Homebuyers: Stress & How to Deal with It (Part 2)
Buying a home is stressful, right from the day you make the decision to buy one, it seems like. Here we’re going over some of the more anxious days you might have as a new home buyer. Especially as a first time homebuyer, it’s important that you know what to expect during the purchase period and escrow so that you are not thrown off guard.
Stressful Day #3: When the Check gets Deposited into Escrow
Good faith deposit checks are usually between 1% and 3% of the purchase price, so to buy a $200,000 house, the deposit can be fairly large. Upto $6,000 is a sizeable amount of money to anyone so it’s normal to be nervous when it leaves your bank account. Always ensure that you know the money is going to a title company (or a trust account, but mostly a title company is used) and that your Realtor® has a receipt of the money received by the title company going into your escrow. There will be a photocopy of the check on the receipt.
Good faith checks are deposited within three business days of acceptance of the offer, so be sure to move money out of savings and place it in checking if that’s what you need to do so that the check is cleared. Ideally, as soon as you start looking for a home you should try and make most of the money you will use for the purchase as liquid as possible. The down payment goes to the title company last so you might have some time for that, but the good faith should be kept in your checking. It will be deposited by the title company into escrow where it will stay until the end of the escrow at which time it will be added to your account for all the money you are paying into the purchase of the property. (Or course, contingencies in the contract protect it so if anything isn’t resolved in terms of repairs or appraisal, you get the deposit back.)
Stressful Day #4: Inspections
Talk of the good faith deposit segues well into talk of inspections because the contract usually has contingencies associated with it. If the home does not appraise for example for the price you intend to pay for its purchase then you have the right to cancel escrow and get your deposit back. Perhaps the contingencies that protect you most are the inspection contingencies. You should get everything that bothers you checked out, but the most common inspections are termite (also called wood detroying pest inspection), roof and a complete home inspection.
It’s always a good idea for you to be present for each of these. You may have them scheduled on the same day to save time. And since you will be paying for these, it’s a good idea to get your Realtor® to let the listing agent know that they have been scheduled and on what day. Lately with REOs the power does need to be turned on for the complete home inspection. Your Realtor® will have to give the inspectors access to the home.
A pest inspection costs about $100, a roof inspection is usually free (you pay for warranties and repairs) and a home inspection can cost anywhere from $300 to $500 depending on the square footage of the home. The home inspection is the longest and can take about three hours. If you have concerns, it’s a good idea to be there for the entire inspection and speak with the inspector about your worries before he gets started. If not, it’s still good to be there so the inspector can point out what he thinks might be an issue.
Stressful Day #6: Paperwork
This one isn’t so bad because usually you receive the paperwork and have time to look over it at your own home. Remember that the disclosures also are contingencies, so if you do see something in the disclosures that you don’t know about, would like more information on or otherwise is unacceptable, you don’t have to shrug and sign. You can still back out of the escrow at any time provided you are still in the contingency period and have received the disclosures during that time.
Do not remove contingencies unless all disclosures have been received. We are beginning to see that with bank-owned homes that disclosures are beginning to take longer. If that is the case, you should not remove contingencies until all disclosures have been received. Ask your Realtor® to double-check this fact and don’t sign your right to back out of escrow until you receive a positive answer.
Hang in there! We’re almost done with the home purchase now! If this seems anxiety-provoking just to read, chances are you are a potential home buyer. The biggest step you can undertake to protect yourself and make the transaction smoother is just to hire an honest and trustworthy Realtor® to be on your side. Good luck! Tomorrow part 3 concludes this series.
