Buying the home of your dreams
After reading “ready to buy?” and “looking for the home of your dreams“, you are ready for the third step of the guide to buy a house in Orlando. If you have not yet read the previous steps, we suggest you do so before starting this third one which is “buying the home of your dreams“.
In this step we will start where we let off the second step. At this point we will assume that you have made a competitive offer and that it has been approved by the seller.
Security or good faith deposit
The security or good faith deposit will be released to your real estate agent once the offer is approved, another option and the most common one, is that you deposit the escrow, into a title company account. If you give the check to your agent, he/she will deposit it in a “security deposit” account as a sign of your good faith, interest and respect for the seller and also shows that the offer is serious. If everything is carried out in the best way and the sale gets to closing, the deposit will be deducted from the closing costs payment. Now, if the seller decides to exit the negotiation within the right times, the deposit money should be returned to you.
Actually, you are not required to make a security deposit, the question is whether the home seller would accept an offer that does not include a deposit, most of the times they will not accept it and will take in consideration other offers that are accompanied by a escrow deposit showing the good faith sign.
If we put ourselves in the position of the seller of the house, we will understand that it is normal that the seller does not accept an offer without a deposit. If you want to sell your house in Orlando and receive an offer that does not include a deposit, you are risking that the potential buyer is not really interested and withdraw their offer at any time. In this case, as a seller you will assume financial expenses, since if you are still paying for the house, there are mortgages, insurance and property taxes payments, that you must make.
Okay, now the question is how much should you we give as a security deposit? In general, a large part of the buyers usually give between 1% -2% of the purchase price as a good faith deposit, but finally it will be your real estate agent who recommends the specific amount depending on the demand and the market as such.
There are some specific cases where you can lose your security deposit. Suppose you want to buy the house of your dreams but in order to do so, you must sell your home first. The owner of the house of your dreams accepts the offer you have made and immediately you make the respective deposit and put your house up for sale. For whatever reason you could not sell your house and the date has come to close the house of your dreams. You will not have money for the initial payment, since you still need to sell your house to buy the one of your dreams. In this scenario, when you withdraw from business and don’t meet the deadlines, you probably will loose your deposit.
Do a home inspection
An inspection will be necessary so that you know the conditions of the house you are buying. A qualified inspector will be in charge of inspecting the entire house, including plumbing, electrical system, air conditioning, heater, roof, and any other aspect that may affect the value of the property.
Once the inspection is done, you will receive a written report from the inspector, detailing the conditions of the house. Recommendations for repairs, maintenance or any type of adjustments that must be made will be detailed so that you can then decide how to proceed in relation to the offer.
Depending on how costly repairs are and the severity of contingencies the inspector encounters, you may decide to proceed with the purchase, renegotiate the purchase price, ask the seller to make the necessary repairs, or cancel the contract. In the event that the vendor makes the necessary arrangements, a re-inspection is necessary to ensure that all agreed contingencies have been resolved.
An inspection should not be confused with an appraisal. While both are part of the buying and selling process for a property, an inspection seeks to find out the status of the property, while appraisal focuses on determining the value of the property.
The appraisal of the house, as previously mentioned, is the inspection carried out by a professional to determine the value of a property, and which is carried out by comparing recently sold houses in the same area of said property. The appraisal or appraisal is based on methods established following the procedures of the USPAP (Uniform Standards of Professional Appraisal Practices).
If you are going to buy a house through a mortgage loan, the lender will require you to carry out an appraisal, since this way they protect themselves from lending more money than the property is worth. Your lender will lend you at most the value shown in the appraisal.
The lender, as we mentioned, will demand an appraisal from you, but it will be you as the borrower who pays the appraisal. It is important that before making an offer you have the certainty that this is the house you want to buy, since the money you will spend on the appraisal is not refundable.
The appraisal is carried out by an external professional who does not have any type of relationship with the buyer, seller or lender, in such a way that all the parties can feel safe, since this will be impartial and will not be influenced by any of the parties.
Regarding the cost of the appraisal, we could say that there is a range between $200 and $600 that vary depending on various factors such as the size, location, type of house and other factors that affect the amount of time and effort required to carry out the work of appraisal.
Title companies also play an important role in the process of buying and selling a property. The title company will be in charge of verifying that the title of the property that is delivered to the buyer is legitimate. Also ensuring that the seller has the rights to sell the property.
There have been many cases where a property belongs to several owners, whether due to a will or any other reason, and that one of them sells the property without authorization from the others, which will have legal consequences that may affect the buyer of the property home at a certain time. Title companies, through title insurance, protect lenders and homeowners in the event that someone makes a claim about it in the future.
In most cases, the title company is responsible for closing and maintaining escrow accounts. Still, sometimes, though very few, the companies that handle title and title insurance are different.
Usually people tend to confuse the title with the deed. The deed is a legal document that is used to transfer property between owners. When the closing is done, the deed is signed and witnessed before being delivered to the new owner. In the deed you will find an exact description of the property and what is transferred.
On the other hand, a title is a document that says you are the owner of the property. Usually when signing titles documents, mortgage documents are also signed.
A title company will do a title search to identify potential obstacles to a clean transfer. An extensive research is done to make sure there are not other owners that have rights to the property. In addition to the above, the title company is responsible for identifying possible problems such as:
- Pending mortgages to pay.
- Some type of existing liens.
- HOA fees outstanding.
- Taxes pending to pay.
- Leasing issues.
- Easements. This refers to agreements made by the owner to give permission to third parties to use their land for specific purposes. For example, a permit for vehicles to park on your property.
As for title insurance, there are two types, that of the lender and that of the owner. When you buy a house through a lender, you will be required to pay for a lender’s title insurance that you must pay (sometimes paid by the seller). Owner’s title insurance is optional, although it will help protect your investment in properties in Orlando or any other city.
The closing day is the last step in the process of buying and selling a property, and it usually takes place between the fourth and sixth week after signing the purchase-sale contract, although sometimes it may take less or more time. Once all the parties have signed the required documents, you will receive the keys to the property, you will take the photos for the souvenir and you will legally be the owner of the property.
Okay, now for the question you are waiting for about closing day. How much do you have to pay in relation to the closing? On average, the buyer pays approximately 3% to 4% of the home’s purchase price at closing. This percentage includes costs for attorneys, inspection, property insurance, credit reports, among others. Some of the expenses, such as the inspection, must be paid before the closing day.
Your lender must send you closing information at least 3 days before the closing date. This document, known as a closing disclosure, details all the terms of your loan, as well as the costs that you must assume on the day of closing.
It is important that you review this document in great detail and compare it with the initial estimate they made for you. If you notice any significant changes, ask your lender what the new value is due to.
Insurance for your home
If you are buying your house in cash, you are not obliged to take out any type of insurance. If you need a loan to buy your home, your lender will require some type of insurance for your home.
Home insurance is a pledge of guarantee for the lender, since it protects your investment. If at a certain time the property becomes damaged or destroyed by a fire, tornado or any event, this insurance will allow you to repair or rebuild your property.
A question that we are asked very often is what type of insurance policy do I need? There are many types of insurance policies, now, the most desired are those that mainly cover:
- Repair or reconstruction of your house as well as other structures such as separate garages.
- Replace your belongings if they have been damaged or destroyed by a covered loss.
- Accommodation while your home is being repaired or rebuilt.
- Related medical bills up to a certain amount determined in the policy.
With this we finish the third phase of your home buying process, we invite you to continue reading the next step of our guide “Moving to the home of your dreams”.
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