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- Property disclosure form. This form requires you to reveal all known defects to your property. Check with your state government to see if there is a special form required in your state.
- Purchasers access to premises agreement. This agreement sets conditions for permitting the buyer to enter your home for activities such as measuring for draperies before you move.
- Sales contract. The agreement between you and the seller on terms and conditions of sale. Again, check with your state real estate department to see if there is a required form.
- Sales contract contingency clauses. In addition to the contract, you may need to add one or more attachments to the contract to address special contingencies — such as the buyer’s need to sell a home before purchasing yours.
- Pre- and post-occupancy agreements. Unless you’re planning on moving out and the buyer moving in on the day of closing, you’ll need an agreement on the terms and costs of occupancy once the sale closes.
- Lead-based paint disclosure pamphlet. If your home was built before 1978, you must provide the pamphlet to all buyers. You must also have buyers sign a statement indicating they received the pamphlet.
Source: National Association of REALTORS®
Unless the buyer who makes an offer on your home has the resources to qualify for a mortgage, you may not really have a sale. If possible, try to determine a buyer’s financial status before signing the contract. Ask the following:
- Has the buyer been prequalified or preapproved (even better) for a mortgage? Such buyers will be in a much better position to obtain a mortgage promptly.
- Does the buyer have enough money to make a downpayment and cover closing costs? Ideally, a buyer should have 20 percent of the home’s price as a downpayment and between 2 and 7 percent of the price to cover closing costs.
- Is the buyer’s income sufficient to afford your home? Ideally, buyers should spend no more than 28 percent of total income to cover PITI (principal, interest, taxes, and insurance).
- Does your buyer have good credit? Ask if he or she has reviewed and corrected a credit report.
- Does the buyer have too much debt? If a buyer owes a great deal on car payments, credit cards, etc., he or she may not qualify for a mortgage.
Source: National Association of REALTORS®
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About one-third of recent home buyers failed to shop around for a mortgage, saying they were satisfied with the first quote that a lender gave them, according to Fannie Mae’s National Housing Survey. But that could be a big mistake.
Researchers found that higher-income, younger-aged, and minority borrowers were the most likely to gather multiple quotes when shopping for a mortgage.
On the other hand, “first-time home buyers and lower-income borrowers are more likely to say that referrals from friends, family, or co-workers had a major influence on their choice of lender,” note Sarah Shahdad and Qiang Cai of Fannie Mae’s Economic & Strategic Research Group in commentary at Fannie Mae’s website. “Only first-time home buyers are more likely to say that a real estate agent’s or mortgage specialist’s referral influenced their choice of lender. … These findings suggest that there is an opportunity to help consumers be better informed and improve upon the mortgage shopping process.”
Shahdad and Cai urge that consumers be provided with more information about mortgage product choices and that buyers be encouraged to seek multiple sources of information.
“As large and infrequent as the mortgage transaction is in most people’s financial lives, borrowers may be leaving money on the table by not shopping around and negotiating for the best terms they can get,” Shahdad and Cai write. “Getting a better deal can help borrowers sustain their mortgage even in the case of unexpected increases in expenses or decreases in income. The level of influence of referrals on today’s first-time and lower-income home buyers suggests that finding a lender who delivers on other dimensions, such as efficiency and customer service, also is a key area of focus for many.”
Source: “What Is the Mortgage Shopping Experience of Today’s Homebuyer?” Fannie Mae (April 13, 2015)