Filename: The pending process
Duration: 09:45
Hi, it's Travis Anderson here and in this video we are going to look at the pending process a little more closely. Hey, thanks for being here. It's Travis Anderson and like all of our videos, it's 100% free. I hope that you appreciate the service and that you might pass this video along or maybe even give us a call if you have any questions yourselves. Question of the day, what are some of the horror stories that you've heard because the pending process didn't go so smoothly? Let's get right into it. The pending process really begins after the buyer and seller sign the purchase agreement and all parties are distributed a copy. So until that happens, we can't start this process. So make sure that your realtor has copies of everything that are signed and then that way you can go ahead and move on to the next step. If we don't have that, it's a real issue.
Step number one in the pending process is delivery of the earnest money. Earnest money is a really a deposit by you, the buyer. It's a deposit in that you give it up at the time you write the purchase agreement and you receive it back at the time of closing, hence deposit. The reason it's called earnest money is because that's your best effort to the seller to show them how earnest you are in buying the home. Earnest is a way to show them how liquid you are, how confident you are, how trusting you want them to have in you in buying the home, but understand it's acted as a deposit. So step number one is to deliver that earnest money check. Currently it needs to be done pretty quickly within two days of acceptance of the purchase agreement.
Step number two is to handle your inspection process. Understand that inspections, at least currently in Minnesota, that's negotiable. We do have buyers that waive their inspection. I'm one of them. I can look at a home closely enough. I don't need it inspected. Most of the time you are going to want an inspection and in fact, we advise everybody to get one. Typically speaking, there is a period of time that you are allowed to inspect and that's also negotiated up front. Whether that be 5 days, 7 days, 14 days, doesn't much matter, but you and your realtor need to understand that timeline because that's when you need to do your inspection. You will hire a person. They will come through, they will do their inspection, they will do a visual, they will review it with you and your realtor, and then you will decide how you feel about that inspection.
The reason we call it an inspection process is because the inspection is only a part of it.
The other part would be your due diligence. What do the schools look like? What are the crime rates? Have you driven the neighborhoods yet? Where is the nearest park? What you want to do during your time frame of inspection is determine all of the things good and bad that would cause you to buy the home or not buy the home. That's step number two.
Step number three is the appraisal. What's an appraisal? An appraisal is a third party opinion of the price of your home. The seller has an idea of what they want for the home. You have an idea of what you will pay for the home. The mortgage company wants to make sure that you don't over pay for the home. So an appraiser is somebody who is hired by the mortgage company, paid for by you to make sure that you don't overpay for the home. That's the third step. It generally takes place within a week or two after the inspection. You literally get a thumbs up or a thumbs down and you will also get a copy of your appraisal either at closing or a couple of days before closing.
Step number four is what's called title work. The seller is actually required to provide you with clear title in Minnesota. So the seller's job is to do the title work and in addition to that, your job then would be to have a title company, make sure that the seller has done their job, and so we help you through that process. We have title companies that we work with. They go ahead and make sure that everything is good. In addition to the title work, we need to make sure that you personally don't have any judgments against you, bankruptcies, foreclosures, divorces, lawsuits, etc, that are not yet cleared up, because in the event that you do have something like that, now the new title will not be clear. So the seller needs to provide you clear title and you need to take clear title. That is step number four.
Step number five is your mortgage approval. Now, you should have already obtained your pre-approval, which we've talked about in other videos. Your actual approval is the verification of everything that you provided up front. So the mortgage company is going to present the purchase agreement, the appraisal, the title work, all of your bank information, W2s tax returns, letters of explanation, whatever it is that you've provided. They are going to take all of that documentation and put it together in a file and submit it to somebody who is called the underwriter. Yes, the underwriter is a bad person. No, I'm kidding. Underwriter is a good person. They want to make sure that they are providing you with a loan that you can actually pay back. They are going to provide all that documentation to the underwriter and the underwriter is going to submit you with what's called conditional mortgage approval. Essentially, they are going to say, yes, the buyer is good, but I need to see X, Y, and Z. Okay. Once you provide the mortgage underwriter with X, Y, and Z, you are now approved.
Step number six is providing the mortgage company with your homeowner’s insurance. Really all you need to do is provide them with the insurance agent that you want to work with and then the insurance agent and the mortgage company are going to get together over the phone and email and they are going to communicate exactly what it is that you need. Sit down with the homeowner's insurance provider or have a good long conversation with them. Make sure that you are covering things that you might not be thinking about. Things like the siding need to be covered a special way. The roof needs to be covered a special way. What about the sewer line? That could be covered a special way. If you've never owned a home before, you can now include things like your wedding ring on your homeowner’s insurance. It's important to make sure that you have a conversation that's much lengthier than you might think, to make sure that you are insuring yourself and your family properly now that you are going to be owning a home.
Step number seven is what we call the final walkthrough. You looked at this home a while ago; you maybe looked at it twice. Then you wrote an offer. Things move really fast. Then you inspect the property and now you haven't walked in that home for three weeks, four weeks, six weeks, sometimes. Final walkthrough is a process to make sure that that home looks the way it did when you wrote that purchase agreement. We want to make sure that that home is the same or in as close to the same condition as it was before, so you and your realtor are going to go through that property one more time. You are going to do things like make sure the furnace kicks on, make sure the air conditioning works, if it's not too cold, run the dishwasher, run the washer and dryer, if you so choose, things like that. Make sure that that home looks the way that it does. Final walkthroughs are a formality, but an important one.
The last and final step is really the closing. Before you get to closing, you are going to need just a couple of things. You are going to need a copy of your driver's license or some sort of a photo ID. You are also going to need whatever cash you need to close. Generally speaking, we are getting a cashier's check. That would include your cost to close as well as your down payment. You are going to need that as well, and then you are going to need your right or left hand, whichever one you write with. We are going to make sure that you have enough strength in that arm so you can sign all those documents and make it a great day. The truth of the matter is, three days before the closing date you are done. The final walkthrough happens the day of or the day before, but really contractually, financially from an insurance standpoint, et cetera, you should be completely done. All you have to do is go to closing and make that final.
Hey, listen, I want to throw a step number nine in here and it's something that we don't talk about often enough in real estate. It's that we want you to maintain that property. The average cost of home maintenance is 2% per year. That means if you buy a $250000 home, on average, you are going to spend $5000 a year maintaining that property. Now that's a national statistic. Sometimes it's more, sometimes it's less. Obviously, the cheaper of the home you buy, the greater the percentage, the larger the home you buy, the lesser the percentage.
However, understand my wife and I, we've been in our home for three years. I've already replaced the air conditioning unit. I've replaced the hot water heater. All of my appliances are brand new. I've painted the whole home. I've installed all new light fixtures. I mean, we've spent thousands upon thousands of dollars on our home and it was a nice home when we bought it. The fact of the matter is, buying real estate is also a maintaining real estate process. I don't think people talk about it enough. I want you to expect for 2% a year on average that you are going to be maintaining that property.
Hey, thanks again for watching this video. Real quick, there are eight steps that include the closing and then the ninth step would be home maintenance. Go back and review this video if you have any questions or go ahead and reach out to me or my team. I'm happy to help in any way that we can and hey, if you found this video beneficial, pass it along to a friend or give me a call. I would love to hear from you. Thanks again.