The Jim Foster Team
 

Buying a Home

 

Buying a home doesn't have to be a difficult process.  It should be one of the most exciting things you've ever done!  Let us help you by providing the answers to your most common questions.  Many of our clients have us help them with questions relating to the home buying process.  To assist in this process, we've come up with a comprehensive eight step process that will help you buy your new home!

 

8 Steps to Buying a Home:

 

1. Select a Real Estate Broker.

2. Initial Consultation.

3. Determine Your Financing Options.

4. Home Search and Property Tours.

5. Making an Offer.

6. Under Contract (Escrow) Stage.

7. Closing and Possession.

8. Important Expectations.

 

Step 1 - Select a Real Estate Broker:

 

The terms Agent, Broker and Realtor are often used interchangeably but have different meanings. In Colorado a person must be licensed in order to represent buyers and sellers Real Estate, unless they are representing themselves in a transaction. Standards set by the State of Colorado to cover the minimal education, examinations and experience needed to become licensed.

 

In the Denver area, the Agent, Broker and Realtor must be a member of Metrolist in order to have access to the MLS system and agree to collectively share the information on all houses listed for sale . This is done through the MLS or Multiple Listing Service.

 

Interview prospective Brokers to determine who you would like to represent you.  Remember some Brokers are full time Agents, while others are part-time.  It is very beneficial to you to utilize the skills of a real estate with at least one additional licensed broker to assist them, who can truly give you seven day a week service.  Individual agents will hand you off to someone on the days during the week that they take off from work and if they go on vacation.  These brokers may not have ever met you or have knowledge of your specific situation and transaction.

 

Jim Foster and his team are full-time real estate professionals  and one of them is always available to assist you seven days a week.

 

Please contact us at 303-229-5347 with any questions or to schedule a free consultation.

 

Step 2 - Initial Consultation:

 

We’ll sit down with you and discuss what your wants and needs are and how best to meet them as well as your desired time frame in getting started. As for your criteria in a home, we always like to start as specific as possible, entertaining all of your wants in a home.

 

The one common starting point we have for working with all Buyers is to receive from you a description of the home you would most like to have (within the constraints of your financial capability).  We want you to tell us what you consider important!

 

Consider many factors including:

  • Price of home.
  • Size of home.
  • Number of bedrooms and bathrooms.
  • Garage size.
  • Lot size.
  • Commuting time to work place.
  • Access to recreational activities.
  • Age of home.
  • Time until you plan to move in.
  • Neighborhood conditions.
  • Style of home: contemporary, traditional, ranch, 2-story? length of time you expect to live in this new home.
  • New home versus previously owned home, etc.

 

This is an excellent opportunity to get input from all your family.

 

We will use this as a starting point to help you locate the house which most closely meets your requirements. We will also use this as a basis to make you aware of some features, which may be unique to the Area’s homes and neighborhoods, which you may find desirable.

 

Once we’ve exhausted all of those options that match your wants and you still haven’t found the right property, we then scale back on wants but with all needs still being met. This is the best route to see all options that have everything you would want and then branch out from there to see other possibilities.

 

Your time frame is also an important aspect of your purchase. It’s always good to get started early towards understanding the best avenues in making a purchase however you want to time the home buying steps according to your plan. If for instance, it’s May 1st and you would like to close on a home by the end of October, now would be the time to begin contacting Lenders and to search active listings on the market. This will get your financing relationships established and give you an idea of what the real estate market is currently offering. However, it would be too early to begin touring homes as many properties will not be available when you’re ready to move forward on a purchase.

 

It’s best to start touring homes 1-2 months prior to your desired close date. Our website tool, www.ColoradoCastles.com, allows you to search all active homes in the Denver metro area, save listings of interest and create notes on them, setup daily, weekly or monthly email alerts with your specific wants, and request information directly from our team. This is a great tool for us to communicate and be prepared when it comes time to move forward.

 

Also important to discuss in our first meeting are the necessary steps you must take yourself to be ready for a purchase. Financing is something you must do early on as it’s important to know your buying power and at what purchase price you can comfortably afford for each month’s mortgage payment. The next section covers this in detail.

 

Step 3 - Determine Your Financing Options:

 

Know your buying power...

 

With any purchase using financing, you’ll need funds for your down payment and closing costs.

 

Your down payment is determined by the financing option you select. If you’re going to occupy the property as your principal residence, you can put as little as 3.5% down with FHA financing or 5, 10, 15, or 20% with conventional financing. If you have VA eligibility, you may qualify for a VA loan which allows for a 0% down payment. We encourage you to talk a qualified lender to determine the best financing options available to you.

 

Closing costs are typically about 3% of your purchase price and include the buyer & lender title insurance policy, loan costs, reserves and other costs associated with facilitating the loan. So for a $100,000 purchase, you’ll need around $3,000 for closing costs. You can ask the Seller to pay for your allowable closing costs up to the full 3% or pay this yourself. We often times are able to negotiate for the Seller to pay this for you, however, they look at the total price your offering, less any concession for closing costs to determine the actual net amount they are going to receive.

 

Once you have determined which lender you would like to work with, we will need their contact information so that when you are ready to put an offer on a property, we can have them draft a pre-qualification letter verifying your ability to purchase the home at your offer price. In order to submit an offer you must have a pre-qualification letter from your Lender.

 

Items you’ll need to provide to your Lender:

  • Last two years of tax returns to include all Schedules, 1099’s, K-1’s, and W-2’s.
  • Most recent Pay Stubs for the last 30 day period.
  • Most recent bank statements, investment account statements, and saving account statements for the last 60 day period.
  • If self-employed, please provide the last two years business tax returns, include all Schedules, a current Profit and Loss Statement, and Balance Sheet.
  • Home owner’s insurance agent name and telephone number.
  • Completed and signed Uniform Residential Loan Application (to be provided by Lender).
  • And any additional information your Lender may require.

 

If applicable:

  • Landlord’s name and telephone number for the last 24 months.
  • Divorce decree and/or separation agreement, if applicable.
  • Bankruptcy documentation, schedule of creditors and discharge.
  • For refinance transactions, please provide the address, telephone number, and account number for your current mortgage company.
  • Appraisal and credit deposit: for a refinance or purchase, $350.00 typically.
  • VA/FHA Loans: copy of social security card and drivers license.
  • VA Loans: DD214 and current Certificate of Eligibility.

 

Step 4 - Home Search and Property Tours:

 

Knowing what neighborhoods and communities that would fit well with your lifestyle is important in your home search. For instance, if commute time is important to you, we’ll discuss neighborhood options available to you in the areas you’ll be commuting to.

 

If lifestyle needs like mountain activities, nearness to transportation options, or retail/service options are important (as examples) then we would refine your search to areas that meet these desires.

 

If you’re unfamiliar with our neighborhoods and communities or new to our area, we can provide area orientation tours that will help you learn about our different communities. First we’ll pick you up, then, proceed to an area of interest. We’ll highlight local services and community elements as well as tour homes throughout the area to provide a sense of the options available within the community.

 

We’ll do our best to help you better understand our communities and the options available to you there.

 

If schools are important to you, we have a great resource that will allow you to compare the different schools in Colorado.  Please visit: www.ColoradoSchoolGrades.com. You can see how the schools rate in your home state as compared to Colorado schools as well as view rankings from people who share their opinions on those schools and districts.

 

Once you’ve located areas worth touring we’ll send all home options available to you for review and you select those homes worth touring; we then schedule a day and time to tour. We work on your schedule and are available to your anytime, every day of the week. When touring, it’s best to have at least five properties to view for each tour.

 

Typically, you can tour 2-4 homes per hour depending on the location between properties and your interest on a property. Tours can begin as early as 9am and end as late as 8pm (during summer months).

 

The Different Types of Sellers:

 

Individuals – This Seller is more than likely the current owner. There are situations where through Power of Attorney, another individual will negotiate on the sale as their agent but the property is still being sold through the owner. Individuals can be easier to negotiate with at times but can also become emotional as they are directly affected by all aspects of the transaction. All Colorado Real Estate Commission approved contracts and documents are used in this situation. Homes are often priced at market value or higher than market value and their motivation to sell can vary. Title is typically conveyed by a General Warranty Deed (Please see General Warranty Deed under our Glossary of Terms page to see how this conveyance protects you the Buyer).

 

HUD – The Department of Housing and Urban Development offers homes to the public. These properties originally had a FHA loan (Federal Housing Authority) which is an insured loan for the Lender. Once a property owner defaults on their loan and the property is foreclosed, the property is taken by HUD and offered for sale. You do NOT put an offer on a HUD home, you place a bid on the home during its bid period. When a HUD home first becomes available to the public, only owner occupants can place a bid. If the initial bid period passes (which is usually two weeks) without the home selling, the property then becomes available on a daily bid period to all of the public (owner occupants and investors).

 

The contracts and documents in a HUD purchase are not the same as the Colorado Real Estate Commission approved contracts and documents which goes with all other purchases; they have their own forms and deadlines which dictate the contract period. Homes are priced at values determined by appraisers engaged by HUD. You can bid on any price however, to utilize existing programs available to purchasers, must review the program guidelines. Title is conveyed by Special Warranty Deed (Please see Special Warranty Deed under our Glossary of Terms page to compare your protection).

 

Foreclosures / Lenders / Banks – Properties offered by Lenders and Banks are often the result of homes being foreclosed and returned to the lien holders (the Lenders) or banks/private investment organizations that have purchased the home from public trustee sales (bank notes purchased at the end of the foreclosure process from the lien holders). These entities usually offer properties at or below market value in this current market and are unemotional throughout the sale process. Although we utilize the Colorado Real Estate Commission approved contracts and disclosures, all lender/bank owned properties also have their own “Addendum” to the contract which supersedes the original contract to buy and sell. It is your duty as the Buyer to retain legal counsel on determining the ramifications of these addendums as it is NOT in the scope of any Real Estate Broker to interpret them. Title is conveyed by Special Warranty Deed (Please see Special Warranty Deed under our Glossary of Terms page to compare your protection).

 

Corporate – Corporate Sellers occur when an employee is transferred and relinquishes ownership to the corporation or a business is offering the property for sale. Much like a Lender/Bank Seller, we utilize Colorado Real Estate Commission approved contracts and disclosures however they may also have their own addendums to the contract. Home prices are established much like an individual Seller and can be above, at, or below market value. Title can be conveyed with a General Warranty Deed or Special Warranty Deed.

 

Short Sales – Short sales are transactions where the owner is trying to sell the property for less than what is currently owed on it. A Seller has to be at least three months behind on their mortgage payment to begin the short sale process. Although the current home owner may agree to the terms of your offer, all lien holders must agree as well. These are VERY DIFFICULT transactions as it may take as much as 3 months before a lien holder will even respond to your offer and they can deny it at that point. The lien holders can also take the same amount of time to agree to the sale but if they require the Seller to pay the difference in what’s owed (which has no limit) or comply with additional terms which the Seller would be obligated to, the Seller can elect not to proceed forward at that time. All in all, short sales can sometimes provide a good opportunity to buy low, there are no guarantees that the purchase will go through and no defined time table until a response has been made. We discourage looking at short sales unless they are already approved short sales, whereby the lien holders have already agreed to accept an offer at a specific price. These situations do guarantee a short turn around for acceptance and a typical closing timeline. Title is typically conveyed with a General Warranty Deed.

 

Builders These Sellers often do not use Colorado Real Estate Commission approved contracts and disclosures. Because new homes have never been occupied, the standards and processes they are obligated to are different from homes that have been lived in. They typically have their own purchase agreements and documents relating to the sale. In this market, you’ll typically pay current market value for new construction as there will not be as many opportunities to buy low. Timelines depend on what state of completion the home and if it has a certificate of occupancy (which is needed for a lender to fund a loan). Title is typically conveyed with a General Warranty Deed.

 

For Sale By Owners – Properties being sold by the owner without the assistance of a licensed REALTOR or Real Estate Broker often require more attention to the transaction by your Real Estate Broker. These individuals are not governed by the Colorado Real Estate Commission in how they handle the transaction. Also at times, these individuals do not provide a commission to the Buyer’s broker and would cause a fee to be charged to you the Buyer for representation through the sale. Homes are priced above, at, and below market value and the Seller is emotionally involved throughout the transaction. Title is typically conveyed with a General Warranty Deed.

 

Estates – Estate sales are when a home owner has died and either the state, a trust, or executor of the estate offers the home for sale. There is typically additional documentation allowing the change in ownership, as the deceased cannot buy or sell real estate, and additional title work referencing the change in deed conveyance. Home prices can be above, at, or below market value and title is typically conveyed with a Personal Representatives Deed. (Please see Personal Representatives Deed under our Glossary of Terms page to compare your protection).

 

VA – VA homes are homes that were purchased using a VA loan, which is insured by the Veterans Administration for the lender, and foreclosed. These homes are available to everyone and can be purchased using the Colorado Real Estate Commission approved contracts and documents, however, only a US military veteran can finance a home with a VA loan. Homes are priced above, at, or below market value typically and title is typically conveyed with a Special Warranty Deed.

 

Step 5 - Making an Offer:

 

Once you’ve selected a property that you are interested in making an offer on, we immediately perform a Market Analysis and give you our opinion of it’s current Fair Market Value. Included in our analysis is reviewing the Listing History, County Assessor’s Records, Deed Information (to determine current loans recorded against the property) and Sold Comparable Listings of similar homes in the neighborhood within the last 6 to 12 months. Once you determine the property’s fair market value you can decide what price to offer.

 

Earnest Money:All offers must be accompanied by what is called Earnest Money. Earnest Money is the funds required by the Seller to be submitted when under contract and is typically 1-3% of the purchase price. These funds can be in the form of a personal check but sometimes are required to be in the form of a cashier’s check or money order and are not due until the Alternative Earnest Money Deadline, usually 3 days after contract acceptance.

 

Most real estate contract forms provide various contingencies for the Buyer to be able to terminate the contract and in most cases obtain a full refund of their earnest money deposit. Following are the major contingencies included in the Colorado Real Estate Commission approved Contract to Buy & Sell Real Estate:

  • Inspection.
  • HOA Documents (if applicable).
  • Property Insurability.
  • Appraisal.
  • Loan Conditions.
  • Title.
  • Survey.
  • Sale of another property (if applicable).

 

We will provide you in advance with blank copies of all Colorado Real Estate Commission approved forms, for your review (upon request). Contract forms have legal consequences and we recommend that you should consult legal and tax or other counsel before signing.

 

Once we have prepared the offer and reviewed it with you, you will need to initial the bottom of each page and sign and date the signature page. The offer will then be submitted to the Listing Broker / Seller, along with a copy of the Earnest Money Check & Pre-Qualification Letter (from your mortgage lender). If they sign the offer within the specified timeframe, then the offer becomes a Contract. However, the seller may elect not to accept the offer and may either reject the offer or offer a Counterproposal, changing some or all of the terms of the original offer. As the Buyer, you then may either: accept, reject or offer a Counter to the Counterproposal. There is no limit of how many times a counter can go back and forth, but usually not more than once or twice.

 

The following disclosure forms may apply and be added as attachments to the Contract:

  • Lead Based Paint Disclosure (Homes built prior to January – 1978).
  • Square Footage Disclosure.
  • Source of Water Addendum.
  • Closing Instructions.
  • Seller’s Property Disclosure.
  • Seller / Bank Addendum (if applicable).
  • Short Sale Addendum (if applicable).
  • Mold Disclosure (if applicable).

 

Step 6 - Under Contract (Escrow) Stage:

 

Once a contract is accepted and mutually executed by all parties the following applicable steps need to take place to move forward towards a successful closing:

 

  • Abide by all dates and terms of the contract.
  • Make formal loan application with lender, by application deadline (if not already completed) and pay lender for the credit report and appraisal fee.
  • Promptly provide lender with any documentation, etc. that they request.
  • Review all addendums and disclosures associated with the contract.
  • Schedule any property inspections (home inspection, radon test, plumbing/sewer, etc.).
  • Inspection Objection Deadline: Terminate the contract or elect to move forward or ask the Seller to repair or provide a credit for unsatisfactory items found during inspection(s).
  • Review available Home Warranty Plans and determine if you want to purchase one.
  • Review Title Insurance Commitment and reference documents associated with the property and work with the Title Company to correct any items or provide further documentation. Object if necessary.
  • Order a survey (if applicable), review for accuracy and object if necessary.
  • Review HOA Documents (if applicable) and either approve of them or terminate on or before the HOA Documents Objection Deadline.
  • Call an insurance agent to determine if you can obtain satisfactory Hazard Insurance to cover the property, prior to the Property Insurance Objection Deadline (If the property is part of a Condominium, Townhome, Loft or other Home Owner Association development, the Hazard Insurance is usually included in the HOA dues).
  • Review any Off Record Matters (existing leases, unrecorded easement, etc.).
  • You have the right to have an Appraisal and if you are obtaining a loan to finance the property, the lender will require and order an independent appraisal. If the property does not appraise at or above the contract sales price, you may terminate the contract. The seller has the option to lower the sales price to the appraised value.
  • Loan Conditions – On or before the Loan Conditions deadline, you can terminate the contract if you are unable to obtain a satisfactory loan at your subjective discretion.
  • Arrange for Gas & Electric utilities approximately 3-5 days prior to closing. (Please note that water and sewer are transferred by the Title Company).
  • Arrange for other services: Telephone, cable, trash removal (if not included in HOA), moving truck/service, etc.

 

Step 7 - Closing and Possession:

 

Closing on the property is usually handled by the title company which issued the title opinion. We will be with you to provide answers and assistance for you during this process which usually takes from one to two hours. We will be sure to review all settlement statements for you as Buyer for accuracy.

 

Time of possession is established at the time of negotiating the original offer. In Colorado, it is customary for the Buyer to take possession at closing or up to 3 days after closing depending on what is agreed to at time of contract.

 

Schedule the Closing - Once the loan has final underwriting approval, if not before, a closing time and place are determined where all real estate and loan documents will be signed.

 

If you or a co-purchaser cannot attend closing, arrangements need to be made approximately 1-2 weeks ahead of closing for any of the following: Property specific Power of Attorney, mail-out closing, etc.

 

Closing:

  • Photo Identification is required for all buyers.
  • Cash Due at Closing must be in the form of Certified Funds (Wire Transfer, Cashier’s Check, Certified Check or Money Order payable to yourself. You will endorse it over to the Title Company at closing). Cash Funds are not accepted.
  • Review and sign all related real estate documents.? Review and sign all related loan documents.
  • Receive the keys to your new home!
  • Arrange for Gas & Electric utilities approximately 3-5 days prior to closing. (Please note that water and sewer are transferred by the Title Company).
  • Arrange for other services: Telephone, cable, trash removal (if not included in HOA), moving truck/service, etc.

 

Step 8 - Important Expectations:

 

  • If your spouse/partner, mother/father, sister/brother, friend, or anyone’s opinion will be important to you making a decision on a property, they need to see the property prior to writing an offer.
  • Financing is your decision but a relationship with a Lender must be established prior to writing an offer if financing will be used.
  • If you end up speaking with a “for sale by owner” or builder sales office, please inform them that you have a REALTOR representing you; feel free to pass along our information.
  • When touring homes, we recommend seeing at least 5 homes per outing. Sometimes this is not possible but to utilize the best time management for you, we ask to coordinate tours with this in mind.
  • When we provide our opinion of Fair Market Value, we ask that you head our advice and structure a realistic offer strategy, based on the property’s unique situation.
  • You need to act and respond in a timely manner regarding all contract dates and deadlines as well as any major issues that come about while under contract or risk possible forfeiture of YOUR earnest money.
  • For your home inspection(s), you need to seek out professional and qualified inspectors to gain an actual understanding of the home’s systems, structure and conditions.
  • When asking for repairs during the inspection period, attention should be most focused on safety, health and/or structural concerns. Asking for every minor concern (i.e. cosmetic issues) may cause Sellers to become defensive and break down negotiations regarding the major concerns.
  • When seeing real estate yard signs, property websites, or any other property for sale source, please communicate with us for any information needed.
  • We are available to you anytime, however we need at least 24 hrs notice prior to scheduling any home tour or meeting (preferably more).
  • After we’ve met and toured homes at least once, we will present our Buyer Agency agreement to you which will establish our working relationship and duties.
  • In heavy snow conditions, we may delay or reschedule home tours to ensure everyone’s safety.

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