Tag Archives: closing

The Real Estate Purchase Agreement

October 7, 2019   Auto Loans

Buying any piece of real estate property whether it be a home, condominium or building requires a written agreement. This is known as the real estate purchase agreement or a sales contract. It is called for in the U.S. Statute of Frauds that all financial transactions involving real estate be put in writing to be enforceable.

A purchase agreement is entered into by two parties – the buyer and the seller. Being the principals in the transaction, both of their names and signatures should appear on the document.

Other important details that need to be specified in the contract include the following:

* Legal description and address of the property. This should state the physical condition of the home and its specific location.

* The purchase price the buyer is offering.

* The amount of down payment also referred to as earnest money or deposit and who will keep it during the transaction. Usually, a lawyer acts as the escrow agent. A condition may be included as well stipulating the return of the deposit if the sale does not push through due to the buyer’s failure to secure a loan.

* The time frame needed to respond to the offer such as 24 hours or 48 hours. The buyer may specify this to keep the seller from accepting additional bids from other buyers.

* The party in charge to keep the deposit and to close the transaction. The closing may be handled by either the attorney or the real estate agent whichever may be agreed upon by the two parties.

* Items included or excluded in the sale. These refer to the appliances and furniture that the buyer may want to keep or discard in the property concerned such as carpeting and lighting fixtures.

* Home warranty. This guarantees the buyer that the seller will provide a clear title to the property at the time of closing. The document may either be an abstract of title, certificate of title or a title insurance policy.

* The party to pay for the closing costs. Many sellers shoulder the closing costs as an incentive to buyers. Depending on both parties, though, the costs can also be split.

* Clause for inspection and appraisal. Buyers normally ask for a home inspection to ensure that the property they are buying is in good condition. The inspection also aims to find out defects and the presence of pests, if any. The appraisal, meanwhile, is meant to determine the actual market value of the residential property.

* Mortgage contingency. This may be specified by the buyer as a guarantee that the buyer obtains a mortgage loan before closing. This may also release the buyer from the offer in the event he or she fails to get a loan.

The real estate purchase agreement is initiated by the buyer. However, it’s not all the time that the seller accepts the offer in its totality right away. What usually happens is that a seller will respond by submitting a counter offer that proposes some changes to the buyer’s conditions. Negotiations will begin only after the buyer and seller agree to the contract’s terms and conditions.

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Bridging Loans

January 27, 2019   Auto Loans

If you have ever been stuck in between the purchase of your new home and the sale of your old home, understanding bridging loans would have been helpful. Nothing is worse than paying two mortgages when it is unexpected. Thankfully, bridge loans have been created by lenders to help address this challenging situation.
Bridging loans are temporary term loans that help to bridge this gap between the closing of the present home and the closing of the new home. Despite this not being a common scenario, under a few occasions there is a longer time frame than was initially anticipated. The bridge loan helps the property owner to cover their simultaneous mortgage costs, with the proceeds from the bridge loan being also used towards the down payment on the new property once closing occurs.

The Bridge Loan Process

As with any home mortgage, the buyers must go through underwriting to become approved for a bridge loan. Every lender will often have their own approval procedure that must be followed in order for the owner to be approved for the bridge loan. And, these qualifications are often more lenient than traditional home lenders when it comes to debt to income ratios, meaning that these ratios can often be higher than with traditional lending.

The rationale of different requirements associated with the bridging loans is that they are temporary and generally created to assist a property owner in moving from their current property into their new property. And, the proceeds from the bridge loan are almost always applied to the new home loan in the event that they are not used during the transition period before to closing on the new home.

Benefits of Bridge Loans

There are a number of benefits to the property buyer of bridge loans, including:
• It allows the property owner to put their property onto the market quickly and often with less restrictions than if they didn’t have the additional financial cushion.
• A lot of bridge loans don’t require monthly loan or mortgage payments, providing some financial relief to the current property owner.
• The loan can give the property owner some flexibility with contingencies on their home sale, allowing them to turn away offers that are not favourable without financial fear of paying two mortgages in the event that their new property closes as anticipated.

Disadvantages of Bridge Loans

While there are multiple advantages to using a bridge loan when selling or buying properties, including:
• The costs associated with bridge loans are typically more than traditional home loans and even home equity loans.
• Some property owners may not qualify for a bridge loan due to the lending qualifications
• Even though the bridge loan helps the property owner in covering mortgage costs during the transition process between properties, they must still pay for both loans and the interest that is accruing on the bridge loan.

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