documents, the heirs might claim that the property still belonged to the estate. Should an unforeseen claim come up, the title company who insured the property would pay to rectify the situation so you would not lose your house.
Another hurdle to overcome is the appraisal. If you are obtaining a mortgage loan to purchase the home, your lender will want to make sure that the property is worth what you have agreed to pay. If the appraisal they order comes in lower than the purchase price, either the seller will have to come down in price, or the buyer will have to bring more cash to closing so that the lender isn't stuck with the difference. This is also another point in the contract that allows the buyer to terminate the contract and regain the earnest money.
Be responsive to your lender to keep the process moving
One of the last items to settle is Loan Conditions. This is the deadline by which the buyer has to decide if the terms of her mortgage loan is acceptable. Keep in mind, this is not a deadline that the lender is beholden to. Even though the lender is aware of this deadline and wants to give his client as much information as possible by then, there is still no absolute guarantee until final loan approval comes in and the clear to close is given by the underwriter. Most times, though, the buyer is well aware of the terms they can qualify for much earlier in the process.
During this loan approval process, it's important to keep your finances and credit in order. Your lender will pull your credit right before closing to make sure there haven't been any negative events that would affect your ability to make mortgage payments. Avoid any large purchases - no furniture for the new place yet, no new credit lines, and for goodness sake, don't show up to closing in your brand new BMW!
Communication is the key to a smooth transaction. The deadlines that the buyer and seller hold each other to are not technically deadlines for anyone else - not inspector, nor appraiser, nor lender. It's a good idea to check in with these parties if at all possible while you are deciding on deadlines. It's also important to work with an experienced Realtor who not only knows the ins and outs of the process, but also has good relationships with service providers who want to maintain the trust they've built. The earlier snags can be discovered, the easier they are to fix.
It's the one. You got that little spike of excitement when you walked in the front door, and the rest of the house was just as wonderful. You've studied the comps I've provided to decide on an offer price, you have your pre-qualification letter and your earnest money check is ready. Time to fill in the blanks on the Colorado Contract to Buy and Sell.
There are a few things to think about as you're working out the details of your offer. How long has the property been listed? If it's a great house and it's brand new to the market, there may be other offers being prepared as well as yours. How competitive do you want to be? If the house has languished on the market for a while, you may be able to negotiate a better discount or terms. When do you need to close and move in? If that's not that important to you, can you find out what the seller would prefer to make your offer more palatable?Do you need to ask for closing costs from the seller? Perhaps you have the down payment but can't afford anymore costs up front. Keep in mindthat the seller will subtract those costs from the purchase price when he is figuring out his net gain from the sale.
If the seller finds your offer acceptable before the expiration date you wrote in, he will sign and send back, making you officially under contract. If he doesn't, he's likely to write up a counter-offer, adjusting those terms he finds unsatisfactory. This is very common, so don't let it worry you. Decide if you can live with the new proposal, or counter again until you both come to an agreement. Sometimes these negotiations can become emotional, but it's important to keep your goals in mind and remember that this is a business deal. Don't take the seller's comments or needs personally; he doesn't know you or your intentions, he's trying to get the best deal -just like you.
Once you're under contract, you have time to inspect the property to make sure it is what was represented and what you want. Some issues are obvious, like peeling paint on the exterior, some are not, like a cracked heat exchanger in the furnace. I always recommend a professional inspector to start, and then follow up with any other specialty inspections like roofers or plumbers if needed. Should something prove to be too expensive or too much of a hassle to accept, the contract can be terminated by the buyer. Other issues, such as the appraisal coming inbelow the purchase price or the inability to qualify for the right financing, also allow the buyer to terminate the contract.
I should qualify the statement, "terminate the contract." While a buyer has several opportunities to cancel a deal and regain his earnest money, the transaction should not be entered into lightly. The earnest money that is offered to the seller is intended as a gesture of good faith,risking some of your hard-earned cash to show that you intend to follow through with what you started. And while you are not obligated to give the seller a ton of details about why you terminated, you had better have some. The contract you sign states that you are moving forward in good faith, and if the seller believes you are just trying to capriciously skip out he may contest the return of your earnest money.
It's important to inspect the property thoroughly, including checking out the neighborhood, the homeowner's association if there is one, any construction permits that were filed with the city, etc. Having knowledgeable, experienced professionals guiding you is the best way to achieve peace of mind about your purchase. After all, buying a home is the largest financial decision a lot of people make, and a few hundred dollars up front to know what you are buying is money well spent. I have a list of trusted service providers I work with on a regular basis that want to do a good job for me and my clients and would be happy to put you in touch with them.