We know that buying a home can be a confusing process, especially if this is your first time going through the process or if it has been many years since your last real estate transaction. We've explained a few common terms that a buyer might hear during a real estate transaction, especially in the Charlottesville area, below.
EARNEST MONEY DEPOSIT
A deposit made by the prospective purchaser to show that they are serious about buying the property. While you are not legally required to make an earnest money deposit, it is customary in & around the Charlottesville area. The deposit amount, which is not a set amount, is typically due within 5 days of ratification. The purchaser's brokerage typically holds the deposit until settlement, at which point the funds are released to the purchaser's closing agent who then contributes that amount towards the sale.
If for some reason the transaction does not reach a successful closing, the seller may have the right to go after the deposit (and potentially more in some cases), but it should not be assumed that seller has an immediate right to the money, as is often the misconception.
A home inspection (or most any inspection) of the property typically occurs after the purchaser and seller have agreed to all terms of the contract. A home inspector evaluates the structural and mechanical components of the property, and provides a written report including concerns and recommendations. Our agents can help our purchasers to select and schedule the home inspection within the allotted time per the contract. Typically home inspections can take anywhere from 2-4 hours and the purchasers are encouraged to attend the inspection while sellers are asked to leave the property. The reports are usually available the same day or following day and the fees are due at the time of the inspection.
These inspections typically do not include well, septic, termite, specialty items (pools, hot tubs, etc.) or hazardous materials (radon, lead paint, asbestos, mold, etc.), but the purchaser has the right to order separate inspections as allowed by the terms of the contract. In Virginia, with only a few exceptions, the seller is required to provide the purchaser with a termite (pest) inspection/report and well report if applicable.
FINANCING & APPRAISAL
"Formal" (not just speaking with your lender) loan application is due within 5 days of all parties signing the contract. Although you may have already been pre-qualified with your lender, you will still need to provide documentation to get the loan process started. At this point, you will likely be asked to pay for the appraisal of the property. An appraisal is an opinion of value that is completed by a professional appraiser who visits and inspects the size, condition, function and quality of the home. It is ordered by the lender within a few days of the date you apply for your loan.
We recommend speaking with a lender and getting pre-approved for a mortgage before you begin your home search so you know exactly what you will be comfortable spending on a mortgage payment and can quickly make an offer when you are ready. Our team is always glad to recommend lenders that may be able to help you with your transaction.
The closing agent can be an attorney or professional settlement expert who facilitates the closing. The purchaser has a right to select their own closing agent in Virginia and the closing agent will represent the purchaser in reviewing all documents, coordinating closing with the lender and Seller's Attorney, Title and Hazard Insurance Companies, ordering the survey, and recording the sale at the Clerk's office. A purchaser should anticipate very little contact with the closing agent until a couple of weeks prior to closing. In Charlottesville, the closing agent can be an attorney or settlement company. Both handle the closing process the same and have similar fees, however; an attorney can give legal advice where a settlement company cannot.
A policy a homeowner (or seller) pays for that provides for discounted repair and replacement service on a home's major systems or components. Coverage varies by policy and may include the furnace, HVAC system, plumbing, and electrical systems.
If the seller does not have a physical survey to provide, the purchaser may want to consider a survey before closing. A lender may even require one as part of loan or title requirements. An attorney or title company should talk about this more in depth and take care of ordering.
If, of course, you have any questions regarding other terms in the contract or through the transaction, we are always happy to provide explanations.
We will only recommend products or services that we and/or our colleagues at Montague, Miller & Co. Realtors believe are genuinely helpful. We do not accept payment or referral fees for recommendations. Our recommendations are only suggestions of third-party products or services. These recommendations do not come with a guarantee or warranty of any kind.
If you have questions about what any of these terms mean or are looking for recommendations on someone to help you with some of these tasks, our agents are always glad to help. Call us at 434-214-6121 to speak with one of our agents about your questions.