Information I Require as Your Agent

In preparation for our meeting to plan your house hunting, it is a good idea to do some planning on your own.  Take some time to think about the things that you feel are important to have in you new home.  Although it is never possible to completely describe what you want, there are always things of major importance to you and it is important that I know what they are.

Considerations:

·         Type of Residence: House, townhouse, condo

·         Style of Residence: Two-story, ranch, split-level, contemporary

·         Type of setting: country, city, mountain

·         Location:  Proximity to work recreation and schools

·         Space Requirements:  Bedrooms, square footage, special requirements such as in-home office, space for a special hobby, garage space, finished basement, quarters for nanny, in-law apartment

·         Special Features:  View, fenced yard, pool, horse facilities, handicap access, close to public transportation

·         Schools:  Ages of children and any special educational requirements they may have

·         Lifestyle:  Entertain a lot, want minimum maintenance site to permit maximum time for leisure activities, great deal of time is spent at home with family activities, retirement community, community with total recreation package (pool, golf, tennis, jogging, organized children’s activities).

·         Financial:  Must sell current residence, amount available for down payment, maximum monthly expense of ownership.

What are the three most important features about you next home?

Feature 1:

Feature 2:

Feature 3:

Other Features of Importance:

Buyer and Seller Representation

What is Agency?

Agency is a legal relationship between parties, that carries with it the duties and legal responsibilities that each party to the agency agreement has toward the other(s).

What types of Agency are common in real estate?

A real estate agent may act as:

·         Seller’s Agent:  A Seller’s agent acts solely on behalf of the seller and had the fiduciary (legal) duties to the seller which include reasonable care, undivided loyalty, confidentiality and full disclosure.  A seller’s agent must also disclose to prospective purchasers and other agents any known defects of a material nature affecting the physical condition of the property. 

Agents helping Buyers find a home who is working in the capacity of Seller’s Agent are becoming increasingly rare.  Most buyers want representation or at least a neutral broker in the transaction (see transactional broker).  An agent must always deal fairly and honestly with you while acting as a Seller’s Agent.

·         Buyer’s Agent:  A buyer’s agent acts solely on behalf of the buyer.  A buyer’s agent has fiduciary (legal) duties to the buyer, which include reasonable care, undivided loyalty, confidentiality and full disclosure.  In dealings with a seller or seller’s agent on behalf of the buyer, a buyer’s agent must act honestly and fairly. 

A buyer wishing to be represented by a buyer’s agent is advised to enter into a separate Buyer Agency Contract.  There is a Colorado Real Estate Commission approved contract that specifically sets forth the duties and responsibilities of buyer and agent in this relationship.

·         Dual Agent:  A dual agent acts as an agent for both the buyer and seller.  Dual agency arrangements are more likely to occur when salespersons show properties listed with their own company to buyers.

·         Transactional Broker:  A transactional Broker does not represent either buyer or seller in a fiduciary capacity as agent, but assists in the transaction.  A salesperson acting as a Transactional Broker has the duty to act fairly and honestly to both buyer and seller, but does not owe fiduciary duties to either side.

Prior to beginning the search for your new home, you must decide upon how you wish to be represented in the transaction.

The Home Search

After we have thoroughly discussed all of the things of importance to you in your next home, we will carefully select properties that could be of interest to you.

As many of your needs and wishes as possible will be considered in finding the right communities and properties for you to see.  When you are uncertain about features of neighborhood and residence, we will go and see a variety of each.  Continually let me know what you do and do not like.

Keep in mind that in a market that is active, the number of homes on the market at any one time that fit your needs may be limited.  I will continually monitor the homes currently for sale and new listings that come on the market daily through the Multiple Listing Service (MLS).  By doing this you have the opportunity to be among the first to see new listings as they become available.

Some Tips when House Hunting

·         Ask questions:  About the neighborhood, the construction of the house, the schools, property values in the neighborhood, how long will it take to get to work, why is this a good place to live, where do I shop, where is the church

·         Totally forget properties you did not like:  Be sure to tell me what you did not like about them.

·         Take notes (and even a camera if you wish):  Looking at a number of properties can lead to confusion about the features of each.  After you have seen a property that might be a possibility, jot down a few things you liked about it to jog your memory later on.

·         Compare properties you have seen:  Keep a ranking on paper or in your head of the three best properties and rank them in order of desirability.

·         When you find the property you want to buy, make your offer quickly:  If you like the property, someone else probably will also.  There is nothing more frustrating, having found the house you want, to let someone else snatch it from under your nose.  Let me know as soon as you know that you have decided to make an offer.

Making A Purchase Offer

There are numerous details to be considered when preparing your contract to purchase.  The Colorado Real Estate Commission approved “Residential Contract to Buy and Sell Real Estate” is a multiple page document that covers all aspects of the purchase of your residence. 

I will carefully go through the contract with you, explaining its contents and obtaining the information that is unique to your purchase.  Once it is prepared and signed by you, I will deliver it along with your earnest money check to the listing agent for presentation to the sellers.

ITEMS OF MAJOR CONSIDERATION IN YOUR CONTRACT

ITEMS OF MAJOR CONSIDERATION IN YOUR CONTRACT (Continued)

Choosing a Mortgage Broker/Banker

Many potential homebuyers seem to be only interested in the percentage rate which the mortgage broker/banker is offering them.  In fact, you should be asking for the rate and an accurate good faith estimate of closing costs, up front (including the loan originating fee and any discount points). 

Closing costs vary considerably from one lender to another and although you may be getting a great rate you may be paying through the nose on the closing costs.  It is certainly worth shopping the rate with two or three different sources, but always find out about the closing costs.

The following charts are to help you get some idea of what you might be able to afford and what your payment might be. There is no substitute for going to see a mortgage broker/banker at the outset.  It is something that you will have to do sooner or later anyway and it could save surprises and disappointment later on.

Mortgage Calculator

As you shop for your new home, it is easy to calculate what your monthly mortgage payment will be.  This easy to use chart gives you the monthly repayment of your mortgage loan (the principal and interest payment).  This payment is in direct proportion to 1) the size of your mortgage and 2) the interest rate charged on that mortgage.  These figures are based on the 30 year mortgage term, which is the most popular with home buyers. 

If your mortgage amount falls between the two amounts listed, simply add the figure from the $5,000 column to the lesser amount.  Remember, these are estimated amounts of principal and interest only.  Your actual monthly payment will include additional charges for taxes, property insurance, and such.  All amounts listed are rounded to the nearest dollar.

Quick Qualifier

The following chart is designed as a guide to help prospective home buyers estimate the amount of mortgage financing they may qualify for.  This chart assumes a housing to income ratio of 33% and a down payment of 20%.  You may qualify for more or less than indicated on the chart, depending on your amount of current debt, employment and credit history, amount of down payment and the type of loan you are considering.

The Loan Process

The loan process is a series of detailed procedures designed to provide the lender all of the necessary documentation to determine whether you qualify for the loan requested.  The lender will determine, based on their underwriting guidelines, if the loan package presented to the lender meets three general criteria:

            1. Will you have sufficient income to pay the debt requested?

            2.  Based on your credit history, have you shown the willingness to repay you debts?

            3.  Does the property meet their lending criteria?

The information requested by your loan originator is designed to present you in the best possible light to the lender.  It is important during the loan process that you provide the requested documentation in a timely manner to ensure loan approval by the date set forth in your purchase contract.

Following is a standard list of information required at the time of your loan application.  The required items may differ based on your individual situation.

1.  two-year history of employment, including the name and address of current employer and any previous employers.

2.   Two year history of residence addresses and landlord contact information.

3.  Copy of a current pay stub showing your year-to-date earnings. 

4.  Complete copy of your last two years of tax returns and W2’s.  In addition, a current P&L and balance sheet is necessary for all self-employed persons.

5.  A copy of the last two months or the most recent quarterly account statement for all checking, savings, investment and retirement accounts.

6.  The name, account number, monthly payment and approximate balance for all debts.  These include mortgage loans, car loans, personal loans, student loans, credit cards, etc. 

7.  If you are divorced or legally separated, a copy of the divorce decree and/or separation agreement is required and the amount of any alimony or child support that is paid or that is received.

The Loan Process (Continued)

8.   If you have investment property and/or a second home please bring the following:

·         Name and Address of Lender

·         Account Numbers

·         Current Monthly Payment

·         Loan Balance

·         Value of Property and Property Type

·         Copy of Rental or Lease Agreements

9.   If you have previously filed for bankruptcy a copy of the bankruptcy and the discharge.

10.  Certificate of eligibility (DD214) if applying for a VA loan.

11.  Money or check for credit report(s) and appraisal fee.

All of the documentation required for your loan approval will continue until your loan package is complete and ready for submission to the underwriter.  Each item takes time to complete and I will check with your lender frequently to determine if everything is progressing satisfactorily. After obtaining the required information from you and reviewing the purchase contract, your loan originator will provide you with a written Good Faith Estimate of all the costs of obtaining your property.  This estimate will include the down payment amount, the closing costs for the purchase of the real estate and the costs of obtaining your loan.

Inspections(s)

THE HOME INSPECTION

Your contract provides you the opportunity to have the home you are purchasing inspected by experts of your choice at your expense.  There are many reliable home inspectors and home inspection companies available to conduct the inspection and I can give you names and phone numbers.

Some items included in this type of inspection are:

·         Appliances

·         Water and plumbing lines

·         Electrical

·         Heating and ventilation

·         Bath and kitchen fixtures

·         Roof

·         General maintenance

In some instances and depending on the type of home or property which you are buying, it may be prudent to investigate further or hire a specialist expert inspector or engineer for such things as structural concerns, wells, septic systems, termites, etc.

You should be present for the inspections.  Many inspectors, in addition to performing their inspection of the property, will provide you with helpful information about things you can do to keep you house and its various systems in good working condition.  Sometimes your inspector will recommend an additional inspection by an expert such as a structural engineer who is specifically qualified in that field.

Within a few days after the inspection you will be given a written report by your inspector detailing the findings.  If you feel that there are questionable or unsatisfactory items in the inspection report, you should discuss it with me.  Your purchase contract sets forth the time frame in which the seller must be notified of unsatisfactory conditions and such notification must be given in a timely fashion.  I will take the responsibility for delivering your notification to the seller’s agent.

In the event that you and the seller cannot come to a satisfactory arrangement for the correction of unsatisfactory items, your contract terminates and your earnest money deposit is returned.

THE RADON INSPECTION

More and more home buyers are conducting radon tests as a part of their inspections when buying a home.

Radon is a naturally occurring gas produced by the breakdown of uranium in soil, rock and water and has been deemed by the EPA (Environmental Protection Agency) to be the second leading cause of lung cancer.  The EPA suggests that if the radon level is 4 picocuries per liter (pci/l) or higher that you have the problem mitigated.  The cost of fixing a home with a radon problem generally ranges from $500 to $2,500 and in most cases will be dealt with by the seller if addressed within the inspection period..

THE HOME WARRANTY

A home warranty policy may give you peace of mind as the purchaser. It is an insurance policy that can be purchased by you or the seller which pays for the cost of repairs of certain appliance, heating, plumbing and electrical items.  The average cost of a one year policy  is approximately $325.

Prior To Closing

After your loan application has been made, your inspection is satisfactorily completed, and the title commitment has been delivered, there is a period of time which is devoted to waiting for loan approval.  During this time, the lender may ask for additional items required for you loan package but, in general, you will simply be waiting for other people to get the job done for you.

HOMEOWNER’S INSURANCE

Your lender will require that you carry a Homeowner's Hazard Insurance Policy on your property in an amount at least equal to the principal balance of you loan.  However, you may wish to have coverage in excess of that.  If your insurance agent does not provide home owner's insurance, I can provide you with names and numbers of companies that do. 

In many of the townhome and condominium communities, the homeowners hazard insurance is carried by the Homeowners Association and is paid for in your monthly maintenance fees.  This insurance normally covers the exterior of your unit but none of the contents.  You will want to get additional insurance coverage in a policy similar to a tenant’s policy to protect the interior of your property and your personal possessions.  Your lender is not a party to this insurance.

It is your responsibility to make arrangements to have your homeowner's hazard insurance in place on the date of closing.  You will pay for the first year in advance and subsequent years through an escrow fund setup by the lender at closing.

Your lender and the title company closer will need to know the annual premium amount for purposes of preparing the closing settlement statements.  Have your insurance agent contact them with this information.

Prior To Closing (Continued)

UTILITIES

It is a good idea to notify your utility company and your phone company sufficiently in advance of the closing of the service changes required.  This is solely your responsibility and you will sign a document at closing acknowledging that fact.

MOVING ARRANGEMENTS

Making your moving arrangements well in advance of your moving day is a wise thing to do.  Your mover has especially busy times of the year and getting your move on their calendar will avoid those last minute problems.

AFTER YOUR LOAN IS APPROVED

Once you loan is approved, which normally happens only a few days before the closing, your lender, title company closer and I will work together to get figures and settlement statements prepared.  Although every attempt is made to notify you well in advance as to the exact amount of money you will need to bring to the closing, there is often a need for some last minute banking.

“GOOD FUNDS”

Either I or the closer from the title company will give you the exact figure (to the penny) that you need to close.  Your purchase contract states that you will provide these funds in cash, cashier's check or certified funds.  Cashier's checks can either be made out to the title company or to yourself and then signed over to the title company at closing.

Although it is not always possible to have funds in place in your bank due to the closing on another property or the necessity of wiring funds from out of state, try to have all arrangements made in advance so your closing can happen in a timely fashion and in compliance with your purchase contract.   Remember that checks from foreign or out of state banks might take a few days to clear.

The Closing

Even if you are experienced at buying and selling properties, the closing still has mysteries for most homebuyers.  There is a seemingly endless stack of papers to be signed, especially  by the buyer.  There is no need for confusion about the procedure; title is transferred first, then your loan is made and placed as an encumbrance against the property.  Remember, if you like to read every word of documents or would like an attorney to review them before you sign them then you should request the documents a few days in  advance of closing in order to do this.

BRING THE FOLLOWING TO CLOSING

1.      ‘Good Funds’ - Either cash, cashier's check or certified funds.  You will not be able to close without one of these.  Personal Checks cannot be accepted.

2.      Driver’s License or other official photo identification for any parties signing documents.

TRANSFER OF TITLE

The Closing (Continued)

ENCUMBERING THE PROPERTY

Now that you have been conveyed title to the property by virtue of the first part of the closing, you may encumber the property with your new loan.  The two most important documents in this part of the closing are:

If you are assuming a loan, the lender holding that loan will have sent documents to be signed regarding the assumption, but there will be no new note and deed of trust.

Once all of the documents have been executed, funds are collected and disbursed by the closer. 

Congratulations!

You are now the proud owner of your new home!