This is Michael Anthony O’Connor with Community Home Funding and in this video I am going to share the details of writing a purchase contract.

If you are getting ready to make an offer on a house, you want to stop and think about a few things before you put pen to paper. Especially in a hot market. You want to look at all the costs associated with the home, not just the purchase price. Older homes may need things like a new roof or furnace in the future and property taxes are important to consider as well. If you are in a flood zone, you may need flood insurance and you need to know how much your homeowners association dues are. Take the time to assess the overall cost and condition of the property and don’t be afraid to ask for a few things in writing a purchase contract. Let’s take a look at some things you should consider before penning that contract, beginning with the millage rate.

Before you commit to a property, find out the millage rate used by the property tax assessor to determine an expectation of the future property tax bill. This is especially important if you are buying new construction with no prior history of property taxes. To determine the amount allocated for monthly property taxes during the qualification process, some lenders will use the current owner’s property tax bill, while other lenders will use an estimation for the upcoming year’s tax bill by multiplying the county’s millage rate by the sales price to determine the amount allocated for monthly property taxes. You can check your local assessor or municipality’s website, or call the tax office for a more exact figure for your home. You can also search by state, county, and ZIP code on publicrecords.netronline.com.

If you are concerned about the energy efficiency of the home you may want to ask the homeowner for copies of utility bills for the preceding twelve months to get a complete picture of annual expected costs. While it is not required that the seller share this information with you, it may allow for better monthly budgeting and peace of mind of moving forward with your offer, knowing that you can afford all the additional monthly housing expenses.

As a part of the inspection period allowed by your purchase contract, be sure to obtain a four-point inspection of the property. A four-point inspection includes assessment on HVAC including heating, ventilation and air-conditioning as well as electrical wiring, panels, plumbing connections, fixtures and roof. Insurance companies have become

increasingly reluctant to issue policies on homes twenty-five years or older. Their common concern is that there may be conditions in an older home that could become a liability to them. For example, a home with a roof nearing the end of its life may fail while under the policy and the homeowner may seek reimbursement for damages to the home or its contents. Similar concerns may include the HVAC, electrical or plumbing systems. If these items are in poor condition, in need of being updated or replaced or were improperly installed, they may fail and cause fire or water damage. Getting an inspection will put yours and their minds at ease. You can also include a contingency in your purchase contract that will require the seller to pay for any items that arise during the inspection.

Additional details to pay attention to when writing a purchase contract include things like:

1. Contract closing date.

Be sure to identify the contract closing date at loan application and ensure your lender has the capacity to meet your closing date.

2. Settlement agent.

If the purchase contract lists a settlement agent, confirm with your lender that you will be able to use that agent at closing.

3. Financing contingency date.

Check with your lender to make sure that they have the capacity to issue a loan commitment within the time frame specified in the agreement. Find out things like what is their appraisal and underwriting turn times.

4. Listing and selling realtor information.

Have your selling agent work with the listing agent to provide support in obtaining any property related information such as the contact information for granting and scheduling appraiser access, the contact information for the homeowners association (HOA) and master certification of insurance for condominiums and townhomes.

5. Closing cost contributions.

Find out if closing cost contributions are allowable with your loan program and if so, to what extent and what can be included. This is important to know upfront.

Making sure you know the condition of the property as verified by an inspector as well as all costs associated with the home, will help you to feel more confident in making your offer. Being able to close on time and meet the closing date of your agreement is critical, so knowing realistic time frames and getting confirmation will help to make sure that your offer is accepted and met, and you have a smooth transaction.

Thanks for watching.