Writing a Purchase Contract in North Carolina

You've found the home you want to buy! Is the asking price reasonable? How much should you offer? Offering Price, Contingencies, and Home Inspection are elements included in the sales contract..

Offering Price

This is the price you are willing to pay for the home and will be presented in the purchase contract you offer the seller. Your real estate professional will be able to guide you by reviewing recent sales of comparable homes in the area. Much like an appraiser, he or she should be able to adjust for the positive and negative factors of your chosen home to calibrate an offering price. Supply and demand will also play a role.

• If the housing supply is limited but there are lots of buyers, then a full-price offer, or even higher, may be necessary to win the bid.
• In a slow market, or buyers' market, you may want to consider requesting that the seller pay point(s), contribute to closing costs, or even provide seller financing.

Price is just one aspect of the contract, albeit a big one! Your offering price may be countered by the seller; then you can decide whether it is reasonable and you will accept it by signing the contract, you can make another offer somewhere between your original offer and the seller's offer, or you can walk away. However, if a seller has multiple offers, then he or she will look at the whole package:

• Price
• Amount of earnest money deposit
• Ability of the potential buyers to complete the transaction within a specific time frame
• Contract contingencies, such as subject to getting financing or subject to a home inspection

Contingencies

In a real estate contract, a contingency is a condition of the sale or of your purchase offer. No matter how hot the market is, you are about to make a major financial commitment. It is unwise to write a real estate sales contract without contingencies for obtaining financing at a reasonable rate and having a home inspection performed by an independent professional who can evaluate the home's major components:

• heating/cooling
• electrical
• plumbing
• foundation
• roofing
• well water or septic system, if appropriate

All contingencies should be time sensitive. The seller will want to know that you are making progress to ensure that the contract is ratified and that closing, or finalization of the transaction, can be completed within the date specified in the contract. Typically, you will need to complete a mortgage application within 48 hours and receive a preliminary approval within five days. Likewise, a home inspection should be scheduled within three days and performed within seven days.

Home Inspection

You should accompany the home inspector because you will gain a wealth of information about the condition of the house. You will also receive a detailed report that typically prioritizes any defects. It is then up to you and the seller to negotiate what needs to be fixed or price allowance made.

Other inspections may be specified in the contract, some of which may be required and some optional. Again, be guided by your real estate professional, who will know what is typical--or advisable--for the area, such as inspections for:

• termites
• radon
• lead paint

The contract usually spells out which party will pay for these inspections. But you may want to pay the appropriate professionals to perform these inspections. Evidence of termite damage or the presence of toxins may necessitate further negotiations with the seller for remediation or a price adjustment.

Secure Your Financing

You now have to meet certain time frames as specified in the contract, one of which is to get a loan commitment. You should also know about:

• Disclosures
• Locking In Your Interest Rate

If you've been pre-approved by bank or mortgage broker, then applying for the loan is easy. You'll just need to inform the lender of any financial changes since receiving your pre-approval. Your lender will let you know what paperwork is required, but you can expect to supply documentation of your income, assets, and outstanding debt and a copy of the purchase contract.

Disclosures

At the time of application or within three days, your lender is required to disclose the fees associated with your mortgage. The most important are:

• Good Faith Estimate of Settlement Costs, which estimates your closing costs. (The closing is the actual settlement of your loan.)
• Truth in Lending statement, which shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage.
• Mortgage Servicing Transfer notice, which states the possibility that your mortgage servicing may be transferred.
• Other disclosures may be provided based on state law.

Locking in Your Interest Rate

Ask your loan officer for advice on interest rates, so that you can decide whether to lock in a rate prior to closing. Interest rates change daily--sometimes several times a day--due to market fluctuations, so you may want to monitor interest rates every day while your mortgage is being processed. If you think interest rates will rise, you may want to lock in a rate. If you think interest rates may fall, you may prefer to wait.

• A locked-in interest rate will guarantee a specific interest rate for a specific loan product for a certain time period. Your monthly mortgage payments will be calculated based on the interest rate that you lock.
• Check with your lender to determine the rate lock options that are available to you, such as locking your rate online or a floatdown option.
• Make sure your rate lock extends to the scheduled closing date (and a little beyond for safety).

After the property is appraised and the lender has verified your income, assets, and debt, if all is satisfactory, the lender will extend a loan commitment and you can finalize the transaction.

Close Your Loan

This is the step you've been waiting for! Papers get signed, money gets exchanged, and you receive the keys to your home. Learn about the costs and closing process.

• Settlement Costs
• Settlement Papers

Your lender or real estate agent will be able to recommend a title company or settlement attorney who can handle the closing. Generally, an attorney officiates to ensure that all the legal documents required to finalize the transaction are properly prepared and executed in compliance with state and federal law.

As soon as you get a loan commitment:

• Contact the attorney or title company to schedule the closing.
• Notify all other parties of the date and time (which should be mutually acceptable to all): the lender, your real estate agent, the seller, and seller's agent.
• Contact all the utility companies and establish accounts with them for the property as of settlement date.

The day before closing, or even the day of closing, you should arrange to have a final walkthrough of the property. Check that everything is still in working order and any items that were to convey with the property have not been removed.

Settlement Costs

The closing attorney and lender will coordinate all the necessary paperwork. Request a copy of the settlement statement (also called the HUD 1) prior to closing so that you can review all the costs. Note that a personal check generally will not be accepted at closing, so you will need to get a cashier's check.

Your New Home

Congratulations! You are now the proud owner of a home. You've joined the millions of Americans who carry the title of "home owner" with pride. There is much to enjoy now that you hold the keys. And there are a number of important things to keep in mind. One is the role of the "mortgage servicer" to whom you will be paying your monthly mortgage.

Shortly after closing, you will receive a letter from your mortgage servicer welcoming you to your new home and reminding you of when your monthly payments are due.

You will probably receive a coupon book or statement and envelopes to remit your monthly payment. For your convenience, many lenders offer the option of having the payment automatically deducted from your bank account.

If you have an escrow account, your property tax and homeowner's insurance bills should go directly to the servicer, but if you receive a bill, be sure to forward it to your servicer promptly for payment.

Enjoy Your Home!