I highly recommend every buyer review the Oregon Property Buyer Advisory from the Oregon Real Estate Agency full of valuable information. This advisory is designed to provide guidance on the home buying process, financing, inspections, and information on common issues in property transactions that every buyer should consider investigating or verifying before purchasing a home.
The Home-Buying Process
Step 1- Qualifying for a Loan
It is easy to get excited by the idea of buying a new home and wanting to get in the car right away to start looking at properties. However, the first important step is getting pre-approved. By getting pre-approved you will find out what price range you qualify for. You do not want to set yourself up for disappoint by initially looking at homes that are more expensive than you can afford. You can get preapproved with a bank or mortgage broker. I recommend you interview and compare to make sure you are using someone you feel comfortable with and can trust. You should receive a Good Faith Estimate which will show you your estimated monthly mortgage payment and how money you will need for your down payment and closing costs. You will also need to get a pre-qualification letter which is necessary to accompany your offer. If you need help finding the right lender I can offer recommendations of lenders who have done phenomenal jobs for my clients in the past. A good lender can counsel and guide you to the most advantageous and appropriate program for your needs.
Some documents that you should have ready for when you make loan application are: last 2 year’s W-2’s, most recent pay stubs covering a 30-day period, two months statements and all asset accounts.
Step 2 – Identifying your Needs and Desires
Once you have been pre-approved we are ready to meet and talk about what features and criteria are most important to you in your new home. A short commute? Good schools? We will identify what are “must-haves” and what are “would like to have, but are not deal breakers.” Once we have determined what you are looking for I will email you properties that fit your search criteria as they hit the market.
As you find homes that interest you I will arrange for us to view them in person. As your agent I will point out to you issues that you should consider when making your decision, especially features that could affect your resale positively or negatively down the road. It is easy to get caught up in the beauty of a property but you need to know the good and the bad so that you can make an informed decision.
Step 3 – Making an Offer
So we find you the right house and you are ready to make an offer. First we will take a look at comparable home sales in the area. I try to find homes that are similar in features, size, area and age that have sold recently. This Comparable Market Analysis will help us determine if the home you desire is priced fairly.
Once we determine what sales price you are comfortable offering we will fill out a standard Oregon Sale Agreement. While filling out the contract we will talk about how much earnest money you would like to put down, which is held by the title company and is credited to you at closing.
We will talk about the property and what stays with the home. The majority of homes sold in Portland are sold without the refrigerator and washer and dryer unless indicated, but any other appliances that are attached stay with the property including the dishwasher, garbage disposal, and if built-in, the stove and microwave.
As your Buyer’s Agent, I present the contract to the seller’s agent and whenever possible to the seller as well. I will be negotiating with the seller’s agent to get you the best terms possible. There may be multiple offers, there may be counter offers. Time is of the essence and a fair offer usually generates a fair response. I will not leave any stone left unturned to get you the best possible outcome.
Once we have an accepted offer the seller will deliver disclosures. The Seller’s Property Disclosure Statement discloses the property condition to the best of the Seller’s knowledge. If the home was built before 1978, there is also a lead based paint disclosure. You will have 5 business days from the Seller’s delivery to review the Property Disclosure Statement and revoke your offer if you disapprove of anything you find in the statement.
I recommend scheduling a home inspection as soon as possible. The home inspection period is typically 10 business days which starts the first business day after the acceptance of the offer. If you need help choosing a home inspector I have inspectors I can recommend. I will attend the home inspection and it is best if you can be there as well. At the end of the inspection the Inspector will provide us with a typed inspection report and photos addressing all the items on the property. Upon our review, we will then address any necessary items to be repaired in a repair addendum to the seller. All this is done within our home inspection period which we specified in the contract.
After inspections are completed and repairs have been agreed upon, that is generally when the appraisal takes place. The appraisal is ordered by your lender and you pay for the appraisal at closing which is included in your closing costs. The appraisal needs to come back at our above the agreed upon sales price. If it comes in below you have the right to terminate the transaction and get your earnest money back.
Step 4 – Role of the Title Company
What is escrow and what happens in escrow?
An escrow is an arrangement in which a neutral third party holds legal documents from the buyer, the seller, the lender, and the deposit of funds, according to the buyer and seller’s instructions via a sales agreement. As soon as a sales agreement is mutually agreed upon by buyer and seller, the buyer’s earnest money (credited to funds at closing) is placed in an escrow account at a title company. This opens the escrow account.
An escrow is important so that both parties can move forward separately, but simultaneously in providing inspections, loan commitments and funds, deeds, and other reports, using the title company as a central storage place for all these items from both parties.
The escrow holder sees that all of the terms and conditions for the transfer of ownership of the property are carried out properly for both buyer and seller. The escrow officer then processes the escrow in accordance with the escrow instructions.
The obligations of the escrow holder include:
1. Receives all funds from the buyer and/or lender and manages the funds in accordance with instructions.
2. Provides all parties with a copy of the Preliminary Title Report and CC&R’s (Covenants, Codes and Restrictions)
3. Prorates insurance, taxes, rents, homeowner’s association fees, etc.
4. Facilitates and disburses the funds for title insurance, recording fees, real estate commissions, lien clearance, etc.
5. Prepares the final statement; the HUD, for each party indicating the amounts to be disbursed and any amounts necessary to close escrow.
6. Records deed and loan documents (deed comes from the courthouse), disburses loan documents to the lender and funds to the seller, therefore closing the escrow.
Step 5 – Before Closing
Prior to closing you want to make sure that you provide the mortgage company with all of the necessary documents needed so they can go through with the underwriting process. This includes notifying your mortgage broker which insurance company will be providing your home owner’s insurance.
As a buyer you want to make sure you have made all the necessary arrangements to hook up your utilities so that your service will be turned on when the seller’s utilities are turned off. A couple weeks before closing I will provide you with a list of important utility phone numbers. Make sure you file an address change form with the post office, notify all bills, magazines, friends and family of your new address.
Step 6– The Signing
You will sign your loan documents with the title/escrow company prior to closing. As soon as the title company receives the loan documents from your lender, your escrow officer will call you to schedule your signing. Your signing will take place at the title company during business hours and it will take about an hour depending on how many questions you have. Depending on when the documents arrive this could happen last minute, so it is a good idea to keep your schedule open the few days prior to the closing date. The escrow officer will prepare your estimated settlement statement and tell you the exact dollar amount you need to bring in at signing. I will also review your estimated settlement statement before you sign to make sure everything is correct. You will need to bring in either a certified check made out to the title company for the amount you owe or wire transfer funds from your banking institution. You will also need to bring in your driver’s license for notary purposes.
In addition, the loan officer will have gone over the closing costs involved for your transaction. Other closing costs will be the title company’s processing fee or escrow settlement fee, the fee for recording the deed, any pre-paid interest, homeowner’s insurance, title policy to your lender, and property tax.
Pre-paid interest: Since mortgage loans are due on the first day of the month, and properties can close any day of the month, the interest will be prorated and paid at this time.
Homeowner’s Insurance: The premium is paid at closing. However, if you have set up for your insurance to be paid from an escrow account on a monthly basis vs. paying it upfront at closing, the mortgage company will be paying the continuing payments. Therefore the mortgage company will divide the annual premium by twelve to get an estimated monthly amount and hold however many months necessary depending on the time of year you close.
Taxes: Are also prorated at closing and you will pay only for taxes from the closing date forward. This proration gives you the credit for the portion of the year that the seller paid up until closing. Therefore taxes will be divided by twelve months to get an estimated monthly amount and hold however many months necessary depending on the time of year you close. The fiscal tax year runs from July 1st through June 30th of the following year.
Step 7– The Closing
On the day of closing, funding and recording will take place. The lender will wire your loan funds to escrow and your escrow officer will release your title documents to the County Clerk to record the property in your name. Once escrow has received confirmation that your documents have recorded and have received the funds from your lender, we are officially closed! I will meet you at your new home to hand you over the keys at the time you are allowed to take possession which is typically at 5:00pm on the day of closing.
I will be here for you every step of the way to guide you, represent you and negotiate on your behalf. This is just an overview of the many stages of the home-buying process to prepare you of what you can expect. If you have any questions never hesitate to let me know. I think open communication is key to a successful transaction. My goal is to make the experience as stress-free and smooth as possible.
Download the Oregon Real Estate Agency Disclosure here.