What Lawyers Tell Their Friends About Buying a Home
Whether you are a first-time home buyer or relocating, the home buying process can be daunting. Ever fluctuating interest rates, multiple offer situations and home inspection tensions can make for a stressful process. How can you make the process as painless as possible? Control the things that you can control. Sure, issues may still arise but you want to put yourself in the best position possible to be able to tackle any unexpected obstacles if need be. No friends in the business? These tips will provide valuable insight to help prepare you for the process so you can avoid any major missteps:
1- Select a good team. This cannot be stressed enough. In a rush to get into the real estate market, many people will commit to the first real estate professional they stumble upon. But the level of experience and skills of your real estate team may be the most valuable assets you have during the process. So who do you need on your team? Most transactions in Connecticut include a realtor, a mortgage lender, and an attorney.
Lenders. If you need a mortgage, it’s a good idea to start by speaking to one or two lenders to get an idea of how much you can qualify to borrow. I cannot stress enough the significance of finding a reputable loan originator or loan broker, one that you can meet with in person. Why? Online applications may appear to offer some convenience at the outset, but if complications later arise you do not have an individual point of contact to speak with. The risk of the online-only mortgage process is that you will not have a personal connection with one individual who has a vested interest in your loan. Serious issues can occur, sometimes right up to the day of the closing. Having a personal relationship with a loan originator may turn out to be critical to smoothing over problems in a timely manner. Otherwise you may find yourself feeling stranded. Find a person you can trust and stay in close contact. Personal referrals are often the best source of information when starting out, ask multiple friends, family members and co-workers about their experiences. This will help you quickly rule out some choices and may help you find the best person for your situation.
Realtors. Again, personal referrals are best. You may also want to ask any mortgage person you speak to for some names. Take the time to meet and speak with each possible candidate. Remember, they want your business, they will give you adequate time to get comfortable with their approach. Talk to more than one realtor in more than one agency, do not feel pressured to sign on the spot.
Attorneys. In many states, closings are conducted without attorneys, but Connecticut has resisted the institutional forces that promote title company dominated closings. However, you may find great value in having legal counsel. Most attorneys closing fees have stayed relatively modest for decades, but avoid basing your decision on price alone. Instead, find out what you are getting. Paralegals handle much of the day-to-day communications with clients, but you need to know that an attorney will get involved when needed. Make sure you will have access to the closing attorney throughout the process in case their advice is needed. Another important point, be sure to ask if the attorney has a dedicated real estate paralegal who works in the office with them. Many attorneys subcontract out for this work, and non-employees work off-site on your file. This can work out fine in some cases, but it is far from ideal. Closings require frequent communication between the paralegals for buyers and sellers, the attorneys, the lender, the realtors and the clients. Anything that slows this down, or creates a risk of ineffective communication can become a major headache. Also find out about the law firms security protocols. They will be managing personal data and significant funds on your behalf, be sure they have a cyber security plan in place and adequate safeguards to protect your interest. Many title companies offer a certification process for law firm’s which requires an audit of the firms records, bank accounts, procedures and protocols on a regular basis to certify that they are employing “best practices” in the closing process. While attorneys are not required to obtain these certifications, it can give you some peace of mind that the firm has met these standards. Again, a personal referral is usually the best. Your lender or realtor may help you find the right closing attorney.
2- Do not get too attached until the inspection period is over. In Connecticut it is typical for the home inspection to occur after the contract is signed. Your realtor will likely give you a referral for an inspector, but be sure that the inspector you select is properly insured. Inspectors look mainly for structural, mechanical, electrical and plumbing issues. You may also elect to have them test for radon, mold, and a host of other matters. If there is a private well and/or septic you should absolutely have those inspected. If the house was built in the 1980s, especially if it is in Tolland county, you should get the foundation concrete tested. https://www.nytimes.com/2016/06/08/nyregion/with-connecticut-foundations-crumbling-your-home-is-now-worthless.html Do not skimp on the inspections or you may unknowingly find yourself inheriting a major problem. A house is one of the biggest single investments you will make in your lifetime, this is no time to cut corners. The inspector will give you a lengthy report and you will need to boil it down into a list of requested repair items for your seller. This is where the second round of negotiations begin. At this point you already have a signed contract, you have started the mortgage process, and you have likely begun picturing yourself living in the house. It is therefore very easy for emotions to creep into these negotiations. Try to avoid the temptation. You need to be rational and realistic. Some deals fall apart completely after the home inspection, and while it’s a hard pill to swallow, its usually for the best. If you are a parent, avoid telling your kids about the new house until you are past the inspection period.
3- What’s missing? The number one thing that most people don’t know during the closing process? The important due diligence considerations that your closing team is not providing. Most lenders do not require any due diligence as to building or zoning violations. These types of investigations are also not routinely performed by many realtors or attorneys. So what types of problems can go undiscovered? Many homeowners have applied for building permits for home improvements and then failed to get a final inspection conducted. Some have had home improvement work done without seeking any permits. A common example is a finished basement and no corresponding permit to reflect the same. Some attorneys can order a municipal search for you if requested, which may reveal some of these items, but these are informational only. You should therefore put in the time to independently investigate these matters within the town hall records. No experience with this? You may still be the best one to research this because you are personally familiar with the improvements that may actually exist at the house. These are publicly available records and most town staff are helpful in pointing you in the right direction. Bottom line, you never want to buy a problem. The burden should be on the seller to address these issues, as rectifying this type of issue can be quite costly.
Another item that is not automatically produced for your Connecticut purchase: a survey. It’s simply not a prerequisite to close. Your legal description may be based upon a map that is decades old. That may be perfectly acceptable, unless you have some concerns about the boundaries or plan to put in a pool or other items that require a good understanding of the property limits. Otherwise, you are accepting title subject to whatever conditions an updated survey may reveal. This is customary in Connecticut and the great majority of buyers do not elect to conduct a survey, but this is another factor to consider. If you are contemplating having the property surveyed you should absolutely plan to do so before you purchase the property, as opposed to after you acquire title. If you are considering putting in a shed, pool or other structure you should also inquire with the local wetlands officer about whether or not there are wetlands on your property.
4- Why haven’t you read your title search? Your attorney will order a title search early on in the process, as most lenders require that the title work be promptly provided. Unfortunately, not all firms take the step of sharing the title report with the clients early on. It is very important that you obtain a copy as soon as its available and review it carefully. It may look like gibberish, but it still contains invaluable information about the lot dimensions, private setbacks, easements and restrictive covenants. These can be significant and may impact your ability to use the property, to construct certain improvements, such as a pool or shed, and may even dictate the type of siding and color scheme your house may be. Not all lots have onerous restrictions or easements, but its important information to have when venturing into a big purchase. And it you cannot make sense out of it, your closing attorney can help you understand the implications of the search results.
5- Your money, your risk. Chances are, you are using a significant part of your savings for the closing. It is very likely that you will need to wire this to your attorney. Law offices are targets for hackers because of the significant funds they collect and disburse through their clients’ funds account. Even though they may have security measures in place, you need to be very cautious in responding to instructions that you receive electronically, especially as they relate to funds transfers. It is very important that you call your attorney’s office to verbally confirm wire instructions. This is especially important if you receive any instructions regarding wiring funds which deviate from their prior instructions. There are many heartbreaking stories about people who failed to take this precaution. https://www.washingtonpost.com/news/where-we-live/wp/2015/10/12/hackers-latest-scam-tricking-home-buyers-into-wiring-them-settlement-funds/?noredirect=on&utm_term=.2b49daa8ff7d
6- Be flexible. So many things in the process will be outside of your control. Contract closing dates are not set in stone, instead it may seem to become a moving target as the process inches along. That’s normal, but it is still maddening. If you can avoid a situation where you have a simultaneous purchase and sale on one day, then by all means avoid it. If you are renting an apartment, allow some cushion time by targeting for a closing date that is a few days or weeks of cushion time before your lease ends, you may be glad you did. If you cannot build-in flexibility in advance, have a back-up plan.
7- Don’t go picking out that new furniture. Do you have a spouse who loves to shop? Then you will love this advice. You need to be on a lean budget before your closing. Your lender will likely obtain an updated credit report again a few days before the closing. An increase in your credit card debt for that bedroom set you had to have could easily shift your debt ratio enough to suddenly disqualify you for your mortgage. There will be plenty of time after the closing to decorate.
The idea of getting through all of these steps may seem overwhelming, but it is a process and this gives you more appreciation as to why the process usually takes many weeks. And you are already taking the right steps by getting better informed. Be persistent and deliberate and you will get to the closing table before you know it..