The Process – Step-by-Step
The Initial Agreement and Deposit
A contract to purchase a home is a binding legal contract between a potential purchaser and the home’s seller.
Some important tips to keep in mind to streamline the process:
- For the sake of both clarity and legality, all agreements including counteroffers and addendums should be in writing, signed by both the buyer(s) and seller(s), and preferably drafted on the forms provided by Florida Realtors and/or the local board of realtors in the Florida county where the home is located. We will assist you in drafting all the paperwork for your purchase, ensure timely submission, and provide you with copies of all documents.
- Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in violation of their agreements. During the process, we will keep you continually updated so you will always be prepared for the next step!
The Closing Agent
Either a title company or an attorney will be selected as a closing agent. Once your offer to purchase a home has been accepted, you will have to put down an earnest money deposit, which is, at minimum, usually at least 1% of the home’s contract value. We can advise you regarding the best earnest money deposit to indicate in your offer to purchase, which fluctuates somewhat given the market conditions.
The closing agent will hold the deposit in escrow and will research the complete recorded history of the home to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some homes are subject to restrictions which limit various activities such as building additions or parking restrictions. There may also be recorded easements and encroachments that limit the rights to use your property.
How to Hold Title
You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate, and tax implications—especially when selling or upon death of the title holder.
Inspections
Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the time frame agreed upon in the effective contract to purchase. While most homes in the 850 area are purchased “As Is,” we still recommend you obtain an inspection after your offer is accepted to identify any serious problems that may or not be visible. You may elect to have different professionals inspect the home to obtain opinions from inspectors who specialize in a specific area (i.e., roof, HVAC, engineers, etc.). Many loans are contingent on parcel surveys. We are happy to recommend several different local inspectors and licensed land surveyors.
Depending on the outcome of these inspections, one of two courses of action may happen:
- Either each contingency (financing, inspections, required repairs, etc.) is successfully achieved and the contingencies will be removed, thereby bringing you one step closer to the closing; or
- The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually repairs or a price reduction). While most offers in the FL Panhandle are “as is” with the right to inspect, an experienced real estate agent with superb negotiating skills can provide tremendous value during the inspection process and advise you when to renegotiate—and when to stand down.
Appraisal and Lending
It is vital that you and your agent keep in close communication with your lender who will let you know when additional documents are needed to finalize and fund your loan. If the contract is conditional upon financing, then the home 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 that their investment in your home 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.
Property Insurance. If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the home. The value will depend on the lending institution, the home’s condition, and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. You may be able to obtain a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials, etc. Persons over 55 years of age or long-term customers may also be offered discounts.
- Insure your home—not the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.
We will be happy to recommend experienced knowledgeable insurance agents for every property type!