Real Estate Attorney in Coos Bay, Oregon
Real Property Sales and Valuations in Oregon have skyrocketed in Southern Oregon, with appreciation in single family homes as much as 18% or more. One’s home, is for many people, the single biggest investment they will make in their lifetime. Having a place to call “home,” where one feels safe and secure, represents fulfillment of a major basic human need. Consequently, it makes sense to understand one’s goals in purchasing a home, knowing how much home is affordable, and the homebuying process.
What Is the Homebuying Process All About?
Buying a new home can feel daunting, and at times, overwhelming. We’ll work to make a new home purchase a bit less complicated and more understandable. The process begins by focusing on a couple areas:
What do the buyer & family want and need in a new home?
How much property can the buyer reasonably afford to purchase?
What happens during the homebuying the process?
Current and projected near-term family size dictate the number of bedrooms and bathrooms the buyer is seeking. Numbers of and sizes of bedrooms and bathrooms and, other needs include whether the home will include more than one story, inclusion of a family and living room, a garage, decking, landscaping, fencing, and a suitably sized yard. For families with children, a specific school district may be important. Other buyers focus on shopping availability, access to health care, local employment opportunities, and recreation. All serve to realize the sense of “being at home.” Many real estate brokerages and internet websites offer photographs of properties currently available for sale.
How Does Anyone Know What They Can Afford to Buy?
Once a decision is made on the physical attributes of the new home, and possible neighborhood, it’s time to get down to “the brass tacks” of determining what you, the buyer, can afford. You will need to determine your family income and amount of debt you have, both long term and what’s due in the next 12 months. Many times, it is useful to visit your local bank with whom you have an established relationship, or contact a mortgage broker and ask them to pre-qualify you for purchasing your new home. At the end of a relatively short interview of 20-30 minutes, your lender can usually provide a “pre-qualification” letter. The letter, which is not a guarantee of a loan, will tell you the maximum you can afford to borrow based on information you provide that the lender does not verify during pre-qualification. And, you’ll need that letter to present to the real estate broker when you begin actively searching for your new home.
Where Does the Homebuyer Look for The Right Home?
The next step is to begin to narrow your search for property and go look. Properties may either be “listed” for sale with a real estate broker or may be offered for sale directly by the owner: a For Sale By Owner or “FSBO.” If you work with a real estate broker you have the option, in Oregon for representation by the broker as a client to whom special, fiduciary duties are owed. Representation is many times preferable to simply being a “customer” to whom few duties are owed. Some brokers work exclusively with buyers under “Exclusive Right to Represent” contracts whereby the buyer works with just one broker. The Broker is compensated when his Buyer-client finalizes the transaction.
Who Pays for My Broker to Represent Me?
Depending on the agreement negotiated between the Seller and the Broker, the Broker’s compensation is paid by the Principal Broker and may come from the funds paid to the Seller at the close of escrow, directly from the Buyer, or a third person. At other times, a Buyer will work with several brokers at a time. Commissions are always negotiable between the Seller and the Broker. Market forces are at work here, but antitrust laws would be broken, resulting in severe civil and criminal penalties, if Real Estate Brokers, as a group, created a “standard commission rate” all Sellers would be required to pay. Any such rate “agreement” would be in violation of anti-trust laws.
You as the Client should feel confident in your Broker’s professionalism, honesty, and dedication to your real estate needs. In any event, if you contact a broker, expect the broker to ask if you have been working with another broker. This assures the broker that if you are shown a property, the broker knows he/she will be the “procuring cause” for selling you your new home and will be paid for the efforts expended, once the purchase is completed.
How Do I Find My ‘Perfect’ Home?
The broker will usually work with you to “hone in” on your specific property needs and your price range. Many times, the broker will search the Multiple Listing Service (MLS) database for available properties that fit your price range, desired physical characteristics and, neighborhood. You can usually provide the broker with properties you know are available for sale, either by newspaper or internet ads, or yard signs. The broker will schedule property showings and make arrangements to invite you inside. You will see for yourself whether the home suits your needs.
Once you locate the home you want to purchase, the broker will assist you in preparing an offer she will present to the Seller or Seller’s Broker on your behalf. Your Broker, if an “Agency Agreement” has been agreed to, will negotiate on your behalf as to price and terms for purchasing your new home. If you don’t have an Agreement, you will only be a “customer” and the Broker’s client will instead be the Seller. Typically, a buyer will make an offer to purchase, but reserve conditions or contingencies to the conclusion of the sale, or “close of escrow.” Contingencies can include appraisal value, financing approval, a whole house inspection, a well flow test, and other contingencies as well. It is thought that certain contingencies or too many of them may create reluctance on the Seller’s part to accept the Buyer’s Offer. The Seller may accept the offer, reject it, or make a counter-offer. In that case, the Buyer has to decide whether to accept the counter-offer, or in turn, make a counter-offer to the Seller.
Once My Offer to Buy Is Accepted, What Happens Next?
Let’s say you have made an offer which has been accepted by the Seller. The transaction has been placed “in escrow,” usually with a title company. It’s time to return to the lender bank or mortgage broker and make a formal loan application, usually within 3-5 days after your offer has been accepted by the Seller. Within three days the lender should provide a Loan Estimate so you can see what your projected interest rate and projected monthly payments. The Estimate can also tell you if the proposed loan is a good deal for your circumstances. You might receive better terms (e.g., interest rate, buy down costs, origination & loan fees) on your proposed loan by shopping around with other lenders or loan brokers. During the loan approval process, you will usually need to provide 2 or 3 years of tax returns, documentation of your current income, proof of down payment, the lender will perform a credit check, and likely request additional supporting income and asset documentation.
How Do I Borrow Money to Buy My New Home?
Many loan programs are available, based on your credit history, down payment, military service, type and location of property you want to purchase, and other factors. The lender will examine the interaction between your housing-debt and your total-debt to your income, which dictates the maximum amount of money you can afford to borrow. Usually, the down payment is 20% of the loan which allows for conventional financing. In some cases, the Borrower/Buyer has less than stellar credit or requires a lower down payment. A mortgage insurance premium may need to be paid each month, part of the monthly payment, as a condition for the home loan. One alternative option includes an FHA loan, which allows a down payment as low as 3.5% of the loan amount. If you’ve served in the military, you may qualify for VA financing, with a 0% down payment.
Successfully processing a loan approval demonstrates to the lender you are capable of paying the monthly loan payments, including principal, interest, taxes, and insurance, in addition to your household expenses and other debt. Once the lender has prepared your loan package, it will be sent to the lender’s underwriter who will examine all your documentation, including the property appraisal report. Your home loan will either be approved, denied, or the underwriter may request additional documentation. Upon loan approval and, at least three days before your sale closes escrow, the lender provides a Closing Disclosure which will indicate how much money you will need to finalize and close the transaction.
My Loan’s Approved, Now What?
Next, is closing escrow on your new home. The closing agent, usually the title company representative, will provide instructions for how to bring your closing costs “to the table” and close escrow. An appointment will be scheduled, usually at the title company office. You will show up at the title company and may be accompanied by your Broker or an attorney, at your cost. There are usually a lot of documents to review, so bring your reading glasses. You’ll also need photo identification, issued by a government agency, like the DMV. Once the documents are signed and the deed is recorded, your new home is yours to occupy and the keys will be provided so you can begin to move in.
The purchase of real property can be frustrating, daunting, and seemingly overwhelming at times. It doesn’t have to be. Your broker and attorney if you have one, can answer your questions, so you have an understanding of the process at all times. Good luck and happy house hunting!
How We Can Help You
We would be happy to schedule a time to consult with you regarding the purchase or sale of property, review of proposed sale documents, property disputes & boundary issues, loan and debt problems, Landlord-Tenant situations, and more. Feel free to contact us to schedule a consultation.