FAQs

Q. What Is a Purchase Agreement?

A. Also known as "Sales Contract", this document indicates the amount of your offer and may also include details that stipulate, for instance, which appliances stay and when you'd like to take possession of the house. The seller or selling agent will need you to sign a purchase agreement and put down "earnest money." Earnest money is a deposit showing that you're willing and able to buy the home; it's usually a small percentage of the asking price and later applied as part of your down payment.

You can also go to "Glossaries of Terms" to check other terms

Q. What is meant by the term "contingency" in a sales contract?

A. Sales contracts typically contain several "contingency" clauses, or stipulations that the sale is subject to. For example, with a mortgage contingency, if the buyer is unable to obtain financing within the specified timeframe, neither the buyer nor the seller is required to complete the purchase. Among other common provisions in the "subject to" section are termite and other inspection issues and the purchaser's need to sell a current home first.
Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to buy a home. If you cancel a contract without having built-in conditions and contingencies, you could find yourself forfeiting your earnest money deposit.

Q. What is an escape clause?

A. An escape clause, also known as a kickout or kickou~ or kriockout clause, is a provision that allows the party to void the contract. For example, the seller may retain the right to look for a more favorable offer, with the original purchaser retaining the right, if challenged, either to firm up the first sales contract (such as by waiving a contingency) or to void the contract. As another example, sellers might insist upon an escape clause in a contract that hinges on the buyers' selling their home.

Q. What REO stands for?

A. Real estate owned or REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

Q. As a buyer, am I responsible for any certifications?

A. As a buyer of a Short Sale or REO property you may be responsible for Certificate of Occupancy before closing. Sometimes you may have to do several repairs or clear up building violations in order to receive C of O. Your Real Estate Sales Associate can advise you.

Q. What do I need to know about lead paint?

A. Lead was used as a pigment and drying agent in alkyd oil-based paint until its use was banned in 1978. The federal government estimates that lead paint is present in 75 percent of all private housing built before then. It was commonly used on doors, windows and other woodwork. An elevated level of lead in the body can cause serious damage to the brain, kidneys, nervous system, and red blood cells. A lead-based disclosure statement must be attached to all sales contracts and leases regarding residential properties built before 1978, and a lead hazard pamphlet must be distributed to all buyers and tenants. Buyers have the right to test for lead paint; however, its existence does not automatically constitute a hazardous condition in all cases.

Q. Should I have the home inspected?

A.Yes, you should. You have a right to inspect the home you've made an offer on, and most purchase agreements are contingent upon inspection. Hire a qualified professional to inspect the home--it's the best way to ensure the home is in good condition. A thorough inspection is an objective examination of the home, from top to bottom, inside and out. It includes:

• Heating and cooling systems
• Plumbing and electrical systems
• Structural integrity of walls, floors, ceilings, foundation, roof
• Condition of gutters, spouts, insulation and ventilation, major appliances, garage, etc.

The home inspector should check everything and leave you with a very detailed report listing the condition of each item, as well as recommended repairs. It's best to be there when the home inspection takes place. It usually takes a few hours and you'll learn not only about the condition of the house but how everything works and you can ask questions as you go along. It’s also a very interesting experience. .

Q. What happens if the home inspections reveal a serious problem?

A. Generally, if the home inspections reveal a serious problem, you can get out of the contract. What usually happens, however, is that the cost of remedying the problem becomes an issue of negotiation. This is where the negotiating skills of the seller's sales associate can be critical in resolving the issue and keeping the home sale moving.

Q. What is radon and what is the purpose of radon testing?

A. Radon is a radioactive gas produced by the natural decay of other radioactive substances. If radon dissipates into the atmosphere, it is not likely to cause harm. However, when radon enters buildings and is trapped in high concentrations (usually in basements with inadequate ventilation), it can cause health problems. The general rule is that remediation is indicated if radon levels measure four picocuries (pci) or more. Recent evidence suggests that radon may be the most underestimated cause of lung cancer, particularly for children, individuals who smoke, and those who spend considerable time indoors. Radon levels vary, depending on the amount of fresh air that circulates through a house, the weather conditions, and the time of year. It is relatively easy to reduce levels of radon by installing ventilation systems or exhaust fans.

Q. How many homes should I plan to view and how should I make the final decision?

A. Generally you should view a number of homes so you can become familiar with what you can expect to get for your money. When you find a home you really like, it's a good idea to go back and look at it at a different time of day. This will give you greater insight into what it will be like living in the home full time.

Q. How can I check my credit rating before I apply for a mortgage?

A. Your credit rating is based on a combined score generated from three credit bureaus who look at-your credit history, amount of credit available, and recent inquiries to determine what's called your FICO score. A smart way to go is to have your Century21 Services Manager check your rating for you and, if appropriate, suggest ways for you to improve your credit. For a small fee, you can get your score or review your credit report by going online to www.myfico.com or contacting the credit bureaus directly at :
EQUIFAX, www.equifax.com
EXPERIAN, www.experian.com. (888) 397-3742
TRANSUNION, www.transunion.com. (800) 916-8800

Q. Why should I consider paying points?

A. Buyers often choose to pay a one-time charge called mortgage "points" in exchange for a lower interest rate. Usually paid at closing, each "point" costs 1 % of the mortgage amount, or $2,000 on a $200,000 loan. The lower rate reduces the monthly mortgage payment, and points paid in conjunction with the purchase of a home are generally tax-deductible in the year they're paid (see tax advisor). Monthly savings will often exceed what was paid in points in just a few years' time.

Q. What is the purpose of an attorney review?

A. In states where the real estate agent writes the contract, there may be an attorney review period. This specified period allows the attorney to cancel the contract or request it be altered. Both buyer and seller would then have to agree to the revised contract in writing. In some state, either party may void the contract without penalty during this period.

Q. What is title insurance and why do I need it?

A. Basically, title insurance helps assure that you have clear title to the home you're purchasing and provides insurance protection in the event anyone makes a claim to your property. A title search is the primary component of "due diligence," a process that will be started either by your attorney, if you are using one, or by the title company you choose. The title search determines whether the seller actually owns the property and if there are any claims against it. You might not be able to get a mortgage without a title search and insurance.

Q. What happens if the house I want to purchase does not appraise at the amount expected?

A. If the house doesn't appraise at the amount expected, other alternatives are typically found. A second appraisal may be sought, the buyer may be willing to put more money down, the seller may have to adjust the price or offer other concessions, or the two sides may negotiate to split the difference between them.

If you have any other questions, please contact me and I'll be more than happy to help.