Step 8: Going to Contract.

What goes into a contract to buy a home. In a nutshell, the rules that the buyers and sellers shall both abide by on the road to closing day. There is certain information that is required to be legally binding however, virtually anything can be included and that is good and bad. As such it is good to seek legal counsel specializing in real estate.

• The Purchase and Sale Agreement.
• Finding a good Lawyer.
• Obtain Homeowner' s Insurance.
• Home Appraisal.
• Commitment Letter from Lending Institution.
• Review all closing documents and closing costs.
• Call all the utility providers.
• Fire Marshal Certificate.
• Condominium 6D Certificate.
• Prepare for moving.

The Purchase and Sale Agreement.

While the Offer to Purchase Real Estate firmly sets several key elements of the transaction like the purchase price, deposit amount, date of closing, mortgage loan amount and the buyer contingency to have the property inspected and to be able to secure financing. The final agreement or Purchase and Sale Agreement is the final and formal agreement, drawn up by the selling broker, which spells out between buyer and seller the agreed upon specific details, terms, conditions, and rules. This document is binding after the buyer and seller sign it and generally supersedes the Offer to Purchase and any prior agreements between the parties.. As a result it recommended that the Purchase and Sale agreement be reviewed by a real estate attorney.

Typically, on the day the Purchase and Sale Agreement is signed, the home Buyer will be required to place a deposit with the seller's attorney or listing agent's broker (or escrow officer) usually equal to 3% to 5% of the purchase price, which can be negotiated. This deposit is to help ensure that the home buyer does all that is necessary with due diligence to obtain financing and close on the property under the terms of the Purchase and Sale Agreement. If the Buyer fails to strictly adhere to these requirements, the Seller will likely sue for this deposit for damages (i.e. the losses incurred for taking this house or condo off the market).

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Finding a good Lawyer.

It really helps to have a good attorney that specializes in real estate law working for you. An attorney can advise you on the disclosure laws, draw up or look over any contracts, and make sure your interests are protected. It's always tempting to use a lawyer that the family knows and they may know something about real estate law. However, in real estate the devil is in the details so only an attorney with experience in real estate law would be recommended. We can provide you a list of attorneys that were recommended by our past clients and that we have successfully worked with.

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Obtain Homeowners Insurance.

Homeowners insurance covers your home, your possessions, and people on your property. The lender requires it. You may also be required to have flood insurance, depending on whether your new house is in a flood plain. Still, things happen, and you should be prepared with good home insurance policy. All lenders require at least fire, theft, and liability insurance. You may get a discount from some insurers if you have both home and car insurance with the same company. You may also have an umbrella policy that can save you even more money.

When you purchase a home, the lender usually requires that you pay for one half to one-year of insurance policy up front. Usually you must do so at or before closing. You'll most likely be asked to bring a paid receipt/binder for proof the insurance policy.

The lender will set up an escrow account and collect one months insurance payment each month in addition the regular monthly mortgage and tax payments. When the insurance bill comes due, it is sent to the insurance company automatically by the lender.

Home owners policy generally covers these 11 most common perils (however, consult your insurance carrier for the exact details):

The following is a list of the various types of coverages (however, consult your insurance carrier for the exact details):

• HO-1: Basic policy - (cheapest) Covers fire windstorm, explosion, smoke, broken glass, and other perils - including theft, vandalism, and liability.
• HO-2: Broad Form - Covers the same as HO-1 but adds burst pipes, exploding furnaces, collapse of building, and falling objects.
• HO-3: All-Risk Form - Covers everything not specifically excluded. May cover features that are part of the structure like wall-to-wall carpeting, tile floors etc.
• HO-4: Renter's Policy - Protects the renter's personal possessions.
• HO-5: Comprehensive - (most expensive) Covers everything in HO-3, plus more. Exclusions are specifically listed.
• HO-6: Condo/Co-op - Insurance for condominiums and cooperatives.

Consider the following when you are deciding how much coverage you need (however, consult your insurance carrier for the exact details):

• Ask your lender how much is required? Most lenders will require a minimum of purchase price less the land value. However, you may want to purchase additional coverage.
• Figure out the replacement cost of your home. To estimate the replacement costs call the MA Builder's or NH Builder's Association.
• Consider the amount of insurance needed for your possessions.

Don't wait until closing before you are required to buy insurance. Shop around and get quotes from several companies.

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Home Appraisal.

Your lender will require an appraisal of the home you wish to purchase before a loan can be approved. You may want to make your offer contingent on an appraisal, and you may want to spell out what to do if the appraisal comes back lower than the negotiated purchase price (i.e. you can renegotiate the price or you can withdraw from the deal). The appraisal fees normally are part of the lender's closing costs. For more information:

Formal appraisals are time-consuming and can cost several hundred dollars. An appraiser inspects the property from foundation to attic, measures its square footage, makes detailed notes regarding everything from the quality of construction to the amount of wear and tear, photographs the house inside and out, photographs comparable homes to the house being appraised, writes up the appraisal, and so on.

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Commitment Letter from Lending Institution.

When your loan has been approved, you will receive a mortgage commitment letter or a formal offer by a lender stating the terms and conditions under which it agrees to lend money to you. Please review this document carefully and raise any questions that you have immediately with your loan officer. In your Offer Contract you will specify a specific date by which you promise the sellers, of the home you wish to purchase, the last day you must receive your commitment from your lender. Should you find that your lender needs some additional time in order to give you your final commitment, please make sure you convey this to the seller or seller's agent through your buyer agent. You may need to obtain an extension for your commitment date. The extension, like all changes in your agreement with the seller, must be and should be in writing. The seller usually doesn't mind giving a reasonable extension.

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Review all closing documents and closing costs.

Closing day is now approaching in a few days. This is when all the terms of the original purchase and sales agreement are finally fulfilled. This is near the point in time where legal ownership passes from the sellers to you the buyer.

The person in charge of the closing (the closing attorney) ensures that on closing day all appropriate documents are signed and recorded and that any exchanges of money occurs properly.

Here is where you need to make sure you have everything ready for the closing:

• Decide how to take title:
  • Joint Tenancy: Invokes a right of survivorship upon the death of one owner: typically, the property is automatically transferred to the surviving spouse or co-owners.
  • Tenants in Common: Upon the death of an owner, the deceased person's portion of the property is transferred according to the express wishes in deceased will.
  • Tenancy by the Entireties: When a spouse dies, the surviving spouse becomes the sole owner of the property.
  • Property in Severalty: Which means there are no co-owners. This is if you are single.
• Decide which type of title insurance to purchase. This policy (a one-time premium payment at closing) protects you and the lender against unknown defects such as forged signatures, undisclosed heirs, spouse not signing documents, etc. Ask you closing attorney about all types of policies, but also about an owner's title policy to protect your equity.
• Weather you are single or buying a home with someone else, now is the appropriate time to complete or upgrade a will so your wishes regarding the property are clearly known and recorded.
• Check closing costs carefully against the written estimates provided by the lender. Any significant changes in costs without a reasonable explanation should be challenged.
• Ask the closing attorney about the amount of money that needs to be brought to the closing. Do the funds need to come in the form of a cashier's check, money order or will a personal check do.
• Bring a form of identification with a picture like a driver's license.
• Make sure you have received a settlement/closing statement also referred as a HUD-1 statement. This is the official document that shows all expenses associated with the transaction/loan and who is receiving payment for those services. Legally, a buyer is entitled to the statement one day before the closing, to the extent the statement is completed, but statements are rarely completed more than a couple of hours before the scheduled closing.
  • Make sure the content in the settlement statement it is accurate.
  • Do the closing costs on the settlement match the estimated provided by the lender?
  • Do the closing costs on the settlement statement reflect the terms of the purchase and sale contract?
  • If the seller agreed to pay some or all of your closing costs, are those costs in fact being charged to the seller?
• Call all the utilities for your new home to include: electric, water, gas, oil, telephone, cable, sewer, etc. Best to call within a minimum of 48 hours of the closing day.
• Schedule a reputable moving company at least one month from the closing date. Browse web sites such as www.moving.org for information.

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Call all the utility providers.

Within a minimum of 48 hours you should call all the utility providers for the home you are purchasing. The sooner the better especially if you are a first time home buyer. You may need to have a credit check before your account is established with some of the utility companies. This may take some time. Bellow are some of the most popular utility companies in Massachusetts and New Hampshire:

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Fire Marshal Certificate.

FIRE INSPECTION/CARBON MONOXIDE CERTIFICATE:

As required by Massachusetts Law, the sellers must bring a certificate of compliance regarding the Massachusetts smoke detector and carbon monoxide law. The Certificate may be obtained from the local fire department after an inspection of the dwelling and must be dated within 60 days of the closing date. The local Fire Inspector does the smoke detector inspections

All buildings or structures occupied in whole or in part for residential purposes upon the sale or transfer, shall be equipped by the seller with approved smoke detectors. All residential structures with a fuel or wood burning appliance or adjacent garage must install (per manufacturer instructions) an approved CO detector (battery operated, plug-in with battery backup, hardwired with battery back-up, combination types*), 1 per habitable floor at a minimum, installed so every bedroom has a detector within 10' of its door.

* Must also comply with smoke detector rules - 20' from a bathroom or kitchen if not photoelectric type.

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Condominium 6D Certificate.

When purchasing a condominium unit, by law a 6D certificate must be issued before you can close. The 6D assures that all condo fees (common area fees) and outstanding special assessments have been paid by the current owner/sellers as of the date of closing. We will call the selling agent who will contact the condo association to order a completed 6D Certificate and bring to closing.

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Prepare for moving.

Bellow are some recommended time tables of what to do to prepare for moving day:

3 to 4 weeks before the move:

2 weeks before the move:

• Have a tag/yard sale to get rid of unwanted items, or donate them to charity.
• Contact Post Office for a change of address kit. www.usps.com
• Send out your new address notices to those you still want to contact you.
• Send new addresses to banks, credit card companies, insurance companies etc.
• Start an inventory list of each item moved or boxed for moving so you can later find your items. Make sure you are labeling boxes on two sides and the top include the room they came from. Pack boxes according to new room placement.
• Begin packing items you will not use between now and when you move in. Do not pack items you are still using.
• Finish cleaning out attic, garage and basement.
• Contact all other utility companies (gas, oil, electric, cable, water, sewer, Internet, etc.) to schedule connection/disconnection. Some of these companies may check your credit history.
• Schedule/hire professional carpet cleaners, home cleaners, etc., if necessary.
• Call your lender for updates and status. Has he given you a commitment letter?

1 week before the move:

• Confirm reservation with moving company or truck rental facility.
• Confirm reservation with hotels.
• Pack items you will not need for the next week.
• Defrost freezer, and clean appliances.
• Purchase disposable cups, plates, and plastic utensils.
• Buy soft drinks, snacks and cold cuts. Don't forget pet food.
• Buy a cooler if you do not have one.
• Make sure you have a first aid kit.
• Secure newspaper start/stop.
• Purchase new for the new home: New trash cans, trash bags, basic home tool kit.
• Call closing attorney for instructions for closing location and time, settlement statement (HUD-1) and any further instructions.

1 day before the move:

• Pay all your current bills.
• Keep address/phone numbers handy.
• Print out directions to your new home (your computer should be the last thing you pack up).
• Finish packing.
• Clean current home (broom swept is good enough).
• Break down remaining furniture.
• Purchase ice for the cooler. Put remaining food in the cooler.
• Charge your cell phones, PDAs, shaver, cordless, etc.
• We will have a walk through of your new house to make sure the home is what you expected.
• Call closing attorney for any instructions, closing fees and if any bank checks will be needed.
• Get directions to the closing.
• If you are driving a rental truck find a safe place to park the truck for tomorrow's closing.
• Plan for two hours for the closing.
• You may want to leave your kids with any local relatives or friends for the day.
• Kennel your pet. You don't need the distraction.

Day of the move:

Before the closing:

• Keep addresses/phone numbers handy.
• Keep first aid kit available.
• Keep cooler stocked with fresh ice and fresh food and drinks.
• Supervise the movers for rough handling of your house hold items.
• Make sure the boxes are clearly marked.
• Do a touch up cleaning and vacuuming.
• Conduct a final walk-through of your house you are leaving for any items left behind, be thorough and check all cabinets and drawers.
• Leave keys with the landlord or with new owners of your house that you are leaving.

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