Initial Agreement and Deposit

An effective agreement is a legal arrangement between a potential buyer and the property’s seller. Here are some important tips to streamline the process:

• Keep Written Records: Document everything, including verbal agreements, counter-offers, and addendums. We can assist in drafting all written records and provide copies for each party.
• Stick to the Schedule: You and the seller will receive a timeline to complete each stage of the real estate closing contract.

The Closing Agent

Once both parties have agreed upon a contract and signed all documents, a title company or attorney will act as the escrow or closing agent, and you will make your deposit. The escrow agent is a neutral third party who will hold, receive, and distribute all funds associated with your transaction until the closing date. They will research the property’s history to ensure the title is clear of encumbrances by the closing date and that new encumbrances are correctly added.

All contingencies in the Purchase Agreement must be met before escrow can close and you can officially purchase the property.

How to Hold Title

There are several ways to hold title or ownership of a property, each with different implications for ownership transfer, collateralization, financing, and taxation. We recommend consulting an attorney or tax advisor to determine the best option for your property.

We would be happy to connect you with trusted attorneys and tax advisors in the area.

Inspections

As part of the contingencies in the Purchase Agreement, schedule a licensed property inspector to evaluate the home within the agreed-upon timeframe. Inspectors will assess the property’s condition and alert you to any problems. You may want multiple inspectors specializing in areas such as roofing or plumbing.

For commercial properties, you might need an environmental audit or soil test for the lender. If inspections reveal issues not specified in the purchase agreement, you can request a renegotiation of the contract terms, usually the price.

Once satisfied with the inspections and terms, the contingencies will be removed.

Appraisals and Lending

Maintain communication with your lender to ensure timely notification of any required documents for loan approval. If the Purchase Agreement is contingent upon financing, the lender will require a home appraisal by a licensed third-party appraiser. The appraiser will confirm the property’s value based on factors like building costs, square footage, and operating income.

Check with your lender two weeks before closing to ensure the loan will be approved on time.

Association Approval

Some properties may require an association’s certificate of approval before purchase. Request all rules, regulations, and necessary documents from the seller. In the Purchase Agreement, you and the seller will agree on a timeframe to submit paperwork or set up any required appointments for the association’s approval.

Once accepted, your closing agent will request the original approval letter to be recorded with the deed in the county record books at closing.

Property Insurance

Basic property insurance plans protect against damages from events like fire, theft, and certain weather conditions. While most states do not require property owners to have insurance, most mortgage lenders do.

Depending on your intentions for the property, you will need either homeowners insurance if you plan to live in the home or landlord insurance if you intend to rent it out as an investment.