The Process, Step-by-Step
The Initial Agreement and Deposit.
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller. One of those steps is the Earnest Money Deposit. Usually due within a couple of days of the contract being signed, it shows the seller that the buyer is acting in good faith and is serious about pursuing this transaction to fruition. Failure to comply with your contract dates could result in the forfeit of this deposit.
At this point, Nola & Associates will prepare a To-Do list of deadlines that are outlined in your contract. It is important to stick to the schedule. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements.
Once your offer is accepted by the seller, you will have a certain window of time (agreed upon in the contract) to complete any desired inspections. You may wish to have multiple inspectors inspect the property if you wish to obtain professional opinions from inspectors who specialize in a specific area (e.g. roof, HVAC, structure, chimney). We can advise you on what inspections to consider, and can provide you with lists of suitable contractors. You can also use this time to perform other due diligence tasks, such as checking the zoning for any additions you want to add, talk to homeowners insurance company, research costs for repairs of changes you want to make to the property, etc.
Depending on the outcome of these inspections, one of two things may happen:
- Either the inspection period isclosed and the contingencies will be removed, bringing you one step closer to the close, or
- You choose to try to re-negotiate the terms of the contract based on information revealed in the inspections that were unknown before. For example, if the inspection reveals that the chimney needs to be relined, you could ask the seller to complete this work, or to reduce the purchase price, or to split the cost of this repair. Your agent will help you with these negotiations.
- The seller is not required to agree. The seller may refuse to re-negotiate. Your option is to move forward and take on the repairs when you close or terminate the contract and have your deposit returned. You must adhere to the contract dates.
Other due diligence items should also completed during this time. Visit the Town Office and check zoning, etc. Don’t assume you can add a deck or an in-law apartment, etc. without confirming with local officials. Any other issues that may impact your desire to own this house should be researched during the due diligence period.
The Closing Agent.
Either a title company or an attorney will be selected as a closing agent. In Maine and NH, most real estate closings are handled by title companies who have attorneys on staff. The title company will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances. Some properties are subject to restrictions which limit certain building activities, or provide a right of way to a neighboring property. There may also be recorded liens or encumbrances that could prevent you from taking clear title to the property. If such an encumbrance is discovered, it must be resolved before the closing.
You can also speak to the title company or attorney about the different methods of holding title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.
Appraisal and Lending.
It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.
If the property that you are purchasing is conditional upon an association approval (such as with a condominium) there can be an additional step of reviewing rules and regulations of the association. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Most associations require a certificate of approval before move-in.
If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. We will be happy to recommend experienced insurance agents for every property type.