When intending to buy a house, I recommend having an early conversation with your lender. Most local lenders provide home loans, and a lender’s loan officer can give insight (based upon your credit history, work and other factors) on how much money you may be eligible to borrow, which will define what price house you may be able to purchase. However, there is no requirement that someone be “pre-approved” for a loan before going house shopping.
A home that is for sale may have a listing price. However, the listing price is simply a hint of what the seller will likely accept to sell the house. If a buyer offers the full asking price, a seller is not necessarily responsible to sell the house to the person offering the full asking price.
Once a buyer selects a house, the buyer presents a written “offer” to the seller. The seller may sign the written offer or make a counterproposal.
Alternatively, the buyer and seller can reach a handshake agreement on the purchase. In that instance, both the buyer and the seller can sign the written agreement without additional, formal negotiation.
Once the buyer and the seller have signed the same paper that includes the terms to which both the buyer and seller agree, that signed paper is considered a purchase agreement, which includes such details as the price and when the “deal” must be concluded (the closing).
Real estate agents and salespeople can provide offer and purchase agreement forms. Also, any attorney can prepare an offer or purchase agreement for any real estate transaction.
The buyer then provides the purchase agreement to the buyer’s lender. The lender usually orders an appraisal from an independent company. If the lender requires a new survey, the survey is usually ordered along with the appraisal. If the purchase agreement calls for a home inspection, that inspection is usually done almost immediately after the purchase agreement is signed.
Nearly contemporaneously, a closing agent (also known as an escrow agent or a title agent) will be selected, which closing agent will handle the nuts and bolts of the transaction. The seller may demand the use of a certain closing agent only if the seller is paying for all of the buyer’s (and usually the buyer’s lender’s) title insurance premiums. However, many buyers are responsible to pay for all or part of their own title insurance premiums. Thus, the buyer’s lender usually agrees to use the buyer’s preferred closing agent.
For most loans, the lender must provide at least two estimates of the closing costs and financial details to the buyer at or before certain dates before the closing.
The purchase agreement typically identifies a closing date, which is the date when the seller gives official ownership of the house to the buyer and the buyer pays the seller. Typically, the closing agent will handle all of the money and documents, including determining and paying all required filing fees and ensuring that the proper documents are filed with the proper government offices.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.