Mr. Teitle very graciously agreed to write a very informative article to help Home Buyers with an overview of what they can expect, and what they need to anticipate. Please note that this article does not eliminate the need for an attorney, and does not provide guarantees implied or express.
Justin A. Teitle
Attorney at Law
Teitle Law Offices, P.C.
Shopping for real estate can be exciting, but being prepared and knowing what to do when making an offer can be the difference between closing on your dream house and being left out in the cold. As buyers, many people looking to approach the owner on a FSBO listing are unsure of how to proceed if they really like the property and want to move forward. This post is meant to share a few thoughts about the basics and get you started on solid footing.
Ideally it begins before you even make contact or visit the listed home. When you begin to seriously shop for your new home, you must put yourself in a position to convince the seller that you are in fact prepared to make a deal and follow through. This means taking active steps to line up your financing. If you intend to take out a loan secured by a mortgage, go to your chosen lender (you should shop the market to compare rates and closing costs) and obtain a letter of preapproval of financing. Initially, you can get this from most banks or credit unions within a day. Be aware that all letters of preapproval are not equal. A general letter of preapproval may refer to your creditworthiness, but not a dollar amount up to which you are approved.
Later in the process, after you have identified the house you want to buy, a more specific preapproval letter can be obtained, which will refer not only to your creditworthiness, but to the specific address of the house and the purchase price you are offering. This type of letter will be more impressive to sellers and give them reassurance that you are a legitimate buyer. It is superior to a general letter of preapproval because it leaves less question as to whether you can likely get a loan commitment for the amount you need. Be prepared to present or offer letters of preapproval at each stage of the negotiation.
If you are a cash buyer, meaning you do not intend to take out a loan, being ready means having discussed your purchase with the financial institution where your funds are held, and having the institution ready to issue a letter specifying that you have sufficient funds available in a specific amount for the purchase price. You will not obtain this type of letter until you identify the home, as you don’t want others knowing a general amount of money you may have available in excess of your offer.
Once your financing is in order, you are in a good position to contact sellers and visit the property. Once you are convinced you may want to consider a property seriously, ask the seller for a copy of their legally required disclosure statements. These statements will provide details on a variety of issues, as to whether the seller is aware of past problems or repairs. This information is key in deciding whether to make an offer, and for how much. Do not begin discussing terms, especially price, without seeing the disclosures. If seller has not yet secured an attorney to obtain the proper forms and advice, suggest that seller do so before proceeding further with negotiations. By law in both Iowa and Illinois, these disclosures must be made before a purchase agreement is signed, and you are legally entitled to see them.
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