Home Buyers and Sellers "How To" Guide


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Home Buyers
Purchasing a home is a major decision_whether you are buying your first home or you have purchased several homes in the past. We designed this section of the guide to help you make the best choices possible in the home buying process.

How To Select A Real Estate Agent
After you make the decision to buy a home, the next step is to select an agent who will help you find the home best suited to your needs, and for the amount of money you can afford. There's no need to go through this process alone. An agent can add ideas as well as expose you to many more properties than you would have access to on your own. The buyer usually pays no fees for an agent's services.

In selecting an agent, ask friends or relatives who have recently bought or sold a home if they were satisfied with their agents' services. You may also ask your personal loan consultant at Greater Dallas Mortgage to recommend an agent best suited to help you.

You may have a friend or relative who wishes to help you find your home. However, do not feel obligated to use the services of either a friend or relative if you feel uncomfortable with that decision.

The real estate agent you select will be assisting you not only to make a major business decision, but also to make a decision that will affect your family lifestyle for years to come.

Select one real estate agent with whom you feel comfortable!

How To Work With Your Agent
Share with your agent your needs and desires. Also make sure he or she has complete knowledge of your financial capabilities_how much you can put down, your total income, the monthly payment you feel would fit your budget, and your past credit history. Restrict this information to the agent you have selected and your Greater Dallas Mortgage loan consultant. Use your agent to inquire about all homes that interest you. Do not call on ads in the newspaper, respond to yard signs or go to open houses without your agent's knowledge or presence. Your agent has access to multiple listing services and can use those as well as other resources to make the process of selecting a home much easier.

Once your agent has a clear understanding of the type of home you want and what you can afford, he or she will review all properties currently on the market. If you are seeking a home in a large metropolitan area, such a review is often conducted with the help of a computer. Your agent inputs all of your needs and wants, along with your price range, into the computer. The computer will print out a list of those available properties which meet your criteria. You can review that list along with your agent and then select those properties that are of the most interest to you. The agent can also instruct the computer to print out a more detailed report on each of these selected properties. With this information in hand, you can decide which properties to inspect. The agent will then arrange appointments for you to see those homes.

In this guide, you will find "Home Inspection Notes" tables. These "Home Inspection Notes" can assist you in conducting a thorough home inspection and provide a way to record important information. Bring this guide and a note pad along when you go to see each home. Make notes of what you do and do not like about each property. This will help later when you are reviewing your thoughts and reactions to each home. Without notes, it is easy to become confused and forget the features each home contained. It is best not look at too many homes in one day. Three home per day is a good, comfortable pace. If you try to see too many homes, you may become overloaded. Selecting your home then becomes a burden rather than the pleasure it can be.

If you find you are looking at too many homes before deciding on one to make an offer, you may either

1. not be ready to buy or
2. have selected an agent who does not fully understand your needs and wants.

You may wish to discuss this with your agent or possibly select a new agent.

How To Submit A Purchase Agreement
Real estate agents are trained on the intricacies of drawing up a purchase agreement. Review with your agent the price you would like to offer and the terms you would prefer (i.e., the type of financing, possession date and any other terms and conditions you feel necessary to satisfy your needs). Read the written purchase agreement and make sure you understand everything. Remember, the purchase agreement is like a blueprint. Whatever it shows is the way it will be done. The purchase agreement should not reflect any terms you cannot fulfill. Do not assume anything can be changed or added. After the seller signs the agreement, it becomes a binding contract.

Your agent then makes an appointment with the seller(s) (and possibly the listing agent) to present your offer. The seller(s) have three options:

1. accept your offer as submitted;
2. reject your offer as unsatisfactory; or,
3. prepare a counter offer to submit to you.

If a counter offer is submitted to you, it will reflect the needs and wants of the seller(s). Maybe the price you offered was unacceptable to them, or the possession date requested by you was not convenient for them. In that case, your agent will try to negotiate a settlement in those areas where there are differences. After a purchase agreement is signed by both parties, you, as the buyer will need to seek financing.

How To Obtain Financing
Because there are many different types of mortgage programs, you, with assistance from your agent and Greater Dallas Mortgage loan consultant, should be able to select one which will best fit your personal financial situation.

Greater Dallas Mortgage is a mortgage banker. We have our own in-house underwiriitng and closing departments. This provides us more control to get your loan apporved quicker and with less hassle. Plus, we have access to many more types of mortgage programs and more competitve rates.

For example, there are adjustable rate mortgages (ARMs) where the interest rates are lower in the earlier years.

You may prefer to use a mortgage program backed by the federal government such as the Federal Housing Administration (FHA) Program or the Veterans Administration Loan Guarantee ("VA") Program which is available for eligible veterans. Both government programs have loans available with low down payments. "VA" loans can be obtained with little or no down payment.

There are also many conventional loan programs available with 15-year and 30-year amortizations.

You would be well advised to pick a lending institution, such as Greater Dallas Mortgage, which offers a wide variety of mortgage programs and let its professional personnel advise you concerning which program would appear to best suit your financial needs.

After you choose a lender, you will be required to make an application for the loan. At this time the lender will want you to pay (in advance) for its appraisal of the chosen property as well as the costs incurred in obtaining a credit report on you. These costs usually do not exceed three hundred to four hundred dollars. The lender needs this information to make a final determination concerning the amount of money it is willing to loan to you. You should be aware that the money you pay for the appraisal and the credit report will not be refunded to you regardless of the final loan determination.

It generally takes three to four weeks for the loan to be approved. At that time, the title of the property will have to be examined by a title insurance company. The title insurance company makes certain the seller has a clear and marketable title to the property. The lender will require a title insurance policy as a protection for the lender, in the event of a future title defect. For a nominal fee, you can have the title insurance policy extended to cover your interested as well as the lender's. It is a good idea to have the title insurance policy put in your name as well as the lender's.

You will need to purchase a homeowner's hazard insurance policy to protect you and the lender in the event that the property becomes damaged or destroyed by fire or natural disaster. It is a good idea to have the agent who handles your auto and personal life insurance policies explain the types of homeowner's policies available. If all your insurance policies are handled by one agency or agent, you can usually save on the total cost of insurance.

Now you are ready to "close" the sale!

How To Close The Sale
The "closing" can take place in the lender's office, the agent's office, or the title company's office.

In addition to you (the buyer), others in attendance will typically include the seller(s), the closer, and probably your agent. It generally takes one to two hours to review and sign all the final mortgage papers and transfer the title to the property.

The "closing" should be a happy time for all parties, although it would be quite natural for you to feel some apprehension as you go into the "closing." It is not unusual for issues to surface during the "closing" which have not previously been discussed. Your agent can provide useful assistance in these solutions.

In addition to the property appraisal and personal credit report (which you have already paid for in advance) other costs must also be paid at the time of "closing." These additional costs typically include:

1. An "origination fee" paid to the lender for processing the loan (approximately one (1%) percent of the total mortgage amount);
2. Four months of the annual premiums for homeowner's insurance and property taxes. (This amount assumes the lender prefers to establish an escrow account to pay your annual property taxes and insurance. Each month thereafter, you will be paying the lender one-twelfth (1/12) of the annual tax and insurance costs in addition to your loan principal and interest costs);
3. Any costs for conducting a property survey and inspection;
4. Costs for the purchase of the title insurance (In total, all the above costs should total approximately two (2%) percent of the total mortgage.); and
5. Other miscellaneous costs charged by the title company or lender incurred to close your loan.

Congratulations! You are now the proud owner of your new home. Now wasn't that easy?

Sellers usually want at least a day or two to move after the closing. Once you are sure of the date you plan to move into your home, you should contact the electric company, gas company and city water company and let them know when you plan to occupy your new property. In some cases, they may require a deposit before the utilities can be put in your name. Whether you are moving across the city or across the country, consider utilizing the services of a professional mover. Trying to move yourself can often be more costly than contracting for professional help. You may damage furniture or break items because they were not packed properly. Also consider the personal health hazards, i.e. sore muscles, bad backs, etc. Hire a professional mover!

Home Sellers
Why have you decided to sell your present home? Is it based on your being transferred to another city? Has your family size changed so that you require either more space or don't need as much space as you currently have? Whatever the reason, you have decided to sell your present home. This section of the booklet is designed to help you make the best decisions possible when selling your home.

Now what?

How To Sell Your Home
Many home sellers decide they would like to sell the home themselves as a "For Sale by Owner." The main reason usually is to save the brokerage fee.

It has been established that in excess of eighty (80%) percent of the people who attempt to sell their own property give up after thirty (30) days or so and select an agent to handle the transaction for them. The main reason for the low success rate in selling one's home is simply that homeowners do not have access to seventy-nine (79%) percent of the potential home buyers.

Many individuals who do eventually sell their own home fail to realize the full value of their property and actually sell it for a price below the market value.

It is best to contact a professional broker to help you sell you home!

There are three basic sources for attracting home buyers: 1. newspaper ads, 2. yard signs, and 3. multiple listing services. It is known from studies conducted in the real estate industry that only three (3%) percent of home buyers respond to newspaper ads; eighteen (18%) percent call as a result of seeing a yard sign; and seventy-nine (79%) percent find their homes through professional Realtor's multiple listing services (or what is referred to as "inter-office referrals" where one agent in a real estate firm has a client for a home that an agent from another real estate firm has listed with a multiple listing service).

How To Select A Real Estate Agent
You will probably come into contact with many real estate agents if you attempt to sell your own home. You may also ask friends who have recently sold their home if they would recommend their agent to you.

Do not make a hasty decision. You are advised to interview several agents and then determine which one you feel most comfortable with, who also possesses the knowledge, experience and expertise necessary to assist you. The individual agent you choose is most important. Ask yourself, "Would I buy a home from this person?"

Many home sellers wonder whether to list their home with a large firm or a small firm, a franchised firm, or one that has sold many homes in your local area.

It is important that the firm you choose is a member of the multiple listing service.

How To Work With Your Agent
Your agent should assist you to determine what price to ask for your home.

Review comparable homes in your area and other similar neighborhoods. In making your comparisons, pay close attention to the number of square feet in each home as well as the features which one home has when compared with another.

Do not just set a price on your home because that is the price you think you will have to sell it for. Sometimes owners will force their home to be marketed at a price higher than it should be. These owners will attract fewer buyers and/or buyers looking for a more expensive home. The result will be that their home may not sell or may stay on the market so long that it becomes "over-exposed." The marketing process then, will take much longer. Many times the owner of an "over-exposed" home is forced to settle for less money than he/she should have, only because buyers have become suspicious of a home that has been on the market too long.

Price It Right To Begin With!
Your agent should suggest maintenance and repair items, which if performed, would enhance the value of your home. Have your agent make a list of these items and see that they are completed.

When your home becomes available for sale, your agent should schedule all appointments to show it. Do not allow any prospective buyer(s) to examine your home without an appointment. Sometimes the party will come to your door after seeing a yard sign. Do not show them your home. Ask them to call your agent for an appointment.

During the times when your home is being shown to a prospective buyer, it is permissible for you to be at home. You should answer questions raised by the buyers or their agents to the best of your ability, but do not volunteer information.

Do not follow the prospective buyer(s) around or try to "help" the agent who is showing the property. This makes the agent uncomfortable and the buyer(s) may feel you are too anxious to sell your home (for whatever reason).

When a prospective buyer agrees to make an offer for your home, your agent will call you and set a time for you to review the offer. The offer comes in the form of a purchase agreement. A purchase agreement is a formal proposal prepared and signed by the prospective buyer which states the terms and conditions under which the buyer will purchase your home. If you also sign it, the purchase agreement becomes a binding contract between you and the prospective buyer.

How To Review The Purchase Agreement
When the time arrives to review the purchase agreement, have all parties present that need to be part of the decision-making process (e.g., your spouse, or others who you wish to share the decision with you).

First read the purchase agreement and ask your agent all questions you have regarding the terms of the offer as well as any questions you may have about the prospective buyer(s). At this point, you have three options:

1. Accept the offer as submitted:
2. Reject the offer as unacceptable; or,
3. Prepare a counter offer.

Some of the terms and conditions contained in the offer may be acceptable to you, while others may be unacceptable. For example, you may wish to change the price, change the requested possession date, or delete certain items of personal property which were included in the offer.

Usually your agent will want to write any of your desired changes on the original purchase agreement and have you initial those changes. Remember that once the original purchase agreement is amended by you (the seller), it becomes invalid and a new purchase agreement is created which must be signed by the buyer. When you submit the amended purchase agreement to the buyer, you are making a "counter offer."

If the buyer accepts the changes and signs the modified purchase agreement, your home is sold. Do not assume the terms of the purchase agreement can be changed later to fit any emerging needs.

How To Finance The Sale
In most cases, legal implementation of the purchase agreement will either:

1. be contingent upon the buyer qualifying for financing, or
2. require you, the seller to "carry back" some type of financing.

These contingencies will be part of the terms and conditions of the purchase agreement.

If the buyer(s) are to obtain new financing, they must make application very soon after the purchase agreement is signed. Your agent should contact the Greater Dallas Mortgage loan consultant after the buyer(s) have made application to see if he or she anticipates any problems with the buyer(s) qualifying for the amount which the purchase agreement calls for.

The mortgage company or lending institution will send an appraiser to inspect your home in order to establish a market value for your home. Meanwhile, the lender will also verify the buyer's credit history, employment history, current income, and present assets (such as stocks, bonds, other properties, bank accounts, etc.).

In some cases, the buyer(s) may wish to "assume" your financing (i.e., continue your current financial arrangements by having them placed in the buyer's name). Should this be the case, you will probably have earned considerable equity in your home. The buyer(s) may ask you to carry a contract for deed, a land contract or a second mortgage to assist them to finance the equity which you have already accrued.

If the buyer(s) assumes your mortgage, your lender has the right to reject such an arrangement. Many home mortgages today have a "limited assumption" clause stating that the lender has the right to approve the person assuming the mortgage.

The process for assuming a mortgage is very similar to the process for applying for a new mortgage.

If the buyer is successful in assuming your existing mortgage, you may still be liable for any payment defaults by the buyer(s) unless you obtain a "release of liability" at the time of "closing."

There are two ways in which you can assist the buyer by carrying a portion of the financing. One is called the "title theory;" the other, the "lien theory."

The "title theory" is a "contract for deed" where you, the seller, have a contract with the buyer(s) to keep the title to the property and relinquish it only after you are paid in full on the contract.

The other is the "lien theory" or "mortgage" when you, the seller, give the buyer(s) the title and take back a lien in the form of a mortgage on the property.

You should review the benefits of each option with your attorney before agreeing to any arrangements. Once the terms and conditions of the financing are agreed upon and approved, an update of the title is ordered by the lender.

A title insurance company will examine the history of the title on the property and make sure you are able to convey a marketable title to the buyer. In most cases, a title insurance policy will be issued to the lender [and possibly the new buyer(s)], insuring the title against any future claims.

Once the title has been updated and examined and found to be clear of defects, you are ready to "close" the sale.

How To Close The Sale
The "closing" may be conducted in the lender's office, the real estate broker's office, or the title insurance company's office.

The persons present at the "closing" typically include the buyer(s), seller(s), their agents and the real estate closer.

All of the expenses incurred in the sale are accounted for at the time of "closing." Such expenses include paying off existing financing, interest incurred in financing, adjustments for taxes and insurance, real estate fees, title work, and any other miscellaneous expenses. Make sure you understand everything that is deducted from your proceeds.

Once you agree to the expenses, a check is issued to you for the total amount of the property minus the amount of the expenses.

Congratulations! You have just sold your home to a proud buyer!!

Usually you have a couple of days after closing to move from your former home. You should, immediately after closing, contact the gas company, the electric company, and city water and let them know when you are moving and where to send the final bill.

It is recommended you call a professional mover to help you make a smooth and efficient transition to your new residence.

*This booklet may not be reproduced in whole or in part without prior written consent of Greater Dallas Mortgage.

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