Who’s Involved in the Buying and Selling of a Home?
Who’s Involved in the Buying and Selling of a Home?
When you’re ready to make the move to homeownership, you’ll work with several business professionals. It’s important to understand what they do because they’re interests can differ from your own.
You can use this chapter to familiarize yourself with business professionals you’ll encounter in the home buying process.
Who will you meet during the home buying process?
Once you’ve decided to become a homeowner, developed your budget and saving plans and evaluated your financial situation, you’ll find several different business professionals are part of the home buying experience. You’ll be the star in this performance, with a varied cast of supporting players. You may not meet each of them face-to-face, but they all play important roles.
Table 7-1: Who’s Involved in Home Buying and Selling?
Loan officer A financial professional who will determine approximately how much money you’ll be able to borrow for a mortgage loan.
Mortgage lender The business person or financial institution that provides the money you’ll use to purchase your new home.
Mortgage broker An individual or organization that brings together mortgage lenders and borrowers.
Loan servicer An organization that handles the day-to-day management (i.e., collecting, billing, and record keeping) of your loan.
Real estate agents, brokers & Realtors Trained professionals who are licensed to negotiate the sale and purchase of real estate.
Home seller The property owner who puts a home up for sale.
Home inspector An individual who provides a trained, professional opinion of the physical condition of a home and its components and systems.
Home appraiser An individual who provides a trained, professional opinion of the market value of a home.
Insurance agent A financial professional who provides protection against the risk of monetary loss.
Title company A company that examines public records to determine that rights to a property can legally be transferred from one owner to another.
Please note that in some of the different legal documents that are part of the purchasing process, you may be referred to as the Grantee, or the Mortgagor. The home seller may be referred to as the Grantor, and your mortgage lender may be called the Mortgagee. Although the names may be different, the roles remain the same in each case.
What Are The Steps To Buying A Home?
We will help you navigate your way through the difficulties of homeownership and mortgages one step at a time.
What are the responsibilities of each individual?
The loan officer will determine if you qualify for a mortgage loan. You’ll have to provide personal financial information, but the result will make your home search easier. The loan officer also can help you get pre-approved for the actual loan by gathering more financial information and examining your credit report. A pre-approval is a written commitment from a lender to grant a mortgage loan based on the value of the house you intend to buy. You’ll have to pay a fee for this service, but pre-approval encourages real estate agents and home sellers to see you as a serious shopper. If negative information shows up on your credit report, the loan officer can tell you what you must do to correct it. If your loan is not approved, the loan officer can tell you what you should do to repair your credit score so you can qualify for a loan in the future. Although loan officers work closely with you to get a loan approved, remember that they work for lenders who pay them to determine that you can and will repay your loan.
The mortgage lender provides money to individuals who want to buy real estate. Your lender could represent a commercial bank, savings and loan institution, credit union, or other type of financial institution. The lender’s primary goal is to earn money by charging interest on your loan. To do this, the lender will rely on the judgment of the loan officer that you can and will repay your loan. If you fail to repay the loan according to the terms of your loan agreement, your lender is entitled to take possession of your home and resell it.
A mortgage broker represents several lenders and earns a fee by matching an available lender with a qualified borrower. To maintain good relationships with mortgage lenders, the broker must be assured borrowers are likely and able to repay any loans that are arranged.
A loan servicer may be the lender who makes a loan, a financial professional hired by the lender to manage a loan, or an independent agency that buys loans from the original lenders. If your property taxes and hazard insurance are included in your monthly mortgage payment, your loan servicer will set up a special account to handle these payments for you. In addition, the servicer will notify you at year’s end of the total amount of interest you paid during that year. Federal law requires your loan servicer to answer any questions you may have about your loan. Once a mortgage loan is made, it may be sold to different loan servicers many times. Although the mailing address for your monthly payments may change, loan terms such as the due dates, length of the repayment period, and the original amount of the loan cannot be changed. Federal law requires both the old and new loan servicers to notify you in writing before any change occurs. They are required to tell you the name, address, and telephone number of the new loan servicer.
The real estate agent is a business professional who will show you homes assist you in negotiating a purchase price and guide you through the legal requirements for completing your purchase. You’ll find two different types of agents: a buyer’s agent and a seller’s agent. The buyer’s agent works for you to locate the most appropriate home and negotiate the lowest possible price. The seller’s agent works for the seller to make a sale as quickly as possible for the highest possible price. Individual agents work for a real estate broker. Realtors are members of the National Association of Realtors and state or local realtors associations. These organizations set codes of ethics and performance standards and provide continuing education for professionals in the real estate industry. Agents, brokers, and realtors can assist you in prequalifying for a mortgage loan. Similar to a lender, they will ask for detailed personal financial information to estimate how much you can borrow; how much you can afford in monthly mortgage payments; and if you have credit problems that must be solved before you apply for a loan. They can also recommend lenders who will likely approve your loan request. These real estate professionals often use a multiple listing service of homes for sale in your area to quickly identify homes that meet your needs and financial situation.
The home seller owns property such as a house, townhouse, condo, or other types of housing that is for sale. The seller’s goal is to get the best possible price as quickly as possible for the property. The seller may be an individual, a family, a financial institution, a homebuilder, a housing development company, or even a government agency. Usually, the seller will employ an agent to show the property to prospective homebuyers. Sometimes an individual owner acting alone will advertise a property as “For Sale By Owner” or FSBO. By handling the sales themselves, owners can avoid paying the 3-6 % real estate agent’s commission.
As a buyer, your major concern with a property being sold by an owner is to make sure the home is not overpriced. Hire a buyer’s agent who can perform a comparative analysis of recent similar home sales and make sure the FSBO sale procedures and contract terms comply with all applicable laws and regulations.
A home inspector will make a detailed physical inspection of any home you want to buy. Whenever you make an offer to purchase a home, your written offer should be contingent on the results of a complete home inspection by an independent expert. You pay for the service, so the inspector works directly for you. The inspector will examine the home’s construction including its major systems such as electrical, plumbing, and heating and cooling. The inspector will also examine the property’s structural components such as roof, walls, floors, doors, and windows. Based on this examination, the inspector will give you a comprehensive report on the condition of the house. When you hire an inspector, ask for this report to be in writing and arrange to be at the home during the inspection. By accompanying the inspector, you’ll be able to ask questions about construction, maintenance, and upkeep of the home. You also may get some useful guidance on any replacements or repairs the home may need. If the inspection uncovers problems that will require costly repairs, you may want to decrease the amount of your offer, have the seller correct the problem—or cancel it entirely.
A home appraiser is an individual hired by your lender to determine the current market value of a home. The appraiser’s opinion may be based on several factors including:
Market value—A comparison of the home with similar homes in the area that have recently been sold.
Cost—A calculation of the value of the land, plus the cost of building the home and making other improvements, minus depreciation of the home, and other improvements.
Income—An estimate of rental income that the property can produce.
The appraiser will consider the home’s size and general condition, as well as the general condition of the surrounding neighborhood, before looking at home sales in the area. The appraiser’s report to the lender will summarize all this information and set a price for the property. In most cases, you will pay for the appraisal as part of your closing costs, so ask for a copy of the report for future comparison.
Different insurance agents will be involved to protect different interests. Your lender will need protection against risks to the collateral, associated with your timely repayment of the loan. You will need protection against risks to your new home and its contents, your ability to repay the loan, and any claims against your ownership of the property. You, the homebuyer, will pay for all of this. Insurance for your lender will be included in your monthly mortgage payments. The price of title insurance will be included in your closing costs and you’ll purchase and pay for your own insurance.
Individuals you’ll probably never meet work for the title company. The title company is responsible for providing the following services:
Provide a legal description of the property.
Identify the legal owner of the property.
Identify any encumbrances, or “clouds,” which are defects in past changes of ownership on the property.
The legal description may require a survey to determine the precise location and boundaries of the property. The legal owner is the person, or group of persons, named on a deed that has been recorded by the local government. Examples of possible encumbrances include liens such as unpaid property taxes, mortgage loans, or court judgments the owner must pay before the property can be sold. Additionally, restrictions on the use of the property such as a historic or wetland designation affecting, how you can build or remodel on the property and easements such as roads or rights-of-way that guarantee other people will have access to the property are also investigated by the title company. Moreover, “clouds,” or defects are possible claims that people besides the seller such as a former spouse, heirs to an estate that has not yet been settled may be discovered during a title search. Once again, your written purchase offer should contain a contingency to cancel if the title cannot be transferred quickly.
A good way to remember your contact with different business professionals is to keep a log of meetings and telephone calls.