Unified Title | I Am A Home Buyer

I AM A HOME BUYER… WHAT DO I NEED TO KNOW? (Continued)

Your insurance agent, inspector, surveyor and attorney…

Others will assist you during the home buying process. Their roles may be ancillary to that of the realtor, lender, builder and the title company, but their contributions are no less important. You will want to insure your homeagainst damage or destruction (e.g., by fire, wind or hail). If you already have an insurance agent for other matters, such as auto insurance, you may choose to work with her. If not, your realtor can make a referral.

If you are borrowing money to purchase your home, your lender will require that you maintain hazard insurance in an amount at least equal to your loan. If your home is located in a flood zone, you will need (and want) to purchase flood insurance.

You may write an offer on a home that is marketed with a home warranty. A home warranty is a separate insurance policy, usually offered as an incentive by a seller, and generally covering fixtures and appliances for a limited period of time (often the first year you own the home). Such a policy gives you peace of mind that if the furnace fails during your first winter, it will be repaired or replaced at little or no personal expense.

Most likely, you will work with a home inspector and perhaps a surveyor after you are under contract. Their roles are discussed below. Some home buyers retain the services of an attorney. Her expertise relates to review of all the paperwork that is a part of every real estate transaction.

DUE DILIGENCE AND OTHER CONTRACT CONTINGENCIES

Due Diligence (dü di-lə-jən(t)s) n. 1. With regard to real estate, a process of information gathering and review. 2. A rigorous investigation of all aspects of a property to evaluate its suitability for the intended use.

Buying a home is a process. First you choose a general location, establish a budget, and put together a list of requirements and amenities. Next, you preview properties that fit your budget and otherwise meet your needs. Then, you write a contract on the one that best fits your criteria. At that point, the process begins in earnest – the signing of a contract marks the beginning of your due diligence period.

From a buyer’s perspective, the Colorado Real Estate Commission standard form contractcan be viewed as a series of contingencies that provide a framework for due diligence. Those contingencies fall into two categories: (i) the physical condition of the property; (ii) rights and duties associated with the property.

Not every buyer will utilize the CREC contract. However, most real estate purchase and sale contracts (e.g., an attorney-prepared form, or a builder form) will mirror the CREC form in broadest terms – at least as far as creating a series of due diligence contingencies. CLICK HERE to view the CREC contract.

Physical condition contingencies involve your assessment of the home and the land on which it is situate. To assist with your assessment, you will review the seller’s property disclosure form.In addition, you may elect to hire a general inspector and/or a surveyor.

The CREC has created a standardized disclosure form that must be completed by any and every seller who retains a licensed realtor as his or her listing agent. As part of an inspection of the property, buyers should review the form carefully as it may point to issues that warrant further investigation.

A general inspector will go through the entire home – interior and exterior, room by room – and check the condition of the structure and fixtures (e.g., the foundation, roof, windows, doors, heating, plumbing and electrical) and the personal property (e.g., the refrigerator, stove and microwave). She will provide you with a detailed report of her findings. Occasionally, an inspector will note items that warrant further evaluation by a specialist.For example, warped or buckling roof shingles may give rise to a suggestion that you have the roof further evaluated, or perhaps certified, by a professional roofer.

Other, more specialized evaluations related to the physical condition of a home include environmental assessments (e.g., a radon test), soil assessments (generally for new construction) or engineering assessments (e.g., to evaluate structural integrity).

Your assessment of the physical condition of the property may include a survey.A surveyor will prepare a drawing that shows you the location of improvements to the property (e.g. the house, out-buildings, decks, fences) relative to boundary lines, the location of easements benefiting or burdening the property and so on.

There are a variety of survey types (e.g., boundary surveys, topographic maps). The most common type for a home purchase is an Improvement Location Certificate (“ILC”). Your title company or lender may require an ILC – particularly in cases of new construction, if you are buying a large, unplatted property, or if you are buying in a neighborhood where survey matters are a common concern. The ILC must be delivered prior to closing in order to insure matters related to lot lines, encroachments and the like. The CREC contract includes a section assigning responsibility for delivery of a survey, specifying the type and allocating responsibility for its cost.