When you are buying a home, you will sign several contracts. If you are working with a buyer’s agent, you will sign a buyer agency agreement. When you have found a home you would like to buy, you will sign a buyers contract, or contract to buy and sell real estate.
1. Understand the finances set in your buyers contract.
Your buyers contract will define your purchase price and terms including purchase price, earnest money, loan amount, and cash at closing (down payment). It is important to have an estimate for closing costs, monthly mortgage payments, and possible repairs so that you can budget properly. Closing costs are not included in your Purchase Price and Terms.
Upfront costs: earnest money, inspection fees, buyer closing costs, down payment, immediate/necessary repairs (if any)
Monthly costs: mortgage payment including home owner’s insurance premium and taxes
Work with your agent to make sure that your upfront costs and monthly costs are within your budget. This should have been established in general terms when you first meet your buyer’s agent, but you will work out the details when you are signing your buyers contract.
2. Understand ways to terminate the buyers contract.
The main reasons that you may need to break contract on your home is if the home does not pass the home inspection. If the home inspector finds an issue with the house that is not satisfactory to you for any reason, you can break contract.
Also, if you are unable to find home owners insurance, or a loan with conditions to your satisfaction, you can break contract by the deadline in your contract. You do not have to have home owners insurance by the deadline, but you will lose the right to break contract because of insurance issues by the date set in your contract. The important thing is to shop around to get the best coverage for the price.
There are several other important issues that need to meet yours (or your lenders) satisfaction in order to continue the closing process including a satisfactory appraisal, review of the Title, and CIC documents.
3. Know the dates.
Your buyers contract will set the dates for important events like Loan Application Deadline, Appraisal Deadline, Inspection Objection Deadline, etc. If you use Outlook, or Gmail, iPhone, or maybe a wall calendar, transfer the dates from your contract to your calendar, or keep a copy of the contract with you. Make sure you know the deadlines for each task, and to complete the task by the deadline. This isn’t a good time to try out your favorite “dog ate my homework” excuse. Once you go into contract, there is a whirlwind of events that take place, and you do not want to miss any of them.
4. Understand the types of inspections available.
In addition to a typical home inspection, which examines all major components of your home, you can also have the land surveyed to make sure that the physical boundaries match the legal boundaries. In other words, ensure that your neighbor’s fence is not in your yard.
As with any other legal document, you should read and understand it before you sign it. Your buyer agent should be able to answer all of your questions before you sign. If you wouldd like to meet or talk to a Colorado Exclusive Buyers Agent, click here.