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| Preparation |
Purchasing a home requires planning and research. One of the most important prerequisites to buying a home is to determine how much you can spend. To do this, add the amount you have saved with the amount you can borrow from a lending institution. Be sure to include other costs such as lender and legal fees, duty, and moving costs. To learn more about costs associated with buying a home, contact your realtor or your local Chicago Title office. For addresses and contact information, see our Locations page.
As you think about what kind of house you would like to buy, it is important to base your decision on factors such as your current and future lifestyle, your existing needs and what you can financially afford for a monthly mortgage. For example, if you are married and are planning on having more children, a larger home with adequate bedroom space will be necessary. Or, if you are caring for an elderly person or are concerned about accessibility, choose a home with a floor plan that will accommodate these needs. Before you go out looking for a home to see what you want, get an idea of what you really need. This will give you some help in knowing what to look for and limit undue frustration.
If you are looking to purchase an existing home, look for possible risk factors such as cracks in basement walls or other problems such as power, sewage, or light fixtures. Make sure that these and similar problems are listed separately in the sale contract and be sure to arrange for a building and pest inspection before signing off on the contract. If, however, you wish to build a home, you can purchase the land and then hire a contractor to build the house on the land or you can purchase a house and land package from a developer. |
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| The Process |
| After considering what you can afford and the type of house you would like to live in, the next step is to locate homes that reflect these needs and interests. The most obvious method of discovering what homes are on the market is the newspaper. Most local newspapers contain illustrated photos of homes in your market. Another method is through a real estate agent. Agents have access to a vast database called a Multiple Listing System (MLS). Agents are required by law to enter homes that are for sale into the MLS System. An agent representing you (the buyer) can locate homes that fit your criteria using this system. They can also inform you of "Open Houses" which gives you an opportunity to visit advertised properties. When visiting properties, think about your own requirements and how much you can afford to buy. Be sure to visit a number of properties as the comparisons will help you evaluate what you are getting for your dollar and to further evaluate your housing needs. Some questions to ask are Will this home suit my needs? Do I like its features? Can I live with its defects? and How does its price compare with other homes? If you visited a number of homes but find yourself needing to expand your search, the internet and real estate journals such as "The Realtor" and "Homes Pictorial" are additional sources that can help you find the home you are looking for. |
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The Sales Contract
It is the seller's responsibility to have the sales contract properly prepared with the appropriate legal documentation and disclosure information. If for some reason the seller does not have the appropriate disclosure information, you have the right to cancel the contract within 14 days from the point the contract was exchanged. |
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Expressing an Interest in a Property
After you have found a home that you are interested in purchasing, contact your real estate agent and obtain a copy of the sales contract. Your real estate agent will probably ask you to put down an initial deposit (earnest money) to "hold" the home until it is under contract. The word hold is in quotation marks because the realtor cannot legally prevent others from buying the home but rather can choose not to show the house to other interested buyers. After the contract has been signed and exchanged with the seller, the home is secured for that particular buyer. It is important to remember that the initial payment on the home does not secure the home. Many well-intentioned buyers have done so believing that the home will be theirs only to find out that an exchange of contract has already taken place with another buyer. It is also important to know that a signed sales contract on the home will prevent the owner from raising the sale price. On occasion an owner will receive down payments from two prospective buyers and then raise the price of the home from the previously agreed upon price by asking both buyers to bid between themselves for the highest price in order to get top dollar for the home. Signing and exchanging the sales contract prevents this process from taking place. The sooner you can get the seller to sign a sales contract, the better off you are. Becoming a pre-qualified buyer expedites the loan application process and allows you to make a timely offer on the house and helps to get it under contract sooner. |
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Apply for Financing/Become Pre-Approved
The next step in the home purchasing process is to qualify for a loan. In other words, become a "qualified buyer". Before contracts are exchanged on the property, position yourself to make the purchase by contacting your lender and complete a formal loan application with a representative from your institution's lender department. As the lender begins to process your loan application, they will perform a value check on the property to determine whether the property provides adequate security for the amount of the loan. They will also charge a fee for this process as well as other loan establishment or processing fees related to the set up of your loan. As the lender completes the value check they will determine the final loan amount based on a percentage of the valuation of the property, not on a percentage of the purchase price. After your loan has been approved in writing, you are free to sign and exchange contracts. After contracts have been signed and exchanged, the home will be "off the market" and secured until the final day of closing. But before signing off just yet, you may want to have some inspections done on the house to make sure that there are no major problems with the home. See our Choosing Your Financing page for more information. |
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Building Inspection
In addition to securing your financing, real estate professionals suggest having a building inspection done on the home prior to signing the contract to ensure that the home is structurally sound. A building inspection is usually done by a visual examination of the foundation and various timber components that include floor joints, rafters, and walls. Additional items such as electrical wiring, outer sidings (brick, stone, stucco), plumbing, kitchen and bathrooms are also visually inspected. Following the inspection, obtain a written report of defects and repairs that need to be made to the home which may be needed for final price negotiations. |
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Pest Inspection
The property should be inspected for insects, termites and other rodents. In Ohio, the seller is required to provide a termite inspection for the buyer as a condition to the sale of the home and a one-year warranty for the protection, treatment or elimination of termites. Hollow sounds or cracks in boards and beams may mean the presence of termites. Termites are winged and non-winged insects that live in nests in the soil. The Entomology Department at the University of Kentucky College of Agriculture receives more calls about termites than any other insect pest. They reported that termites cause more damage to homes than all other natural disasters combined. |
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Exchange of Contract
The contract is a legal agreement between the seller and the buyer. It outlines terms and conditions of the sale and should include any amenities that are being purchased with the home such as curtains, blinds, light fittings, awnings, air conditioner or TV antennas. Real estate attorneys, who represent both the buyer and the seller, draft the contracts. They prepare and review the contracts and obtain signatures from the clients whom they represent. The contract is signed by the seller and then forwarded to the attorney representing the buyer to obtain the buyer's signature. The contract is dated, an exchange is made and a purchase takes place.
At this point in the home purchase process, many things are taking place such as inspections, loan approval and the signing of the contract. In terms of the timing of these events, it is a good idea to first find a property that you are happy with, become approved for a loan and then have your home inspections completed. If not, you may make a contract exchange too quickly.
It is difficult to determine whether your buying experience will unfold exactly as described above. Usually it does, but sometimes it depends on the market. If the market is favorable for the seller, then long delays on your part may cause you to lose out to another buyer thus preventing you from purchasing the home. If the market is favorable for you as a buyer, delays can be tolerated longer without the risk of losing your purchase to another buyer. |
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Document Preparation
After the contract has been signed and exchanged, a great deal of research and preparation of legal documentation takes place within a four to eight week period by a number of parties that involve attorneys, real estate agents, lenders and title companies. To help give you an idea as to what takes place, here is a brief summary of the many documents and activities associated with processing the sales contract.
The first is the Deed. The deed is a written record that shows the legal transfer of property ownership from one person (seller) to another (buyer). When the document is finished, it will list the buyer as the new owner of the home. The document is taken to the Office of State Revenue and then sent to the seller or the seller's representative for a signature and then returned to the buyer at the closing table for review and signing.
The next document is the Survey. The survey is basically a report of the property. The report shows the property and the position of buildings and fences. It also shows the boundaries, which outline the correct placement of buildings and other things located on the property. The survey will also show any encroachments on the land (things that should not be there) or on the property next to it. Almost all lenders will require a survey of the property before they will execute a loan. Local public service providers learn more information about current and future plans that may affect the property. These service providers include the electrical and water authority and the local council. Calling these and other authorities notifies the lender whether or not they have any future interest in your land for things such as road widening, hiking of water board rates, or land tax charges.
The lender also begins the process of preparing your loan. They begin with the Mortgage Document. This document lays out the terms and conditions of the loan such as the loan amount, the length of the loan, and the payment requirements. Make sure you understand what your obligations are before you sign. If for some reason you cannot make payments on the property, the Mortgage Document will allow the lender to sell the property and recover the loan including interests and applicable costs.
A Title Insurance company conducts a title search on the property. If they find information that was previously unknown about the seller or undisclosed information about the property (i.e. unpaid property taxes and other liens), the information or requisitions are sent back to the seller's attorney.
A "Settlement Statement" is drafted and sent to the seller. The Settlement Statement details the final amount that is owed and includes adjustments for rates and taxes. |
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Insurance
It is possible that the home or a part of the home may be damaged prior to the completion of the sale. The seller is responsible for damages incurred during this time. When the property becomes yours, you become responsible for incurred damages. If the seller does not have insurance, you may want to explore insurance options to cover potential damages. |
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The Closing
The closing is the last step in the process and may take place in a variety of locations including your title insurance company. Most closings are done at title companies. During the closing, legal documents are signed such as deeds, compliance agreements, lien affidavits, and a number of other forms necessary for purchasing your home. Financial activities take place as well. Outstanding bills are paid, monies are collected and checks are issued. All legal and financial issues are settled and taken care of at the closing. When the closing is over, your work has been completed.
It is important to choose a title company that you can trust who will handle your investments with care and ensure that everything is done right. It is our hope that you will choose Chicago Title. For your convenience, we have nine different office locations located throughout Columbus with five real estate attorneys available to assist you. As you contemplate a title company, keep us in mind. We would like to earn your trust as we have with thousands of Ohio customers. Their confidence in us has allowed us to be the largest title insurance underwriter in Columbus and in the nation. We hope yours will too. |
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