Real Estate Purchase Process
If you’ve never bought a home, the process can seem scary and foreign, but you’re not alone. Many of the I work with are first time buyers who fear the real estate process. Fear, of course, comes from the unknown. So, in order to tackle your fear of buying a home, let’s take away the unknowns.
Buying a home is much like buying a car. You go shopping until you find something you like, decide you want to buy it, and start the negotiating. And, just like buying a car, the better the negotiator, the better the deal. No one wants to pay to much when purchasing anything, so your first step to buying a home is to negotiate.
P I don’t want to be another telling you to hire me because the buying process is “scary” and you might lose out on money if you don’t. That’s not the reason you should work with an agent when buying a home. Real estate agents are experienced in buying and selling real estate and are a third party without the emotional investment in the deal. When negotiating it’s important to keep emotions out of it.
It’s the same principle doctors use when performing surgery. If they know the patient, emotions may compromise their skills, so they should pass the duties onto a different surgeon. The same can be said about real estate. Buying a home as a first time buyer can throw you through an emotional roller coaster.
First, you fall in love with a home, second you get cold feet about writing an offer, and next you get mad because the seller won’t negotiate. P If you’ve never bought a home, the comfort of having a guide to show you the process is well worth the commission you’ll pay. You’re paying for a service. If you feel you don’t need that service, you don’t have to work with an agent.
Many people buy homes all the time without real estate agents so don’t feel like it can’t be done. However, if you’re not confident in your ability to negotiate the best deal, a real estate agent helping you with the deal is a sound choice. Writing an offer to buy a home is a little more complicated than coming up with a price you’re willing to pay. There are many sections in the typical real estate purchase contract that Realtor’s use to cover all the bases.
In Utah, the purchase contract is six pages long and filled with contractual items to ensure both parties are protected from potential liabilities. P Section 1 – This section details all the items to be included and excluded in the purchase. Things like appliances, carpets window and door screens, fencing, and even landscape. Basically, section 1 of the REPC ensures that you’re offer includes anything attached to the home and it gives the sellers a chance to exclude items they want to take with them.
Section 2 – Explains the purchase price of your offer, how much earnest money you’re willing to deposit, what type of loan you’re applying for, and possible seller financing details. Section 3 – PSettlement dates and actions needed to close the deal. This section is for the dates you expect to settle the contract, meaning you perform the stated obligations in the contract making it complete. Once the contract is settled, you will close on the home.
P Section 4 – Outlines the details of possession of the property. You can choose to take possession directly after closing and funding, a certain amount of hours after closing, or a specified number of days after closing. P Section 5 – Confirmation of agency disclosure. Basically it states that the buyer and seller both were explained what real estate agency is.
It also outlines your agency details with your agent whether they are a seller’s agent, buyer’s agent, or a limited agent. P Section 6 -PAssures you that the seller will convey a free and clear marketable title to the buyer. It also states that if any rental or lease agreements are assigned to the property, the buyer must honor them if they continue past the closing date. It also details that the seller will buy a title insurance policy to insure any possible title problems in the future.
Section 7 – Seller will provide the buyer with seller disclosures prior to the seller disclosure deadline. This deadline is usually a week. Seller disclosures are documents relating to the knowledge the seller has of their home. If they know of any problems they must legally disclose them.
The sellers must also disclose any repairs or updates to the home, water rights owned, rental and leave agreements attached to the property, and any bylaws associated with the property. P Section 8 – Outlines the conditions for a buyer to purchase your home also known as due diligence. It gives you time to secure financing, perform the needed inspections on a property, places your purchase contingent on an appraisal, and outlines your rights to cancel the contract if contingencies are not met. This is the main section for a buyer in a real estate transaction.
P Section 9 – Describes any addendum’s to the original purchase contract. Things like an FHA addendum, lead paint disclosure, seller financing addenda, and any changes made in the contract will be specified here. P Section 10 – This section outlines if there will be a home warranty plan and who pays for it. It also explains to the buyer that they will be buying the property in as-is condition.
However, it also explains that the sellers should explain any known defects of the property in the seller disclosures. If there is a problem with the property, and the buyer an prove the seller knew about it but never stated it in the disclosures, the buyer can seek restitution. P Section 11 – Buyer is allowed a final walk-through prior to settlement to inspect the property. Any repairs requested by the buyer and agree to by the seller must be done by this date and satisfactory to the buyer.
If there are problems, this part of the contract allows a reasonable amount to be escrowed at closing to pay for the completion of the work. Section 12 – Seller will agree to no changes to the property regarding any lease or rental agreements, no iterations or changes to the property will be made, no financial encumbrances will be made, or any changes to the legal title of the property. P Section 13 – States that the buyer or seller who sign the contract bind the terms if if they represent a corporation, limited liability company, trust, estate, or any other entity they represent. P Section 14 – Says the REPC replaces any other agreements, contracts, and any prior negotiations whether written or oral.
The contract, with all the addenda and paperwork specified will supersede any other agreement for the purchase of the property. P Section 15 – If there are any problems with the contract between the parties, this section says they must first seek mediation prior to filing a lawsuit or damages. P Section 16 – States the terms of default should the buyer or seller fail to fulfill the terms in the contract. Sellers can request earnest money and cancel the contract, sue the buyer to perform the contract, or return the earnest money and seek any other legal remedies.
Buyer’s, if the seller defaults, can cancel the contract and retrieve their earnest money, sue the seller to perform the contract, or seek other legal remedies. Section 17 – Attorney fees will be paid by the party, following litigation, who was found at fault. If you are sued, this says that if you lose, the party who sued you can request attorney and court costs. P Section 18 – All agreements will need to be in writing and given to all parties involved including buyers, sellers, and their respective agents.
P Section 19 – P The buyer can’t assign liability of the contract terms without the written consent of the seller. Meaning, if the buyer wants to change the assignees of the contract, the seller must first agree, and an addendum must be provided. Section 20 – Risk of loss is outlined that if any act of God, fire, vandalism, flood, or earthquake were to damage the property, the seller is responsible for the repairs during the contract period. If the damages exceed 10%, the seller or buyer may cancel the contract.
P Section 21 – The time is of the essence clause, which states that all dates and time frames are binding unless agreed to in writing to be changed by both buyer and seller. Section 22 – Allows for electronic transmission of the contract, meaning faxes, emails, and any other signed electronic transmission is the same as delivering the original contract. P Section 23 – Acceptance is outlined as the buyer and seller both have signed in the acceptance areas of the contract and it has been communicated to either the agent or seller/buyer that the offer has been accepted. Section 24 – Contract deadlines are specified here including the seller disclosure deadline, buyer’s due diligence deadline, financing and appraisal, and the settlement date.
P Section 25 – The time period for the buyer or seller to accept the terms of the contract. I usually give 24-72 hours for the contract to be accepted or countered by the other party. Information gathered from the Real Estate Purchase Contract for educatoinal purposes only. This information does not express the full contents in the contract provided by the Utah Association of Realtors.
For a full contract please visit the official. P Acceptance,PCounter Offers, Rejection, Closing After submitting the offer for purchase, it will either be countered, rejected, or accepted. Acceptance is fairly simple to understand. Once the parties communicate that the offer has been accepted you will go under contract and will then have to complete the terms of the contract to make it to closing.
If the seller counters your proposal, this is where negotiations start and depending on the experience of you and your agent, can save or cost you thousands of dollars. Rejection simply means the contract will die as the seller refused to accept or counter your offer. This rarely happens right off the bat. Let’s discuss these process further: Acceptance – Once buyer or seller agrees to the terms of the contract it will be accepted.
Acceptance doesn’t mean you have bought the home yet. It just means you are formally under contract. Acceptance becomes official when both parties have received communication of the acceptance. This can be verbal or in writing.
Counter Offer – When you submit an offer to a seller for consideration they usually have terms that want. They will provide you with a counter offer to your offer specifying what they accept in your terms and what they want to change. Usually you will start out at a lower price, the seller will counter with a higher price, and it goes from there. There could also be dates in the contract the seller won’t agree with as well as many other provisions.
A counter offer can move to acceptance when both parties agree to the terms and it is communicated. P Rejection – If the seller rejects your offer the offer is dead. An offer can be rejected with formal notice to the buyer or the seller can just refuse to respond and the time frame for acceptance or counter will lapse. However, you didn’t lose yet.
If you get rejected it means the seller wasn’t happy with your offer. You can re-submit another offer changing the terms. This would be a completely new offer. If you offend a seller with a low/bad offer, they may choose to not work with you and reject your offer again.
So be careful not to offend a seller whose house you really want. P Closing – At closing you will gain possession of the home on the date and time specified in the contract. Usually it takes 24 hours for possession to occur as the title company must fund and record the transaction. Closing usually takes place with a title company here in Utah where final papers are signed, deed and title are transferred to the new owner, and the funds are dispersed.
You will also be given a settlement statement detailing each expense and credit including all closing costs, fees, commissions, and financing.