Buyer’s Guide
Leah Pham Windermere Real Estate 206.992.2019 Direct 206.935.7200 Office www.LeahPham.com Leah@windermere.com
SECTION TWO Financing Numbers to Know Closing Costs - defined Title and Escrow SECTION THREE Questions and Answers SECTION FOUR About Leah How I Work
Buyer’s Guide
SECTION ONE The Buying Process Pending to Close What I Can Help You Buy Windermere.com
GETTING PRE-APPROVED By getting pre-approved, you know exactly how much home you can afford. There is nothing worse than finding your dream home, only to find out that you cannot qualify for a loan to buy it. A pre-approval also strengthens your bargaining power when negotiating with a seller. Please see the service providers list for a trusted lender.
DETERMINING YOUR WANTS AND NEEDS I have several methods to help you determine your wants and needs. I have found the most effective method is for everyone who will be living in your home to sit down and fill out a wants and needs worksheet. This helps you, as a group, to really analyze everyone's expectations on your new home.
THE SEARCH BEGINS At this stage, I will compile a packet of information and pictures of all of the properties available that match your wants and needs. Next, you’ll select 5 - 10 properties you would like to look at on our first tour of homes.
RE-ANALYZING YOUR WANTS AND NEEDS Often times after our first day of looking at homes, you will gain a greater insight on what it is you want and need in your new home. If this is the case, I will get you a new list of homes and we will begin the process again.
THE SEARCH CONTINUES - PREVIEWING After touring homes with you, I will gain a pretty good idea of what you are looking for in a home. At this point, I will preview all of the remaining homes that match your wants and needs profile. Together we will tour the homes that best fit your criteria. If you wish, you can also do a drive by of all the available homes and give me a list of the ones you want to get inside of.
The Buying Process
STAGE 1 - FINDING YOUR- HOME
In addition to checking the MLS database at least once a day, I input your information into the MLS database, which notifies me via e-mail when new properties are added that match your search criteria. As new property becomes available I will tour the property with or without you (your choice).
PROACTIVE SEARCH If your search criteria is narrow enough, I will send postcards to all of the homeowners who have properties that match your wants and needs letting them know that I have a qualified prospective buyer interested in homes like theirs. This method has proven to be very effective for buyers with limited options.
STAGE 2 - MAKING AN OFFER DETERMINING YOUR OFFERING PRICE Once you have found the right house, I will prepare a Comparative Market Analysis (CMA) on the property to help you determine the fair market value of the property.
WRITING THE OFFER Our goal is to get this home on your terms which includes things like closing dates, items to be included in the sale, and of course price and earnest money. I will explain your contractual rights and responsibilities, talk about different negotiating strategies and give as much advice as I can. The offer will spell out how much you are willing to pay for the home, what type of financing you will obtain and a myriad of other important details and dates relevant to the purchase of the property.
The Buying Process
NEW PROPERTIES ON THE MARKET
HOME OWNERS ASSOCIATION If the property is a part of a Home Owners Association, we will have an opportunity to read and accept the documents pertaining to the association. These documents describe the rules, regulations and finances pertaining to the association.
TITLE COMMITMENT The sellers of the property will provide you with a title insurance policy. This policy protects you, the buyer against loss arising from disputes over ownership of a property. We will have an opportunity to review the policy and determine if there are any exceptions to the policy that you find objectionable. Your lender will require you, the borrower to purchase a separate policy that covers them.
INSPECTION RESOLUTION You have the right to have an inspection of the property prior to closing. I recommend you hire a professional inspector to help you with this task. If you find any problems with the property that are out of the ordinary, you can ask the seller to repair them or compensate you for future repairs. Please see the service providers list to find a trusted inspector.
APPRAISAL Your lender will hire an appraiser to determine if the property is worth the price you are paying. There are contingencies built into the financing addendum to protect you and your earnest money if the appraisal comes in lower than the purchase price.
The Buying Process
STAGE 3 TAKING CARE OF CONTINGENCIES
CLOSING The "closing" is actually comprised of two separate closings. At the escrow closing (signing) you and the seller will sign closing documents relating to the transfer of the property. The loan closing takes place after you sign the loan documents. Once all documents are signed, the lender disburses funds to the closing agent, the seller is paid and title to the home is transferred into your name.
POSSESSION The time and date of possession of the property is negotiated on the contract. Upon possession, you can start moving in!
PENDING TO CLOSE Once we make an offer on a home it is my job to make sure that your offer is accepted, carefully executed, and every detail of your transaction is completed, and adheres to the strict time schedules of your contract. I will be providing you with a Pending to Closing calendar (time line sheet) once we have mutual acceptance on your home. The time line below is provided as a visual display of the important dates of your contract. Sample time table for Mr. and Mrs. Smith 04/23/00 Mutual Acceptance! Congratulations 04/26/00 Must have made written application for financing 04/28/00 Must have the inspection contingency removed. 05/01/00 Must have insurance binder in place. 05/15/00 Must have financing in order (last day of contingency). 06/12/00 Closing and Possession.
The Buying Process
STAGE 4 CLOSING AND POSSESSION
By working with me, you will have access to information on all homes currently listed for sale in our area, no matter how or where you find them. 1. Homes advertised in the newspaper 2. Homes that are “For Sale by Owner” 3. Homes found during an Open House tour 4. Homes listed for sale by another agent or real estate company 5. Homes you’ve heard about from friends, family, or other contacts 6. Homes advertised on the Internet
The Buying Process
WHAT I CAN HELP YOU BUY
Determining how much you can afford before you begin your home search will save you valuable time. Pre-qualification vs. Pre-approval 1. Pre-qualifying for a mortgage generally helps you determine how much house you can afford. 2. Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, range between 25 and 28 percent of your gross monthly income. 3. Remember, becoming qualified does not necessarily mean that you will be approved for a loan of that amount. 4. Pre-approval from your lender means that you have provided them with the necessary paperwork, and they have approved your actual loan amount. 5. Having pre-approval for a home loan will put you in a much better negotiating position, because the seller knows you are able to obtain your loan to purchase their home. Down Payment 1. Most lenders require a 3.5 to 20 percent down payment; 25 percent or higher down payment may qualify you for a lower percentage rate. 2. I can help you locate a lender who will assist you in finding a financing package that best meets your needs.
The Buying Process
FINCANCING
The purchase amount is the amount you are paying for the house. It is inclusive of the Earnest Money. It is inclusive of your down payment. It is not inclusive of the Closing Costs. The Earnest Money, paid by the buyer, is a portion of the purchase amount that is held by the Escrow Company while the transaction is in process. The purchase and sale agreement is very specific regarding the disposition of earnest money when a transaction is being terminated. When the transaction closes and the buyer becomes the new owner of the home, the Earnest Money is transferred to the seller as a portion of the original purchase amount. Earnest Money is usually 3-5% of the purchase amount. Closing Costs are not a part of the purchase amount. They are miscellaneous charges associated with the buyer’s loan and the transaction itself, and prepayments required by the lender. The Escrow Company collects closing costs at the same time that the down payment if collected. The Down Payment is the portion of the purchase price that the buyer is paying in cash. The balance is the mortgage amount. Down payments can range between 3.5 and 100%. A buyer, working with their lender, determines the best scenario for their particular purchase. So how does this all work? Upon entering into a contract to purchase a home for $200,000 (purchase amount) with Earnest Money of $5000, the Smith’s Earnest Money check is deposited into the Escrow Company’s trust account. The Smith’s decide on a mortgage program with a 5% down payment ($10,000) and their closing costs total $3750. The mortgage will be for 95% of the purchase amount ($190,000). Purchase Price $200,000 Earnest Money ($5,000) Down Payment ($10,000) Closing Costs $3,750 Total cost to buyer: $188,750
The Buying Process
NUMBERS TO KNOW
Throughout the shopping phase of buying a home, choosing a lender and settling on a mortgage program, the words closing costs are tossed about frequently. What are closing costs? More importantly, how much are they? Most importantly, who pays them? Closing costs are an assortment of fees based on the transaction between the seller and the buyer of a home (fees based on the closing of the transaction, hence the name). They are fees that are collected by the escrow company at the signing appointment, usually a day or two before the transaction is recorded. Some closing costs, such as excise tax on the sale and real estate commission, are the responsibility of the seller. Some closing costs, such as the cost of the escrow company, are split between the buyer and seller. Many of the closing costs are related to the buyer’s mortgage and these are the buyer’s responsibility. One of the largest costs associated with the mortgage is the ”loan origination fee” or the fee charged by the lender to provide the loan. This varies between lenders and is something that you should be considering when shopping for a lender. Some buyers elect to pay a separate fee to “buy down” the interest rate. Lenders also can charge for an appraisal, title insurance, courier fees, etc. In addition to closing costs, the escrow company will be instructed by the lender to collect “pre-payment amounts”, also referred to as “pre-paids”. These prepayments are for such things as real estate taxes, insurance, etc. The kind and amount of closing costs you will incur will depend on your loan, your lender and the home you decide to purchase. Upon making your initial loan application, your lender will provide you with a Good Faith Estimate which will give you a better idea of what to expect.
The Buying Process
CLOSING COSTS — DEFINED
For a seller, it is important to prove that they own the property. This is done by showing clear title to the buyer. The title to the property can be insured as marketable and to be made aware of title issues that might need to be resolved prior to closing. This is why it is beneficial for the seller to order a “Preliminary Title Commitment”. Upon listing their property, one of the first steps they will do is order this report from a Title Company, who will research ownership of the land back to the time it was owned by the government. Once an offer is received, all parties involved will want to review the Preliminary Title Commitment. There will be two separate title insurance policies purchased. The seller will buy the purchaser a title insurance policy, and the buyer will purchase one for their lender. These are a one time charge policy that last as long as the buyer owns the home. The buyer, seller and lender can then proceed with the closing after clearing any encumbrances in the title, which may have been uncovered by the title search.
Escrow: What is it, what’s in it for me, and who pays for it? Escrow - a written agreement (or property or money) delivered to a third party or put in trust by one party to a contract to be returned after fulfillment of some condition. Or in laymen’s terms… The process by which property is transferred from one party to another, and where the conditions set forth within the Purchase and Sale Agreement, Loan Commitment and other written instructions are satisfied. The escrow process brings together all of the people, paper and money, and answers the questions – Who gets the money? And who gets the property? It is important to have a neutral third party involved to assure that everyone’s interests are met. The costs for the escrow company are generally split between the buyer and the seller equally and are also part of the “Closing Costs”.
The Buying Process
Title: Why do I need it, and who pays for it?
What if I need to sell my home before I buy a new one? To put yourself in the best negotiating position before you find the new home you want, hire a qualified real estate agent to help you put your home on the market. Once you write an offer on a new home, your offer will be “contingent” upon the sale of your current home. A buyer in this position may not have the same negotiating power as one whose home has already sold (or at least has an accepted offer). The seller may be hesitant to accept your offer because there are too many things that must happen before the sale can close. A bridge loan may be an option for you. How does my offer get presented to the seller? I will call the listing agent for the home you have chosen. We will make an appointment with the seller where I will present your offer. I will be there to explain the details of your offer and negotiate on your behalf. What happens if I offer less than the asking price? If you offer less money, the seller has three options. They can accept the lower offer, counter your offer or reject it completely. Remember that there could be another buyer who is also interested in the home you’ve chosen. If they happen to write an offer at the same time you do, the seller will have two offers to compare. There are usually many aspects of each offer to consider, but ultimately, the seller will want to accept the best and most complete offer. In active real estate markets, homes often sell for their listed price. In hot markets, there may be many buyers vying for the same house, which sometimes drives the final sale price above the original listing price. As a real estate professional, I can help you plan your strategy, based on the current real estate market in our area. Does it cost me money to make an offer? When you write the offer on the home you’ve chosen, you will be expected to include an earnest money deposit. The deposit is a sign of your good faith that you are seriously interested in buying the home. Where does my earnest money go? Once the buyer and seller have a mutually accepted offer, the earnest money is deposited into a trust account. That deposit becomes a credit to the buyer and becomes part of the purchase expense. Can I loose my earnest money? Real estate contracts are complicated legal transactions. This is another area where having a knowledgeable and professional agent is a necessity. Rarely does the buyer lose the earnest money. Most often, if the transaction falls apart, there are circumstances beyond the buyer’s control that cause it to happen. If the buyer willfully decides, however, that they no longer want to buy the house, and has no contractual (legal) reason for rescinding their offer, then the seller has the right to retain the earnest money. Is that all the money that’s involved? Some lenders require the cost of the appraisal and credit report at the time of the loan application.
The Buying Process
QUESTIONS AND ANSWERS
I pride myself on creating long lasting relationships with my clients. My utmost goal is to help my buyers make wise Real Estate purchasing decisions. In doing this I have to be honest, forthright, and sometimes point out negative things the buyer cannot see. This is all done to achieve the goal of making a wise Real Estate purchase and a wise Real Estate investment. I offer my clients the highest level of service by providing them an in-depth analysis of their needs, their wants, and of course what is realistic for them. I offer personal service and I do not hand my clients off to anyone. Communication is the key to our success! Once I have completed the analysis I then provide my clients with ongoing research and information to give them the most options and choices that are available. I never rush my clients and I let them know from the beginning that this process may be quicker than they expected or take much longer than they expected. Either way, I am with them until they reach their goal. Once we have found the perfect home and have made an offer and even closed on that home that is when my true level of service shines through. I do not forget my clients after closing and I stay in touch with you for years to come providing you with up to date Real Estate reports, articles, information, and even an analysis of the home you purchased on an annual basis. I would be honored to learn about your needs, goals and priorities!
About Leah
HOW I WORK
Leah Pham Windermere Real Estate Direct: 206.992.2019 Office: 206.935.7200 Fax: 206.937.6574 4526 California Ave SW Seattle WA 98116 Website: www.LeahPham.com Email: Leah@windermere.com
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About Leah
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