When buying your first property, there are many things to know, and probably will be some things will that take you by surprise.
In this blog post, I’ll lay out some essential things to know if you will be taking on a loan and buying your first property.
So you’ve found a home in Colorado you want to purchase. You are using a Realtor® and you tell them you want it. What’s next?
Earnest Money and Offer
Once you’ve reached this point, you gather your Earnest Money and make an offer. Please do all of this with the help of a Realtor®. You will be enjoy much more protection when you do so.
Anyway, The Earnest Money is one of a few places you’ll need hard cash money, or its equivalent, during the transaction. Other notable spots (detailed below) are the inspection, the appraisal and the down payment (if needed).
Earnest Money proves you are serious. When we make an offer you’ll need to have the Earnest Money in hand, because if they accept, we have to deliver it straightaway. It will be held in a trust account, and if it’s a check, it will be cashed. Earnest Money helps people act in Good Faith. It is skin in the game, very simply put. It’s harder to breach a contract when a buyer knows they could lose $4,000 over it. It also prevents people from making offers all over the place, or making too many offers, or offers they don’t intend to follow through with.
Earnest money is like a deposit. It stays in a trust account until closing, at which time it is normally counted toward the balance of the home, so serious buyers know they are simply starting to pay for something they are buying anyway.
Dates and Deadlines – Inspection, Appraisal, Loan Commitment…
The Due Diligence Period
As you craft the offer with your Realtor® we will be asking you to help us choose dates by when you will have certain things completed. We pick the dates, and they become deadlines. For example, according to the Contract (offer), you, the buyer, will have the inspection done by this date. If anything is discovered in the inspection to which you object, we have by another date to resolve the problem. If the date goes by and no objection is made, the buyer waives their right to pull out of the deal because of the inspection. The same goes for the buyer’s approval of their loan, any HOA rules or covenants, appraisal, and insurance. Your Realtor® should have a solid plan as to what date needs to be where, because it’s a bit of a dance to make them all fit. It takes time to schedule an appraiser, or an inspector, or any other vendor. After that provider does their work, if there is a problem, it can take time to resolve it.
The due diligence period is the time for the buyer to go through everything with a fine toothed comb and make 100% sure they want to move forward with the contract. It usually lasts around 30 days.
Will You Need Money Down?
Maybe. That is a question for your lender. Your lender and your Realtor® are the two trusted professionals that should be used when buying real estate in Fort Collins, across Colorado and the nation (in my humble opinion). Also, your tax professional should be consulted. Call them and let them know your plans, and ask them what you should make sure to cover as you move forward in this process.
Money down makes offers look better, because Sellers like people who have real cash. Money down takes money off the balance of what you owe on the loan, so it can lower your payment. There are situations where no money down is needed, so if you aren’t sure about how you can proceed, consult a lender. They will meet with you for free(if it’s not free don’t do it) and will simply let you know for what you will qualify. Perhaps a loan with no money down is one of those things.
Besides the Down Payment, What Else Could You Be Paying For?
During a real estate transaction, as a buyer, there are a few times when you’ll be asked to flash your wallet and pay for some things.
- Inspection of the home – Costs vary, but count on it being in the hundreds of dollars. It depends on the size of the home and property, location, difficulty, etc. It’s a service with variables, and the more variables, the more it is going to cost.
- Appraisal of the home – Having an appraiser assign a value to the home is something a buyer has to do, usually to please the lender. It is also a buyer’s chance to gauge soundness of their investment. Cost of appraisals, like inspections, depend on the size and scope of the job. I hesitate to ballpark it here because this post will live a long time. To get a handle on the current approximate costs, just give me a call, or shoot me a message.
- Earnest Money – the aforementioned, detailed above in this post.
Your Realtor® Will Most Likely Be At No Cost to You
I’d normally start by saying something like “Get with a Realtor® right away!” but I figured I’d start here, and explain how free we are to buyers in Colorado. Not only is it to your benefit to use one, but you probably won’t pay your Realtor® when you are on the buyer’s side of the transactions. Realtors® are most often paid by the Seller’s side of the transaction.
While there are many parts to a transaction, this blog post was to let you know about some of the key parts. As some of them cost money, it’s important for you to know about the inspection, appraisal and earnest money. Real estate in Fort Collins, Loveland, Greeley, Windsor and across the rest of Colorado’s Northern Front Range and the state is a fluid, dynamic thing. That’s why your BEST bet is to hire a Realtor® like me (or me specifically, please:), because they can keep you informed, educated and ready to make great real estate decisions that benefit you in the long run!
Here’s to our real estate success!