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What's Involved in Buying and Selling a Home
Anyone buying or selling a home should be familiar with the following documents, terms and explanations:
- CONTRACT TO PURCHASE. The contract to purchase is a legally binding contract when signed by the parties and all its contingencies are satisfied. It recites the parties’ names, the property’s address and legal description, the purchase price, the terms of payment, the improvements and appliances to be included or excluded and contingencies to be satisfied before closing. Other matters usually covered include the seller’s obligation to disclose and repair defects, pro-rations, the closing date, the allocation of closing costs between buyer and seller, remedies for default and mediation. A contract to purchase recently used in Washoe County is shown in FSBO Washoe’s Services Directory.
- CLOSING. Closing occurs when the escrow holder transfers title to the buyer by recording the seller’s deed in favor of the buyer after all obligations and contingencies specified in the purchase contract have been satisfied. Closing also refers to the date and time when the transfer takes place.
- CONTINGENCIES. Contingencies are conditions and obligations the purchase contract requires each party to satisfy before the sale can close. Examples include the performance of structural, pest and other inspections, performance of the seller’s obligation to correct defects revealed thereby and the buyer’s ability to obtain financing and insurance and to sell his present home before closing.
- ESCROW. “Escrow” is the delivery of a deed by a seller to the escrow holder to be held until the satisfaction of the contingencies specified in the purchase contract, at which time the deed is recorded by the escrow holder in favor of the buyer causing transfer of title. Attorneys, banks, escrow and title companies commonly serve as escrow holders. To initiate an escrow the parties select an escrow holder, agree on a closing date and deposit with it the earnest money, the purchase contract and other required documents. Among other duties, the escrow holder conducts a preliminary title search, identifies existing liens, records documents, confirms the performance of all applicable contingencies and conditions, disburses funds, secures the issue of the title policy, prepares, records and delivers the deed and provides the parties with a final escrow statement reflecting the escrow fees and other payments for which each is responsible. Since the escrow holder’s fees may be negotiable, it’s a good idea to contact several to obtain estimates of the fees and costs involved. Several reputable escrow holders are listed in FSBO Washoe’s Services Directory.
- FINANCING. Before making an offer, buyers should determine the purchase price they can afford which may depend on how much they can borrow from a mortgage lender. In determining how much they will loan, lenders require at a minimum the buyer’s credit rating, annual income and current debts and obligations. Serious buyers generally pre-qualify to establish how much they can borrow, the loan term, the interest rate and the lender’s homeowners insurance and other requirements. A local mortgage broker who can advise on competitive rates and several reputable mortgage lenders are listed in FSBO Washoe’s Services Directory.
- HOMEOWNERS INSURANCE. Mortgage lenders require buyers to obtain homeowners insurance policies covering repair and replacement costs of the home in the event of its damage or destruction by fire, flood, lightning, hurricane, earthquake, toxic mold and any other risks specified in the policy. Several reputable home insurers are listed in FSBO Washoe’s Services Directory.
- INSPECTIONS. Purchase contracts usually permit the buyer (generally at buyer’s expense) to have his designated experts inspect the premises for structural defects, pests, mold and other defects and establish the extent of the seller’s liability for any defects found. Several reputable inspectors are listed in FSBO Washoe’s Services Directory.
- NEVADA PROPERTY DISCLOSURE FORM. This is an official form on which Nevada sellers are required to disclose to buyers all property defects of which they are aware. A copy of this form is found in FSBO Washoe’s Services Directory.
- SELLERS ASKING PRICE. The seller’s asking price is important. Unrealistically high asking prices can discourage prospective sellers from making offers. One good way to determine what’s reasonable is to check the prices of comparable homes listed for sale and the prices obtained for comparable properties recently sold in your area. Another is to have a licensed appraiser evaluate the fair market value of the property. FSBO Washoe’s Services Directory lists the names of several reputable local appraisers. Before settling on an asking price, sellers should read paragraph 1 of Tips for Sellers.
- BUYERS OFFER. The buyer’s offer is also important since sellers frequently don’t respond to unreasonably low offers. Before making an offer buyers should read paragraph 2 of Tips for Buyers.
- TITLE. Title to Nevada real estate may be taken in a number of ways each of which has important legal consequences. Buyers should consult an attorney to learn which best satisfies their needs.
- TITLE INSURANCE. Title insurance is an insurance policy issued by a Nevada-licensed insurance company to protect the purchaser and the lender from loss due to unknown liens, claims and flaws in the seller’s title. All lenders require title insurance. Several reputable title insurance companies are listed in FSBO Washoe’s Services Directory.
- ATTORNEYS. Although homes are frequently bought and sold directly without the help of a lawyer, FSBO Washoe advises buyers and sellers each to retain a local attorney specializing in real estate law to draft or review the offer, the purchase contract and other necessary legal documents and provide guidance through closing. Several attorneys who perform these services for a reasonable, fixed fee are listed in FSBO Washoe’s Services Directory.
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