Terms of the purchase agreement

Sales Price: For most home purchasers, the sales price is the most important term. (negotiable)

Title: “Title” refers to the legal ownership of your new home. The seller should provide title, free and clear of all claims by others against your new home sometimes known as “liens” or “encumbrances”. You may negotiate who will pay for the title search which will tell you whether the title is “clear”.

Mortgage clause: The agreement of sale provide that your deposit will be refunded if the sale has to be canceled because you are unable to get a loan.

Termite & moisture Your lender will require a certificate from a qualified inspector stating that the home is free from termites and moisture damage. Seller will seek immediate treatment and repairs if damages are found.

Home Inspection: It is a good idea to have the home inspected. An inspection should determine the condition of the plumbing, heating, cooling and electrical systems. The structure should also be examined to assure it is sound and to determine the condition of the roof, siding, windows and doors. If anything that concerns you is found you have the opportunity to ask the seller to correct repairs or simply have the right to cancel the agreement.

Appraisal: Usually the applicant will be required to pay for the appraisal up front. The appraisal is not a home inspection, the lender will require the appraisal for three reasons; to estimate the value of the house, to make sure that the house meets the minimum property standards and to make sure that the house is marketable.

Miscellaneous:

If the house is on a well and/or septic most lenders require a water purity test and septic test. Appraisers will use three comps of recent sales within the last 6 months, if available, of similar size properties in the same neighborhoods. Appraisers will look at the overall marketability of the house for resale, under normal marketing conditions. Lead-Base Paint Hazards. If you buy a home built before 1978 you have certain rights concerning lead-based paint and lead poisoning hazards. Your agent will give you a pamphlet Protect Your Family From Lead In Your Home and the seller must attach a disclosure form to the agreement of the sale which will state if seller has any knowledge or report/records pertaining to lead base paint. (Peeling or flaking paint should be investigated)

Asbestos: Possible existence of asbestos-containing materials may be evident from a visual inspection. Four common types of materials often contain asbestos:

• A fluffy, cotton-candy like material sprayed on ceilings or walls as a fire retardant.
• A granular, cement-like plaster that either sprayed on walls or ceilings for fireproofing a soundproofing purposes.
• Wallboard used for insulation that has sprayed or troweled on material behind it.
• Pipe or boiler insulation that may felt-like or cement-like in appearance or may look like fibrous wrapping paper. If disturbed or cracked, look for a powdery residue. Material is then referred to as FRIABLE.

Other Environmental Concerns

Radon: Considered the second greatest cause of lung cancer.

• Colorless, odorless gas enter houses through minute openings in foundation and cracks in basement floors, walls or openings around plumbing.
• Home inspector will be able to define or determine the presence of anything of that nature.

Underground Storage Tanks: A physical examination of the property may provide clues to the possible presence of one or more underground tanks. Possible red flags could be:

• Vent pipes sticking out of ground.
• Oil sheen in wet areas.
• Bumpy landscape.
• Unpleasant or unusual odors.

Survey: Lenders or title insurance companies often require a survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements. (Closing costs expense)

Flood Hazard Areas: Most lenders will not lend you money to buy a house in a flood hazard area unless you pay for flood insurance. Your lender may charge you a fee to check for flood hazards. (Surveyor will define if the home is in a flood zone) You should be notified if flood insurance is required. If a change in flood insurance maps brings your home within a flood hazard area after your loan is made, your lender may require you to buy flood insurance at that time.

Tax and Insurance Payments: Your monthly mortgage payment will be used to repay the money you borrowed plus interest. Part of your monthly payment may be deposited into an “escrow account” also known as reserve account so your lender can pay your real estate taxes, property insurance, mortgage insurance and/or flood insurance.

Mortgage Insurance: Private mortgage insurance and government mortgage insurance protect the lender against default and enable the lender to make a loan which the lender considers a higher risk. Lenders often require mortgage insurance for loans where the down payment is less than 20% of the sale price. You may be billed monthly, ask your lender if mortgage insurance is required and how much it will cost.

Owner’s Policy: A lender’s title insurance policy does not protect you. If you want to protect yourself from claims by others against your new home, you will need an owner™s policy. When a claim does occur, it can be financially devastating to an owner who is uninsured. If you buy an owner™s policy, it is usually much less expensive if you buy it at the same time as closing.

HUD-1 Settlement Statement: One business day before the settlement you have the right to inspect the HUD-1 Settlement Statement. This statement itemizes the services provided to you and the fees charged to you. This form is filled out Settlement Statement.