Escrow, Inspection and Appraisal
The Process, Step-By-Step
The Purchase Congract and Deposit. The purchase contract is a legal agreement between a potential purchaser and the property's seller.
Some important tips to keep in mind to streamline the process:
Keep written records of everything. In Colorado, all agreements must be in writting in order to be binding, including purchase contracts, counter-offers, addenda, disclosures, amendments to the contract, inspection resolution, etc., and they must be signed by both parties. We will assist you in drafting each of these throughout your purchase transaction and make sure you have copies of everything.
Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline (dates and deadlines) by which each step of the purchase process must be completed. Meeting the deadline requirements not only insures a smoother and timely closing, it is also crucial to protecting your earnest money. Throughout the transaction we will keep you consistently updated, so you will always be prepared for the next step.
Read Everything. It is important that you read and understand the steady stream of paperwork you will receive throughout your purchase transaction. You will receive copies of all the HOA documents (covenants, financials, articles of incorporation, etc.), make sure you understand the restrictions and fees involved and are in agreement with their requirements. You will also receive copies of due dilligence documents as applicable and requested in the purchase contract (i.e., existing leases, building permits, appliance warranties, receipts for repair, etc.).
Closing Agent. Either a title company or an attorney will be selected as the closing agent. The closing agent will hold your earnest money deposit in escrow until your purchase successfully closes, or until at any step within the purchase process, you elect to terminate the contract as provided by the specificed dates and deadlines. The closing agent will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new emcombrances are properly recorded on the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions There may be recorded easements and encroachments, which limit the rights to use your property. Read your commitment for Title Insurance and understand any listed restrictions, requirements and exceptions. The exceptions must be satisfied and the requirements met before the title company will issue title insurance on the property.
How to Hold Title. You may wish to consult an attorney or tax advisor on the best way to hold title to the property. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder(s).
Inspections. Once your offer is accepted by the seller, you will have the opportunity to have a certified home inspector inspect the property. Although a property inspection is not required, it is one of the most important ways you can protect yourself from unexpected and costly expenses and repairs. You may also elect to have multiple inspectors inspect the property, if you wish to receive professional opinions from inspectors who specialize in a specific area (e.g., roof, HVAC, structural, septic, termites/pests, environmental issues including mold and radon).
Depending on the outcome of these inspections, one of two things may occur: 1. Either each milestone is successfully met and the contingencies will be removed, bringing you one steop closer to closing, or 2) After reviewing the property and all of the disclosures, adenda, and title work, you elect to renegotiate the terms of the contract. You may elect to ask the seller to reduce the price of the property in lieu of completing necessary corrections and/or repairs, or you may elect to ask the seller to complete all of or a portion of the corrections and/or repairs prior to closing or some combination of both (price reduction and repairs).
Appraisal and Lending. It is imperative that you keep in close communication with your lender, who will let you know if, and when additional documents are needed to approve your loan application and to fund your loan. If your purchase of the property is conditional upon you obtaining a loan, your lender will order an appraisal on the property to confirm the value of the property is either the same as or more than the contracted purchase price. We will coordinate with your lender to make sure we get through the inspection process BEFORE they order your appraisal; we want to make sure you aren't paying for an appraisal if you elect to terminate the contract after receiving the results of your inspections or if you and the seller cannot come to agreement with regard to which corrections/repairs the seller is willing to address. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, current 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 property (generally 12 months). You may be able to save hundres of dollars a year on homeowners insurance by shopping around for insurance - do your homework! There will be a provision in the purchase contract and a deadline by which you can elect to terminate the contract if you cannot find reasonable property insurance. Make certain to check with your insurance agent to determine if your property is in a flood zone, it will dramatically effect the cost of your insruance. Also don't be bashful about asking for discounts. You may be able to lower your premiums if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. If you are over the age of 55, you may be offered senior discounts. If you are a long-term customer and if you also insure your vehicles with the same insurance company, you may qualify for additional discounts.