BuyingaHomeSummer2020Download

Home Buying Tips: Three Items to Watch out for in a Purchase Agreement Contract

July 15, 2020 by Matt Goeglein

The purchase agreement is a vitally important document that outlines the provisions, terms and conditions for the transfer of property.

It should be read carefully and any ambiguities should be clarified prior to signing. It is a legally binding contract between the buyer and seller.

The purchase agreement may vary depending on the location. Most real estate agents use a form that has been approved by a state Realtors® Association.

The seller may have a different version that was drawn up by an attorney. It should not be assumed that they are all the same.

Typically, the purchase agreement will include an inspection period. This allows the buyer time to verify the conditions stated on the purchase agreement. Three of the most important stipulations in the contract are listed below.

All Owners Must Sign the Purchase Agreement

In most cases, the purchase agreement should be signed by the legal owner of the property.

If there is more than one owner, each owner should sign the agreement. In many states, both parties in a married couple have an interest in a property even if the title is held in one party’s name alone. Therefore, the purchase agreement should be signed by both parties of a married couple.

In the event the property is being sold by a corporation, verify that the person signing the agreement is authorized to commit the corporation to the sale.

List All Fixtures to be Transferred with the Sale

The purchase agreement should list all items that are to convey with the property. “Fixtures” are considered items that are attached to the property.

Legally, they should be included with the sale, but more than a few buyers have been dismayed to find the property stripped of countertops, appliances and window coverings. Any fixtures and personal property that are part of the sale should be included in the purchase agreement.

Verify Zoning Ordinances

The purchase agreement may contain various stipulations. One should include the right to cancel the contract if zoning prohibits the use of the property as planned.

Zoning ordinances may restrict the use of buildings or land. This may prove to be an obstacle for someone who intended to include a workshop on the property. The buyer should be able to withdraw from the contract if they discover that zoning prohibits the intended use.

These agreements can be complicated, so be sure to check with a local real estate agent if you’re unsure about how to proceed.

THE LOAN PROCESS – DOs & DON’Ts, & Tips for first time buyer:

What constitutes a Valid Loan Application?

  1. name
  2. income
  3. social security number
  4. property address or (TBD)
  5. estimated value of property
  6. mortgage loan amount sought
  • Once these 6 items of info are submitted, lender MUST supply a Loan Estimate (LE) within 3 business days

Mortgage Application Checklist – NEEDS LIST

  1. ID (Driver’s License / Passport)
  2. Residency – complete address for each residence you’ve resided in the past 24 months
  3. Purchase Contract – Sales Contract with original signatures along with copy of the earnest money check
  4. Employment – Name address and phone numbers of all employers for the past 2 years
  5. Income – Last 2 years W2 or 1099 forms, Last 30 days pay stubs, Last 2 years tax returns (all schedules)
  6. Assets – Last 2 months bank statements (all pages) on all checking and savings, investment accounts.
  7. Divorced or Separated – Complete divorce petitions, recorded final decree &/or separation agreement
  8. Rental properties – copies of current leases and tax returns

Additional items may be needed based on ASU/DU/LP Initial Automated Review:

  1. divorce decree
  2. profit & loss
  3. BK discharge
  4. any non-disclosed items, called out from AUS or noted on credit reports
  5. additional bank statements
  6. Explanation of large deposits
  7. Explanation of employment gaps
  8. Explaining bonus, commission, overtime

TOP 10 DO’s and DON’Ts During the Loan Process

  1. Don’t apply for new credit
  2. Don’t pay off Collections or “Charge offs”
  3. Don’t close credit card accounts
  4. Don’t max out or over charge credit card accounts
  5. Don’t consolidate your debt
  6. Don’t do anything that will cause a red flag to be raised by the scoring system
  7. DO join a credit card watch program
  8. DO stay current on existing accounts
  9. DO continue to use your credit as normal
  10. DO call your Mortgage Loan Originator to help you choose the right loan for you

THE KEY LOAN MILESTONES ARE:

  1. loan started
  2. initial disclosures with LE out
  3. loan submitted to processing
  4. loan submitted to underwriter
  5. loan approved
  6. updated LE (loan estimate) out, if needed
  7. CD (closing disclosure) out
  8. docs ordered
  9. doc out
  10. wire requested
  11. loan funded

Lending / mortgage keys:
a: Credit score: if spouse is also applying, lender take the lowest score of your spouse.
b: Public Records is a huge factor.  Prefer blank.
c: Lender Look for the highest limit and balance 
d: Don’t close accounts 30 days prior to applying for the loan 
e: Mortgage companies look for records from these companies: Experian Equifax, and Transunion 
f: Even though you received approval notice don’t jump the gun until all is documented (CD / closing disclosure)
Once closing disclosure goes out the buyer has 3 days to sign 

2.22.20 |DON’T FALL VICTIM TO WIRE FRAUD!

Scammers are stealing down payments via wire fraud and getting more clever every day. Avoid Wire Fraud by following these steps:

  1. Pay attention to how wire instructions are sent. It is best to only accept instructions that are secure and encrypted.
  2. Before wiring funds to an individual or company, call to verify the wire instructions independently with the title company.
  3. Be very watchful of any changes. Wire instructions rarely change. I you receive an email saying that any wiring instructions have changed, call your Realtor or title company immediately to confirm.

How can you avoid real estate fraud?

BE ALERT!

  1. phony investment schemes
  2. fees to delay foreclosure
  3. home improvement scams
  4. ownership transfer schemes
  5. loan modifications
  6. imposter agents
  7. false representation of government programs

NOTE: These are helpful tips for first time buyers, and what to anticipate in the process. Every lender is different in their processing of the loan. Talk to your lender for important information specific to you.