Buying a Home

Although the process of purchasing a home can be complex and daunting, the rewards are so considerable that it’s absolutely worth the effort. Of course, the best way to ensure that everything goes as smoothly as possible is to hire the most experienced and accomplished guide you can find. In this particular area, that would be us!

Ideally, a prospective buyer will have already consulted a mortgage provider and obtained a Prequalification Form before reaching out to us for assistance. The Prequalification Form not only confirms that they are qualified to purchase a home in the price range they’ve selected but it’s contractually required that it be submitted with any offer. Investing the time up front helps avoid any disappointments and can help expedite the negotiation process once a home selection is made.

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Of course, first time buyers or those in need of pre-counseling as to price ranges, product inventory, communities and even lenders before deciding to spend time with a mortgage professional, are encouraged to call or make an appointment to talk about those concerns. The first formal step when we do get together is to discuss exactly what the buyer might want in terms of a home or a community and for us to explain the nature of the “agency relationships” that will govern our joint efforts during the process.

The next step for prospective buyers is to learn as much as they can about what’s required of them so that the entire exercise proceeds as smoothly as possible. We generally provide our clients with a Buyer’s Guide that covers much of the background information that they’ll need to know about making a purchase in this area, familiarizing them with the purchase contract and explaining how to access the local Multiple Listing Service through this website so they can browse the market on their own.

The subsequent step is actually the fun part of the process: finding that special house and that special community. Once we find a property, we guide them through the contract preparation and the negotiation and, assuming that we are successful, the incredible 10 day whirlwind of activity that includes home & termite inspections, CC&R reviews, analysis of the Seller’s Property Disclosure, mortgage applications, etc.

Then, after all that frenetic activity is completed, buyers get to pause for just a moment before they need to arrange for those movers, tell the postman and perform the myriad number of other tasks involved in actually MOVING! Before the big day arrives, they’ll be asked to stop by the escrow company, sign those papers and turn on those utilities (not necessarily in that order) and, alas, once the deed records, they will get the keys and start to unpack!

The process itself can be exciting but we’ve always found that looking back about ninety days later is when the real sense of satisfaction takes hold.

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Realtors and their clients are required to formally document the nature of their working relationship before beginning the process of actually finding a home.

In general, there are two types of “agency” relationships that can come into play in the course of a traditional residential real estate transaction.

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There’s the Buyer’s Broker relationship in which the Agent works only for the Buyer and has obligations, called fiduciary responsibilities, to that Buyer. These responsibilities include “undivided loyalty, reasonable skill and care, confidentiality, obedience and disclosure.”

Of course, regardless of the underlying agreement, a Buyer’s Broker is required to treat all parties, including the Seller and the Seller’s agent, fairly and honestly and may not make misrepresentations on matters that are material to the transaction. Not surprisingly, Sellers and their agents have similarly documented relationships and those Agents have the equivalent responsibilities and obligations to their clients and to prospective buyers.

There’s also the Limited Dual Agency relationship. Limited Dual representation is a phenomenon that occurs if you wish to view the home of a Seller client of RE/MAX Fine Properties. In this scenario, the Broker, RE/MAX Fine Properties, would be representing both the Buyer and the Seller with some limitations on the duties owed to either party.

In general, a brokerage firm acting in a limited dual representation capacity is not permitted to put one party’s interest ahead of those of the other party and cannot advise or counsel either party on how to gain an advantage at the expense of the other party. We are obligated to treat everyone fairly and honestly.

If you choose to work with us, these agreements and their implications will be explained at our first meeting. However, if you wish to review those agreements in advance, you can simply click on the images above.

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Although the conforming* 30-year mortgage is still the most popular choice for financing a home, it is far from the only option available. In fact, it might not even be your best choice in every circumstance.

Before you proceed with your purchase, you should be familiar with other mortgages that may offer better rates, graduated payments, tax advantages or even the opportunity to build the equity in your home at a faster rate.

You should know that if you are serious about purchasing a home, your first step should be to meet with a lender that you trust and obtain either a Prequalification Form (PQF) or the more extensive Loan Status Update Report (LSU). These documents affirm that you qualify for a specific loan amount based on your representations. It should be emphasized that the PQF is contractually required to be submitted with every offer and the LSU is required, at the latest, on day 10 of contract acceptance.

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30-Year Fixed Rate: A fixed rate conventional loan is made by a commercial lender for 30 years and monthly payments (excluding taxes, insurance) remain unchanged for the life of the loan. Most lenders will offer mortgages of this type with as little as 5% down. However, a down payment lower that 20% is likely to require private mortgage insurance.

15-Year Fixed Rate: This product is similar to the 30-year conventional mortgage, except the loan is repaid in half the time. Interest rates are typically lower than for a 30-year loan, and interest paid over the life of the loan is less, but the monthly payments are usually slightly higher.

Adjustable Rate Loans: The interest rate on these loans is adjusted up or down periodically based on financial market indexes (such as Treasury bills). Monthly payments start lower than for fixed-rate mortgages. The initial rate is set for a specified period-1, 3, 5, 7, or 10 years-and then rates adjust at regular intervals. The adjustments generally are limited by both annual caps and a life-of-the-loan cap.

FHA Loans: The government insures these loans so that borrowers can purchase a home with less money down than is required on most conventional loans. The limits on FHA loans are high enough to handle moderately-priced homes in many parts of the country. FHA loans are assumable for future buyers who qualify.

VA Loans: Loans for qualified veterans are backed by the Department of Veterans Affairs and permit the veteran to make a purchase with either a low down payment or none at all. VA loans can be assumable to qualified buyers.

*In our local market, the term “conforming” refers to conventional mortgages of up to $484,350 which conform to guidelines established by FNMA. Loans over that amount are called Jumbo loans.

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Unlike many other parts of the country where contracts are either crafted by attorneys to fit the specific situation or are standardized (but subject to an extensive post-negotiation review), Arizona is blessed with a situation in which standardized contracts, provided by the Arizona Association of Realtors, are used for more than 98% of all residential real estate transactions.

The value in this procedure is that the contract has been fully vetted by its continuous use and, for the most part, protects the rights of both buyers and sellers equally. It also means that the negotiations on the sale of the property are focused on the actual terms of sale and not on the efforts that each party might make to gain an advantage through the insertion of some deftly crafted clause. However, this procedural advantage notwithstanding, it is still essential that buyers and sellers be both familiar with the contract terms and vigilant in its completion and execution.

Toward that end, prospective buyers are encouraged to click on the image above, read through the contract at their leisure and then call or email us if there are any questions regarding interpretation. While we are not attorneys, we are quite familiar with the generally accepted interpretations of the document by virtue of having negotiated hundreds of sales over the years. Should additional insight be required, we generally refer clients to a real estate attorney who can assist them.

A good Realtor is one who helps demystify the process for their clients and a little bit of early education can make the process so much more pleasant. Please take advantage of the offer!

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The escrow process is the mechanism by which funds and documents related to a real estate transaction are assembled and conveyed to the appropriate parties.

The process is administered by an escrow company which, despite typically being chosen by the buyer, actually represents both the buyer and seller in the transaction. The company essentially insures that the sale closes on time and in accordance with the terms of the contract.

In order to accomplish that goal, they hold the earnest deposit monies in escrow, order & review the preliminary title report, obtain title insurance for the buyer, obtain mortgage payoff information for the seller and prepare the deed.

In addition, the escrow officer in charge of “the file” is responsible for calculating the settlement statements to ensure that all of the closing figures are correct (including prorations, when required), arranging for both parties to sign all necessary documents, receiving funds from the lender, distributing those funds and making sure that everything is in order prior to recording the deed.

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Home sellers are required by law to disclose all known material facts about a property to a potential buyer.

In order to ensure that there is standardization in the process, the Arizona Association of Realtors has developed the Sellers Property Disclosure Statement (SPDS) and mandated that it be used on every transaction.

While this document asks most of the pertinent questions that a buyer might generally have about a property, it does not relieve the seller of the broader responsibility to answer any other questions that a prospective buyer may pose.

Among the disclosures a buyer is entitled to receive after entering into a formal contractual agreement is a letter from the seller’s insurance company that lists any claims that may have been made either within the previous five years or during the time the seller owned the property, whichever is less.

By requiring that these disclosures be made early in the overall purchase process, it provides the buyer the opportunity for inspections to be made in those situations where either numerous claims or ongoing problems with the property might substantially impact both coverage and costs.

The Arizona Association of Realtor’s standard contract of sale provides a buyer the right to conduct inspections, at their expense, within 10 days of the date the contract is executed — unless an alternative period of time is mutually agreed upon.

The most common options selected are the structural home inspection, which addresses the major systems in the house such as plumbing, cooling, heating, electrical and pool equipment and the termite inspection. It should be noted that about half the homes sold in the Valley show some evidence of termite infestation, it’s very common in Arizona and not, in itself, any reason for undue concern.

However, there are a number of ancillary inspections that a buyer might want to consider including a lead based paint inspection (for those homes built prior to 1978), fire sprinkler, radon gas and mold.

Home inspectors in Arizona must be licensed and a good source for references is the American Society of Home Inspectors (ASHI) which requires that its members adhere to a Code of Ethics and Standards of Practice. They also require members to have passed written examinations, performed at least 250 inspections and completed 20 hours of continuing education each year. They can be reached at 1-847-759-2820 or accessed via the internet at www.ashi.com.

Termite inspectors must be licensed by the State of Arizona and are under the auspices of the Pest Management Division of the Department of Agriculture (602-255-3664) or https://agriculture.az.gov

Once an inspection has been performed, a buyer may submit an itemized list of any structural or mechanical concerns to the seller. The seller then has an opportunity to respond to that request (usually within 5 days). If there are items that the seller refuses to fix that are of concern to the buyer, the buyer is entitled to cancel the contract and have their earnest deposit refunded.

Any other item of importance (“material concerns”) which might ultimately affect a buyer’s decision to proceed with an agreement must also be investigated during the inspection period. This includes, but is not limited to, things like airport noise and flight patterns, flood zone information, Meagan’s Law, the community CC&R’s, etc. See Disclosures for additional details.

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The Realtor’s primary role in the process of buying a home is to provide those services required to locate the property and negotiate the sale. Once having achieved that goal, their responsibilities shift to offering advice on matters related to the transaction and doing whatever might be necessary to expedite the overall process.

Realtors are, unfortunately, not qualified to discover defects or evaluate the physical condition of a property. However, they can help you find qualified inspectors to assist you and can obtain documents and tap other resources that might provide important information about the property you’ve chosen.

Ultimately, the formal decision as to what constitutes effective due diligence is up to the buyers themselves. After all, every buyer has a different perspective on what is important and while concerns about such issues such as schools, CC&R’s, flood plains, etc. might be vital to one individual, they may be of marginal importance to others.

To ensure that everyone is at least aware of the available due diligence options, the Arizona Association of Realtors has prepared a Buyer Advisory listing most of the common issues that a buyer might decide to investigate or verify on their own. These include common documents a buyer should review, physical issues related to the property that a buyer might want to investigate and conditions affecting the surrounding are that a buyer might want to check out.

If there are any special concerns that a buyer may have about the property or the surrounding area that are not addressed in the advisory, we’d be happy to help you find the answers that you need.

If you haven’t purchased a home in a while, you may not be familiar with just how great an impact the home warranty has had on the real estate marketplace. Insurers have been offering such coverage for over 25 years and it has virtually become a standard feature of real estate transactions here in the valley. In specific, the home warranty is an insurance policy (offered at a relatively nominal cost) that protects the buyer from any problems that might occur after the closing. The party who pays for the policy is negotiated in the contract.

The warranty generally covers all systems (electrical, heating, cooling, plumbing, etc.) in the home for a period of one year from the closing date. And, should anything go wrong with a covered item or be in need of repair during that period, the buyer can simply call the warranty company and they will send a contractor to repair or replace the item at no cost (note: there is a nominal service charge involved).

The use of this tool has effectively eliminated uncertainty from a buyer’s mind and transformed a traditionally contentious part of the real estate negotiation into just another minor part of the purchase process. It’s a WIN-WIN for all concerned.

There are a variety of programs that can be tailored to your needs including those that provide extended coverage for pools, spas and appliances, to name just a few of the most frequently requested options.