The ABCs of Home Buying - Part 2

So far, you have found your dream home, made an offer and got it accepted. You have applied for a loan and delivered the earnest money. We have talked about an appraisal and the next step for you is an inspection. If you didn't read the first post, you'll be able to find it here.

You Really Should Have an Inspection!

You may likely also be dealing with a home inspection. There is a good chance you do not know many home inspectors; however, your broker probably knows several. I have my own favorites and I always send my clients a list of the ones I like to use as well as a link to the NACHI website. I am not a home inspector and I do not understand much about home inspections, but my clients have been happy with them and I think they are great to work with. You should get to make your own choice, just make sure you pick one with proper licensing and a good reputation. The home inspection has a timeline that is stated in your contract. You will have to have the inspection done and your reply sent to the seller by the end of this time period.

The job of a home inspector is to point out flaws. If the inspector finds no flaws you probably do not have a good inspector as a good home inspector will find problems in every home, even a brand new one. This being said, we want flaws. What we don’t want is major problems. We want to hear a sideboard should be replaced, the siding painted, and the roof cleaned. We want to hear the caulking around the sink is getting old and that the dishwasher has not been properly attached. Every home has things that are less than perfect, maintenance that didn’t happen or minor things one can fix once living in the home. During the inspection we are hoping not to hear about structural problems, moisture in places where there should be none or other major issues. Replacing a roof can be negotiated, water in the crawl space may be a bigger problem. Most sellers like to keep the inspection period short and sweet as this is the true “get out of jail free”-card. Inspection periods are nerve wrecking for sellers because this is the point where you can choose to not buy the home due to buyer’s remorse or because you decided the pink carpet wasn’t that nice after all. You do not have to have a real reason. But this is not that transaction, this is not the one where we find major problems, or you choose you no longer want the home. Instead we fill out the inspection response form and the transaction moves on in its due course. We could have also negotiated some repairs or maybe a credit.

And Then We Just Wait? or Do We?

We have now delivered the earnest money, you have applied for your home loan, the appraisal is being taken care of and you have done and approved the inspection. What’s next? Things are hopefully starting to quiet down a bit as your lender and escrow are working behind the scenes to hit the finish line on time. Your loan file has been submitted to underwriting and the underwriter is bugging you with questions. Your job is to answer these questions to your best knowledge. Sometimes the answer may be that you do not know or that what they are asking is not possible. Be honest. Your lenders team and your broker are there to help you if you are unable to answer as it’s likely someone else has had the same problem in the past. These people can tell you what worked before and how to give a satisfactory explanation on the situation to your underwriter. Do not panic. Most problems can and will be solved.

I keep throwing in the word escrow. What is escrow? What do these mysterious people do? Escrow is a tad like flight control. Their job is to follow the purchase and sale, the contract and make sure everything that is written in it happens. They follow the timelines and gather information from all parties. If you come from the East Coast, escrow does what the attorneys do in the East. Washington is an escrow state and we use escrow to navigate transactions. They are the good guys, no, I should really call them Switzerland as they take no sides.

Everyone involved wants to make this happen. Your lender, both brokers, the seller, escrow and you. We are all on the same side working as a team. We want to solve potential problems, we want the home to change ownership.

Closing on a Home

Eventually we come to the point where your loan file has been approved. You will have to acknowledge receiving your closing disclosure (CD) – the document that lays out all the fees and interest rates and the true price of money - and the 3-day waiting period starts. What the heck is that? Why are we waiting for 3 days? Who are we waiting for? We are waiting for you to review your closing disclosure and giving you time to ask questions from your lender. The “Know Before You Owe” -rule went to effect beginning of October in 2015 and is a federal requirement to protect you. So, we are waiting for you. When it comes to real estate, we don’t usually count Saturdays and Sundays unless the time period is longer that 5 days. So usually 3 days starting on Friday would be Friday, Monday and Tuesday. However, with the 3-day waiting period we do count Saturdays, meaning Friday, Saturday and Monday.

We’re getting close to closing here! Next, you’ll sign. I refer to this as your phone book appointment as the pile of paper that you’ll be signing will be somewhat thick. Make sure your wrist is in good working order and do your finger stretches before you start. Signing appointments can be at the escrow, at my office, your office, your current home or even at the closest Starbucks. I always offer my clients to join them at the signing, mostly as an emotional support person but it can truly be nice to have a friendly face cheering you on. Signing is not closing though, and this tends to be one of the big misconceptions, thinking that once you have signed the home is truly yours. Think again and whilst thinking, don’t go buy a boat, a car or quit your job because all those may just ruin everything, and trust me when I tell you that all of those have happened and that they have also managed to make thing at the very least difficult. So, wait until someone gives you the keys and says congrats once more.

It's Closing Day!

On closing day your task is to go to work or school or whatever you usually do during the day and wait. Your broker and escrow will keep you updated as we wait for the lender to fund after their last credit check, the file gets released for recording and then escrow records the sale. Once we have the recording numbers, then the home is truly yours and the keys to the house can switch hands. Congratulations! You have just bought a home! You are welcome to start carrying your stuff over to your new home and live your happily ever after.

If you want to keep going and read more, click here.