This was originally published on Monday, January 25, 2016, in the Pacific Daily News. Click here to subscribe to the PDN.
The process to buying a home can be lengthy. Preparing your finances, securing an agent and then finding a home you want can take months. At this point you are almost in the home stretch. Although you can see the light at the end of the tunnel, be prepared for a lot of paperwork.
Your agent will draft an offer letter to present to the seller’s agent. This can be one of the most stressful steps in the home buying process. Using information that your agent has on the property, you and your agent will decide on how much you want to offer the seller. Remember the seller wants to get the most from you and you want to give the least amount possible. Somewhere there is a happy medium and your agent will try to find it. Some of the information to consider are:
- The housing market. Is it a seller’s or buyer’s market? If there are many houses in the area to choose, the seller is usually at a disadvantage due to competition. If there are a fewer homes then the seller has the upper hand.
- How long the property has been for sale? If the house has been on the market for a while, the seller is incurring costs with the property just sitting there. They may be more inclined to sell. Just the opposite if the house is new to the market, the seller may want to test the waters and see what top price they can get and may hold out for a while.
- Why is the house being sold? If the house has been foreclosed and the bank is trying to recoup its money , the bank may want to sell it quickly. If the house has been deeded to the seller without a mortgage, the house may stay on the market longer. If the seller is leaving island or has purchased a new home, they may be willing to sell faster.
Your agent takes this and other information and deduces a price. The agent offers the price to the seller’s agent. If the seller disagrees, they may counter with a different offer. This process can go on for a while. During the negotiation, those repairs you were asking for may also be included.
You should also take into consideration that the seller may have multiple offers. Once a price is agreed upon the next step is to go through escrow.
Escrow clears property
Escrow is when a third party steps in and ensures that the steps to closing are done properly. The escrow company handles all the money that is exchanged and sees that all conditions are met. At some point, the property will have to be appraised. This could be a condition of your offer.
You may also want to have the house inspected, especially if it is an older house or if the house is in a special zone such as flood or tidal. You may also require that the house be inspected for pests. A house infested with pests could have structural damage. The seller is required to mention any major damage to the home.
If the property is a foreclosure and the bank is selling it, it may be sold as is. An important step a title insurance company takes is to check if the title of the home is free and clear. In other words, there are no outstanding lawsuits as to who owns the land and all property taxes have been paid.
Once the escrow company is done clearing the property for sale, the next step is getting the home insured. Most banks require that insurance be purchased before the house is occupied. Majority of the time the bank will ask you who you want to insure your home with, and will work with that insurance company. The monthly payments for the insurance may be included in your monthly payments.
The last step is signing the multiple copies of documents at the bank. Once the documents are completed, the keys are handed over and you are now a homeowner.
Take pride in the steps you accomplished and enjoy your new home.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.