Maybe you are planning on selling your home, or maybe you are looking to buy.
In case you didn’t know, there are quite a few people involved in the process to ensure that the transaction goes smoothly.
A mortgage lender (which could be a bank or a mortgage broker) helps the buyer apply and be approved for a mortgage. A buyer will usually work with a mortgage lender before looking at any homes with a real estate agent, because the mortgage lender will give the buyer a “pre-qualification” letter that states how much money the buyer is financially qualified to borrow in order to purchase a house. This “pre-approval” can be very important in a competitive real estate market, as it can make your bid more attractive to a seller than a potential buyer without pre-approval.
Once an offer is made, the buyer will usually be given the opportunity to hire a licensed home inspector who will evaluate the home and ensure that the property is up to county or state code. The home inspector will evaluate sanitary facilities, living, sleeping, cooking, and dining areas, water quality, temperature, roofing, electricity, any lead paint, ability to access the property without trespassing onto someone else’s property, ensure there is safe drinking water, make sure there are no pests, mold, or mildew, and consider any non-residential use of the property. Generally, the home inspector will assess the property to make sure the house is fit to live in safely and comfortably. The inspector then provides a written report, which can be used by the purchaser to negotiate certain repairs or upgrades as recommended in the report.
Buyers will also pay for an appraiser to inspect the homes and give a Notice of Value that shows the parties how much the home will cost. The primary function of the appraisal is to satisfy the lender that the home is worth the purchase price, since the home will be collateral for the loan.
A title company generally acts as the combined agent of mortgage company, buyer, seller, and other related parties, and their role is to ensure that the seller legally owns the property and can transfer the title to the new buyer. A buyer pays an initial deposit called “earnest money” to the title company to hold until the home’s closing, and the escrow officer is the person responsible for taking care of the money and having it available at closing to give the deed to the buyer. The company also issues a title insurance policy. An attorney may also be the escrow officer and replace the role of the title company instead.
The closing agent is either a title company or an attorney, who collects and the purchase money and closing costs, prepares the necessary documents for closing, ensures that the documents are executed properly and recorded in the public records as necessary, and then disburses the proceeds of sale to the seller after seeing that all closing costs are paid. The closing agent will also inspect the legal title and certify to the lender and/or purchaser that they are receiving a good and sufficient legal title to the property.
The different parties to the home-buying process work to accomplish a series of goals:
- Ensure that the seller has the title or deed to the property so it can be sold,
- Ensure that the property is in good condition so it can be sold and eventually lived in,
- Ensure that the buyer has enough money to afford a down payment on the house and to qualify for a loan for the rest of the costs
- Determine the price of the property and how much the buyer will pay for the property, and
- Transfer the title or deed from the seller to the buyer.