The Home Buying Process

Thisis an outline of the home buying process in Colorado. Morespecifically, this is how we, Joe and Jennifer Boylan approach the buying process with the buyer clients we work with.

TheColorado Contract to Buy and Sell Real Estate provides severalcontingencies for the home buyer. These contingencies are short periodsof time to get our financing in order (loan conditions), verify that the property condition is acceptable ( inspection objection ) and to make sure the title is clear and merchantable (title objection). Once these contingencydeadlines pass, the buyers earnest money will become...“atrisk”. This is why we work closely with our clients to getthrough this period with satisfactory results. Although contingenciesare an important part of the work we do, they are just a small portionof what we manage during the home buying process. Here is a more comprehensive overview.

>Step One-(Pre-Qualification) Pre-qualification is the beginning of the formal loan applicationprocess. At this stage we establish how much you can and want to spendon your new home. Additionally, an experienced lender will look at yourlong and short term financial goals and present you with the appropriate loan programs.

Werecommend two reputable lenders. Although we love the Internet we don'tlove it for loans. Lenders will make outrageous claims in order to setthe hook but at the end of the day the money all comes from the sameplace and no one really works for free. Beware of Internet lenders thatoffer rates and closing costs the seem “to good to be true”! If you didn't fall for the Nigerian Diplomat scam , please don't start falling for scams with your home loan.

>Step Two-(Needs assessment) It is important that we have a clear idea of what your priorities are as they pertain to lifestyle, finances, etc...

>Step Three-(Area Tours) Oncewe have a through understanding of your priorities, we get in the carand drive through those areas that most likely suit your needs. Theidea is to eliminate those areas that just won't work for larger reasons like schools, shopping etc...

>Step Four-(View Homes) Once we have determined your favorite areas we start to view homes inthose areas. We generally preview before we take a buyer. The purposeof previewing is to eliminate those homes that have some kind of resaleissue or major problem. By previewing we are able to eliminate thenumber of homes you will have to look at before you actually get in the car.

>Step Five-(Locate The Home) When we do find the home you are interested in purchasing, the firstthing we need to do is to establish the value, in other words, how muchis the property really worth? The tool we use to establish value is called a “Comparative Market Analysis” .

Thegoal of the Market Analysis is to find similar properties that havesold in the last six months and compare those properties (comps) to the home we are considering (subject property).

Sinceno two properties are truly alike, we use a system of debits andcredits to determine how much the home is truly worth. This is why itis essential to work with a Realtor that knows the market, it’simportant that the Realtor have some familiarity with the comparable properties.

It is important to note the CMA is not as scientific as a professional appraisal but renders similar results.

>Step Six-(Prepare Offer) Once we have established value, we determine how much we would like tooffer. This decision is based on a combination of actual market value,your perceived value of the property, property condition as it relates to the amount of inspection items we think we might have to ask for.

>Step Seven-(Contingencies) Once we have the property under contract the due diligence periodbegins. Our goal during this period is to systematically remove allcontingencies. These contingencies are short periods of time to get ourfinancing in order (loan conditions), verify that the propertycondition is acceptable (inspection objection) and to make sure the title is clear and merchantable (title objection).

>Step Eight-(Full Loan Application) Once we have an accepted offer we are officially “UnderContract”, we send a copy of the agreement (contact) to thelender. The lender in turn starts to process the entire loanapplication. The loan goes into underwriting. Loan Underwriting bydefinition is "The analysis of risk and the decision whether to make aloan to a potential homebuyer based on credit, employment, assets, and other factors".

>Step Nine-(Property Inspection) The inspection is our time in the house with a trained professional,time to discover the true condition of the property you are about to buy. This is why the choice of an Inspector is an important one.

Propertyinspectors are not licensed or regulated but there are organizationsthat set guidelines, standards and promote general competence in the field. Organizations like The American Society of Home Inspectors ASHI , National Association of Home Inspectors NAHI , National Association of Certified Home Inspectors NAHCI , Additionally, personal referrals and past experiences can help find a skilled inspector. Membership in one of the above organizations should be a minimum requirement.

Afterthe inspection, we put together a notice of unsatisfactory conditions,per the deadline in the contract addressing any repairs or potential problems.

>Step Ten-(Negotiate Inspection Issues) This is a process of putting together a list, if the inspection yieldsany unsatisfactory conditions. We present this list to the Sellersagent who in turn reviews it with the Sellers. They have two choices,to agree to all conditions of our requests or to propose an alternativeresolution. If they propose an alternative resolution, the buyer hasthe opportunity to either accept the resolution or walk away from the deal with earnest money intact.

>Step Eleven-(Appraisal) The lender will arrange to have the property appraised. This is an upfront charge that the lender will collect at loan application. Aprofessional, licensed appraiser will research the value of your home.If the property does not appraise for the purchase price, three options are available.

• 1. The amount of your mortgage would be smaller, larger down payment.
• 2. The purchase price can be renegotiated.
• 3. The contract may be terminated.

Stepfive addresses the Comparative Market Analysis. The primary reason wedo the CMA prior to making an offer is in order to avoid having appraisal problems at this point in the transaction.

>Step Twelve-(Title Work Reviewed) The seller must be able to provide, via the Title Company, a clear andmerchantable title to the purchaser. The title company includes allparties in their research, so as a result, you will receive extensive paperwork throughout the transaction period.

TheTitle Company provides a current “status” on the title.This is usually where a flag will appear for any potential problems bynotifying all parties what liens and/or judgements need to be paid atclosing. The Title Company also provides a proposed commitment for yournew title policy. This is where your lender will be listed as a lienholder. Title companies must also provide covenants and Home OwnersAssociation documents. We review these documents for any potential problems prior to the title deadlines set forth in the contract.

>Step Thirteen-(Final Walk through) Priorto attending the closing, we walk through the property one more time tomake sure any contractual inclusions are still at the property.Additionally, we make sure the property condition is acceptable, prior to the Seller receiving funds.

>Step Fourteen-(Closing) We review the final figures making sure there are no excessive lenderfees or erroneous closing costs. Our goal is to eliminate unpleasant surprises at the closing table.