These are explanations of real-estate terms that are frequently used on this website. You can also refer to our extensive Real Estate Glossary for additional definitions of terms.
After an offer is accepted, the lender arranges an appraisal. To prevent any accusations of favoritism, an appraiser is randomly assigned from a pool. The appraisal determines the value of the home and the amount of money the lender will agree to lend on the home. If the home doesn't appraise at the full amount of the offer, three things can happen:
The buyer can cancel the contract.
The seller can agree to amend the contract to accept the appraised value as the full price of the home.
The buyer can pay the additional amount out of their own funds.
The meeting where the actual sale of the house takes place. In Colorado, the title company conducts the closing. They prepare the documents (such as the bill of sale and deed of trust), ensure the accuracy of the documents, notarize all required signatures, deliver the documents to the appropriate parties, and disburse the funds. Usually a closing is attended by all parties and their agents. (Dave attends all closings and continues to advise and represent his clients during the closing.) Any funds that are due at closing (such as the balance of the down payment) must be paid by cashier's check.
A CMA or Comparative Market Analysis is an analysis of the value of a home. Criteria used include the home's location, condition, upgrades, and amenities. Dave also compares the home to similar nearby homes that have recently sold or are currently listed. Homes that are currently available are competitors for the buyer's dollar. Combined with recent sales and other factors, current listings help set the baseline for offers. The finished analysis gives a range of the value of the property.
Dave has 18+ years of experience evaluating and valuing properties for Wells Fargo and other large banks. He is an expert on pricing homes.
For sellers, Dave (who has not yet seen the home in question) prepares a preliminary Comparative Market Analysis with a suggested range of value. The suggested range may be adjusted once Dave has toured the property. Working together, Dave and the seller will assign a price. Price is the most critical factor in selling a house. The seller has final say in setting the price.
For buyers, when a client finds a home they'd like to buy, Dave prepares a Comparative Market Analysis of the home to help them decide how much to offer.
The amount of cash a buyer pays up front. Unless a buyer can afford to pay cash for a home, the balance is financed through a mortgage loan. There are strict rules about where the buyer can obtain the cash for the down payment. Except for the earnest money, the down payment is paid at closing.
A deposit made as part of an offer show that the buyer is "earnest" about buying the home. The amount of earnest money that is acceptable is decided by the seller. A buyer can offer more to try to make a good impression on the seller. Earnest money is held in escrow by either the Title Company or the sellers Broker until the closing.
Earnest money counts towards the down payment. The amount paid is deducted from the down payment due at closing.
When a buyer first makes an offer on a house, they write a check for the earnest money. A copy of the earnest money check is submitted with the offer. If the offer is not accepted, the check is voided. If the offer is accepted, we deliver the check to the party administering the escrow account.
If the contract falls for any reason that is not the fault of the buyer, the earnest money is required to be refunded to the buyer. We follow up on this if necessary for our buyers.
Just before closing, the buyer and the buyers agent make a final walk-through of the home. The purpose is the ensure that all agreed-upon repairs have been satisfactorily completed and the condition of the home has not deteriorated. If issues are discovered during the final walk-through, whether Dave represents the buyer or seller, he negotiates solutions.
If there is a HOA (Homeowners Association), once an offer is accepted, the buyer receives copies of all HOA documents required by Colorado law. Dave reviews the HOA documents with his buyers. If there is anything in them that the buyer can't agree to, the buyer can cancel the contract.
It is the buyer's right under Colorado law to have a professional home inspection. We strongly recommend that all our buyers have a home inspection done by an experienced, certified inspector. A thorough inspection usually takes about 2 - 3 hours, and the cost is paid by the buyer.
If a buyer refuses to have an inspection, they need to sign a statement verifying that Dave recommended an inspection and they refused to have one done. The purpose of this statement is for the buyer to acknowledge that they are voluntarily surrendering one of their legal rights under the contract.
The seller's Homeowners Insurance policy terminates at the closing. The buyer needs to arrange in advance for their own policy. Proof that the buyer has obtained Homeowners Insurance is required by the lender for final loan approval.
A copy of the buyer's Pre-Approval Letter is submitted with all offers. When an offer is accepted, loan underwriting or final loan approval begins. The buyer's lender will be informed of the contract and will contact the buyer for the documentation they need. Final loan approval usually takes about a month. The funds are wired to the title company before closing.
Because final loan approval is so important, we keep in touch with the lender regardless of whether Dave represents the buyer or seller.
This is a form filled out by the seller, where the seller provides information on the home and its systems (such as plumbing, heating, and electrical) to the best of their knowledge. Any known problems are required to be reported in full on the Disclosure.
Once there is a contract, the buyer receives a copy of the Sellers Property Disclosure. Dave reviews the Disclosure with his buyers.
A Survey or ILC (Improvement Location Certificate) of the property is done every time the property is sold. An ILC identifies the location of any buildings on the property, the legal boundaries, and any easements. A pin Survey, which is more expensive, re-locates and marks the actual pins that were originally used to identify the boundaries. Usually a pin Survey is only done on vacant land.
The buyer pays for the Survey or ILC. The cost is included in the closing costs that are paid at closing.
The title company provides a title insurance policy to protect the buyer's title to and ownership of the home. Whoever chooses the title company pays for the policy. Usually the seller chooses the title company and pays for the policy. However, if a title company goes out of business, the policies they've issued are worthless. So if there are any known issues with the title company, Dave recommends that his buyers choose their own title company and pay for the policy.
The title company also conducts the closing. (See above.)
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