Read about Steps 1 through 8 (aka Part 1) by clicking here.
Now the story can continue. I will pick up immediately after step 8, where we have agreed to a price of $185,000 along with several terms and conditions.
Our bank requires a formal appraisal before they can continue forward in financing our purchase. Most banks will. And although this step may not be necessary if we purchased the property with all cash, it is still worthwhile because it validates that we are not overpaying for something.
There are three possible outcomes to the appraisal: it will show the value of the property as MORE than what we agreed to pay for it, it could show it as LESS valuable, or it could MATCH the amount. As long as the value matches or is more than what we agreed to pay, the bank will let us continue forward with the loan and the purchase. If the value is less, then we will have to bring a larger down-payment or choose to cancel our purchase plans.
Our bank identified an appraisal service to use, without asking our opinion or our realtors. This was meant to ensure impartiality. The process was painless and we did not have to be involved. Instead, our realtor met the appraiser at the property on our behalf. After examining the property, they had to go back to their office to run "comps" for the area — comparable sales from recent history.
Nearly 24-48 hours later, we received word that the appraised value came in at $192,000. Success! It may not be much, but because we are purchasing the duplex for $185,000 we will have an instant $7,000 amount of equity in the property after closing. I felt good knowing our negotiating of the price downward resulted some real savings.
Another requirement from our bank is a formal home inspection. This helps ensure that nothing has been missed by our realtor or us by getting "under the surface" of things at the property. They certainly do not want to finance a purchase if the property has significant damages or problems.
Once again the bank wanted to use their approved service provider, but in this case, they gave us a list to choose from ourselves. Using this approved list, our realtor identified someone she has worked for several other real estate deals — and believed he provided a great service. This made it a simple choice for us.
We did not need to be present for the actual inspection because our realtor was happy to show up on our behalf. I decided that I wanted to attend however. I thought there may be value in following the home inspector around so I could ask questions and learn more about what was being inspected and why. That turned out to be a good decision. I learned quite a bit and the inspector was very kind and happy to teach me along the way.
He used a formal book that had pages and sections for each room, appliance, and overall aspects of the property. The pages were very detailed and the inspector did not cut any corners while filling it out. The obvious surface-level items were covered, but I was impressed to see the "under the surface" items. He would pull the refrigerator out to examine the power outlets they were plugged into. And speaking of power outlets, he checked every single one in every room of the entire property! He checked every window to ensure they opened, would pop in/out, and that they would lock/unlock properly. He checked the slope of the ground away from the foundation of the house ouside. These were just a few examples, but he really was quite involved.
I felt the home inspector did a great job and earned his fee for the inspection of our potential duplex property. As with just about everything in this purchase process, we paid the fee. The cost was $400. But the information learned about the property was worth more than this amount. And he did find some faults. More on that in a minute.
Part of the terms and conditions for the purchase of our property include the rights to a home inspection. But further than that right is the ability to end the contract if we find anything to be less than satisfactory. Based on the formal home inspection we had completed, with the help of our realtor we decided to submit a "resolution of unacceptable conditions amendment" to the sellers. This basically tells the sellers we need things fixed before we will continue with the purchase — or else we can cancel the purchase altogether.
Seller to replace leaking hot water tank in unit 1.
Seller to repair/replace exterior damaged siding.
Seller to repair privacy fence on both decks.
Seller will repair/replace several smoke detectors hanging from ceiling in unit 2.
Seller will replace split decking board on deck of unit 2.
Seller to repair/replace screen door of unit 1.
Seller to repair/replace window lock in kitchen of unit 1.
Seller to repair kitchen disposal in unit 1.
Seller to repair/replace damaged bathroom door and loose hinges in unit 2.
Seller to replace missing screen for window in basement bedroom of unit 1.
Some of them were major concerns, some were potential hazards, and others were small items. But this was a big purchase for us. $185,000!!! If I'm spending that money, I want it to be in good condition overall. And it certainly doesn't hurt to ask the sellers to fix this stuff.
Once the form was created and signed, it was sent off to the sellers for their review. Now we await their response.
Our realtor informed us the seller has accepted all but one of the requests from our counter-offer. I would have hoped all of the items could have been taken care of by the sellers, but I am not that offended they didn't accept it in its entirety. I feel they are acting in good faith by agreeing to all but one, so we are going to accept their reply and counter-offer.
The price remains the same, the other terms and conditions remain the same, now we just have this amendment where they are agreeing to make the fixes. As part of the amendment too, it sets up a date where we get to "inspect" the fixes to ensure they were completed and sets up a date when we go to the closing table.
With our agreed upon (and now scheduled) dates with the sellers and the bank, the path is now paved towards our meeting at the closing table to purchase the property.
The last requirement from the bank is to make sure we will have adequate insurance coverage for the property. The choice of an insurance provider is left to us completely — although it just needs to meet some minimum requirements from the bank. They want to be protected in the event of a disaster that destroys the property.
Since it is up to us, my next goal becomes saving as much money as possible when purchasing the insurance coverage. That means calling State Farm, All State, Farmers, and everyone in between to get quotes. Almost everyone will sell coverage and should be happy to give a formal quote over the phone or in person. Armed with this list of quotes, it was easy to select the lowest cost provider.
Now that all requirements from the bank have been satisfied, this last step becomes more of a formality. The closing date is approaching on the calendar and we want to ensure the smoothest possible transaction. Therefore I contacted the bank to make sure they had all required documentation, which they did, and confirmed steps to be expected in the closing process.
We also reviewed the interest rate, other loan terms, and confirmed the down-payment amount. I was advised on how to make the down-payment at closing. A simple check will not work. Instead, we can choose to wire funds or must use a cashier's check. Good news to know.
Everything looks to be ready. I'm glad I did talk proactively with the bank, because I can start to see why so many people could have problems at the closing table. There are a lot of nuances to the purchase and one little item that is incorrect (or unexpected) could cause the closing to be further delayed.
At the closing, it was my wife, myself, our realtor, and the "closer" at the title office. The phrase "sign your life away" can be an accurate description of how things take place at closing. Never before have I seen so many contracts, amendments, addendum, or forms. Sheesh! We're talking 40-50 pages and each one must be signed in precise order with the skillful guidance of the "closer" who also acts as notary public.
Now I must admit I received an advance copy of all the forms we were expected to sign. This gave me a chance to review them in more detail in the nights leading up to closing. So at our closing, these were forms I had already seen and already understood. I read every contract, every page, and made sure I understood what I was doing. I recommend anyone do the same, because mistakes can and will be found. In our case, the closing was rather uneventful. Everything looked to be correct and was as expected.
The sellers had already completed their closing, covering their processes for selling the property. We never met them in person and they were already gone from the title office before we arrived. That left our part as the final steps: the purchase contracts, the loan contract, the insurance purchase, etc. All of these final contracts and forms were signed, notarized, and prepared for shipment to the county records department.
After the final page was signed and the paperwork promptly whisked away, we were congratulated by both our realtor and the closer. The very last step…..the keys were brought out and placed in our hands. We are official property owners! The duplex is ours!
Our purchase of the duplex was quite the process. I can see why there is a lot of time between acceptance of an "offer" and signing the final paperwork at "closing" to make it official. There are lot of steps necessary to protect the buyer, the seller, and bank. All of it takes time too.
And as first-time home buyers, we had a genuine lack of knowledge about it all from the beginning. I had lots of questions, concerns, and confusion at times. But we had lots of help and guidance along the way to the purchase of our duplex. Most credit is given to our realtor. She proved her value countless times and led us through the process in a structured and relaxed way. I'm very thankful we choose to hire a realtor instead of pursuing it independently — and extra thankful that ours was a "good one".
By the end, I feel like I learned very much. It no longer is quite so confusing. I dare say, it all makes sense now! And I have a feeling the knowledge I've gained will come in handy down the road — for yet another home purchase hopefully!