Buying a Home
Pre-qualification is the beginning of the formal loan application process. At this stage we establish how much you can and want to spend on your new home. Additionally, an experienced lender will look at your long and short term financial goals and present you with the appropriate loan programs.
It is important that we have a clear idea of what your priorities are as they pertain to lifestyle, finances, etc...
Once we have a thorough understanding of your priorities, we get in the car and drive through those areas that most likely suit your needs. The idea is to eliminate those areas that just won't work for larger reasons like schools, shopping etc...
Once we have determined your favorite areas we start to view homes in those areas. We generally preview before we take a buyer. The purpose of previewing is to eliminate those homes that have some kind of resale issue or major problem. By previewing we are able to eliminate the number of homes you will have to look at before you actually get in the car.
When we find the home you are interested in purchasing, the first thing we need to do is establish the value, in other words, how much is the property really worth? The tool we use to establish value is called a Comparative Market Analysis.
Once we have established value, we determine how much we would like to offer. This decision is based on a combination of actual market value, your perceived value of the property, property condition as it relates to the amount of inspection items we think we might have to ask for.
Once we have the property under contract the due diligence period begins. Our goal during this period is to systematically remove all contingencies. These contingencies are short periods of time to get our financing in order (loan conditions), verify that the property condition is acceptable (inspection objection) and to make sure the title is clear and merchantable (title objection).
Once we have an accepted offer we are officially “Under Contract”, we send a copy of the agreement (contract) to the lender. The lender in turn starts to process the entire loan application. The loan goes into underwriting. Loan Underwriting by definition is "The analysis of risk and the decision whether to make a loan to a potential Homebuyer based on credit, employment, assets, and other factors".
The inspection is our time in the house with a trained professional, time to discover the true condition of the property you are about to buy. This is why the choice of an Inspector is an important one.
This is a process of putting together a list, if the inspection yields any unsatisfactory conditions. We present this list to the Sellers agent who in turn reviews it with the Sellers. They have two choices, to agree to all conditions of our requests or to propose an alternative resolution. If they propose an alternative resolution, the buyer has the opportunity to either accept the resolution or walk away from the deal with earnest money intact.
The lender will arrange to have the property appraised. This is an upfront charge that the lender will collect at loan application. A professional, licensed appraiser will research the value of your home.
The seller must be able to provide, via the Title Company, a clear and merchantable title to the purchaser. The title company includes all parties in their research, so as a result, you will receive extensive paperwork throughout the transaction period. The Title Company provides a current “status” on the title. This is usually where a flag will appear for any potential problems by notifying all parties what liens and/or judgments need to be paid at closing. The Title Company also provides a proposed commitment for your new title policy. This is where your lender will be listed as a lien holder. Title companies must also provide covenants and Home Owners Association documents. We review these documents for any potential problems prior to the title deadlines set forth in the contract.
Prior to attending the closing, we walk through the property one more time to make sure any contractual inclusions are still at the property. Additionally, we make sure the property condition is acceptable, prior to the Seller receiving funds.
We review the final figures making sure there are no excessive lender fees or erroneous closing costs. Our goal is to eliminate unpleasant surprises at the closing table.
The Colorado Contract to Buy and Sell Real Property (CBS-1) contains specific language that affords buyers the opportunity to inspect the physical condition of any property they are under contract to purchase prior to actually closing on that property. There are a multitude of opinions and approaches to the entire inspection process. This is an outline of how we approach the property inspection.
Once we have found a home that the buyer wants to purchase and we actually have that home under contract the “Due-Diligence” period beings. “Due-Diligence” is a short period of time, generally a couple of weeks for the buyer to get their financing in order and perform the inspections and investigations necessary to have a clear picture of the property’s condition. In the old days the motto was Caveat emptor, Latin for "let the buyer beware". Times have changed and the advent of Buyer Agency has certainly created a more level playing field. During the actual inspection our goal is to expose any potential health, safety, structural or mechanical issues.
The inspection is our time in the house with a trained professional, time to discover the true condition of the property you are about to buy. This is why the choice of an Inspector is an important one. Property inspectors are not licensed or regulated but there are organizations that set guidelines, standards and promote general competence in the field. Organizations like The American Society of Home Inspectors ASHI, National Association of Home Inspectors NAHI, Additionally, personal referrals and past experiences can help find a skilled inspector. Membership in one of the above organizations should be a minimum requirement.
Inspectors generally follow a specific routine as well as a set of standards or guidelines, when they perform an inspection (here are ASHI’s guidelines). The inspection usually begins with the roof and exterior and then progresses in towards the center of the home. The inspection should address all of the major systems of the home as well as any structural, health and safety issues.
It’s important to note the home inspector is a generalist. When there are serious structural, mechanical or electrical issues, the inspector should recommend further evaluation by a licensed specialist (much like a Doctor).
After the inspection, the purchaser can request repair, replacement or remuneration for any conditions they deem unacceptable. The prospective seller then has then right to address the buyers concerns. Ideally both parties agree and we proceed to the closing.
In many cases the inspection becomes a re-negotiation of the contract. Additionally, the inspection phase of a real estate transaction can become an emotional struggle. The seller feels like they have already bent as far as they are willing and now the buyer is coming back asking for more. The buyer on the other hand feels like the seller agreed on the price because they knew these issues existed and they aren’t going to get stuck with someone else’s problems. A good broker will keep the entire transaction in perspective for their clients, present facts and facilitate what is right, not necessarily what is easy.
Radon is a colorless, odorless, radioactive gas. Radon forms through the natural breakdown of uranium in soil, rock and water. Radon moves up through the ground to the air above and into your home through cracks and other holes in the foundation. Homes trap radon inside, where it can build up and be inhaled by the inhabitants. Any home may have a radon problem, new and old homes, well-sealed and drafty homes, as well as homes with or without basements.
Radon gas decays into radioactive particles that can get trapped in your lungs when you breathe. As these particles break down further, they release small bursts of energy. This can damage lung tissue and potentially lead to lung cancer over the course of your lifetime. The EPA estimates that radon is responsible for approximately 20,000 deaths from lung cancer every year. Not everyone exposed to elevated levels of radon will develop lung cancer and the amount of time between exposure and the onset of the disease may be many years.
Believe it or not radon is a controversial topic and there are actually those that don’t even believe it exists, or that it can be harmful. On the other hand, here is a list of organizations that state Radon is a health threat:
Absolutely, radon reduction systems work and they are not too costly. Some radon reduction systems can reduce radon levels in your home by up to 99%. Even very high levels can be reduced to acceptable levels. It is not unusual to see tests in homes with mitigation systems come in below the level of the outside air.
In Colorado Springs, we generally treat radon as an inspection issue. This means that we test for radon during the property inspection. If radon levels are high (4 pCi/L or higher) the installation of a mitigation system becomes a negotiable item. We will discuss inspections in another section.
The cost of a Radon mitigation system can range from $1,500 to $3,000, depending on the state of the existing foundation of the home. Systems for newer homes tend to cost less because modern building code requires builders to install perimeter or French drains around the base of a homes foundation. This drain is intended to keep water away from the foundation but also allows for easier installation of the radon mitigation system.
Radon infiltration is a serious condition. Even if you don’t think it’s harmful, chances are the next person to buy your home will. The time to address radon is before you close not when you sell.
Much of this information comes from an EPA publication named “A Citizen’s Guide to Radon” If you are interested in obtaining a free copy of this publication let us know and we’ll send you one.
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