How to Buy Without an Agent: 3 Steps to Buying a Home for Less, Step 3 Close On the Home
/Welcome to my Three Step "How To" Guide to Successfully Buying a House Without Using a Real Estate Agent. I am a real estate attorney, as well as a licensed real estate broker, and I've helped hundreds of successful home buyers and sellers.
Craig provides the following insight for informational purposes only, and without any warranty or guarantee whatsoever. This blog does not create an attorney/client relationship, and Craig is not your attorney unless you have a signed fee agreement with him. Now with that disclaimer out of the way..
Man oh man oh man, you're getting close to the finish line. Time to bring it home - literally!
STEP THREE GOAL: Complete your purchase successfully.
Note the emphasis. If you close and the house ends up being a money-sucking lemon, you didn't finish successfully.
Due Diligence: The Heart of the Deal
Finding the home is fun, getting it under contract is exciting. Now it's time to get to work. Because the only thing worse than never buying a home? Buying the wrong home. Think The Money Pit - without the happy ending.
There are two parts to a buyer's due diligence:
The physical condition of the property - addressed primarily through the inspection contingency; and
The status of the legal ownership of the property - addressed primarily through the title contingency.
Note that a prudent buyer never skips either aspect of due diligence. Honestly, don't take the risk. Know what you are purchasing.
Insider's Tip: Do your due diligence. Don't scrimp, save, or justify anything less. This is true even if you don't have any contingencies in your contract and face loss of your earnest money if you back out. Because that may end up being the cheapest solution to a really lousy house.
This means that you might be completing your due diligence before making an offer, so you can better compete against other buyers. If you go this route, know that your due diligence will be abbreviated and not as thorough. In other words, you're assuming more risk in buying the house.
Physical Condition: Sounds simple, and it can be. Investigation of the home's physical condition begins with a general inspection by a qualified inspector.
From there, investigate further as indicated. This may mean a geotechnical inspection. Or an electrical inspection. Or whatever is needed to know what costs you might incur if you own the home, given its condition. Your general inspector should recommend follow up inspections by qualified professionals as needed to fully assess the home's condition.
If you're completing this due diligence pre-offer, then you probably won't be able to follow up. And whatever you find should be reflected by your offer. In other words, you may decide to not make an offer, or decide to offer less.
If you've got the home under contract, then you're inspecting the home under the inspection contingency. This allows you to ask the seller to make repairs before you waive the contingency.
Insider's tip: Don't think of this as an opportunity to renegotiate the contract in your favor. That's exactly what it is is, of course, but no seller in the world wants to hear that. Also, focus on safety and deferred maintenance issues, those are clearly fair game. Think twice before calling out a defect that was apparent, like a a front window with a busted seal. The seller reasonably expected you to account for that in your offer. Finally, ask for repairs. If you ask for a monetary concession right out of the gate, don't expect the seller to react well. Again, it's not about renegotiating the contract in your favor.... (wink, wink)
If done well, you can often get some significant concessions from even the hardest seller.
Status of Legal Ownership: This aspect of due diligence most benefits from using an attorney. A real estate broker isn't trained or licensed to analyze a title report. The title insurance company isn't necessarily concerned with the same things that might concern you (like an easement).
If you're looking at title pre-offer, your analysis will likely be limited to the preliminary title report. That is the the primary tool used in analyzing title. But once again, recognize the increased risk of completing your due diligence pre-offer.
If you're looking at title under a title contingency, then you'll have the chance to call out any objections. The seller will be given a chance to cure them.
Insider's Tip: As a general rule, a buyer doesn't need to worry about existing liens on the house. That's because the purchase and sale agreement will require "clear title," i.e. satisfaction of all existing liens. The title insurance insures that there are no liens. And it is the job of the closing agent to make sure all liens are paid. So the whole process is set up to make sure all liens are paid.
What might you find when an attorney reviews your title report? Most commonly, it will be that someone else has a legal interest in the property. A shared driveway easement is an example. Trust us, that is something you want to know before you buy the home.
The Closing Documents
As closing approaches, the closing agent will draft and compile the documents necessary to close. The vast majority of these documents will come from your lender. It's literally dozens of pages, relating to your mortgage loan and related federal regulations.
Once again, you'll really appreciate the insight you get from having an attorney on board at this point. You'll get solid, reliable answers to all of your questions.
Insider's Tip: Your attorney can ask the closing agent know you'd like to get a copy of the docs just as soon as they are ready. That should be the day before you're asked to sign. These documents generally aren't negotiable, but it's a big deal, you review what you'll have to sign.
Seattle Tip: You'll set an appointment to sign the docs with escrow a couple of days before the actual closing date.
The one document that is definitely negotiable is the deed that conveys ownership of the property to you. If drafted incorrectly, it can shortchange you on the promises to which you are entitled from the seller. Usually not a big deal, but you never know what the future holds and what you might regret not having. Needless to say, you need an attorney on board to make sure this is done right.
