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Real Estate News

August 13, 2012

The Anatomy of a Real Estate Purchase


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Most buyers will put a certain amount of money down toward the purchase price. The balance will come as a loan from the bank. But the bank isn't going to hand over that money without doing its due diligence. The appraisal is the financial institution's way of making sure the contract price is the right price. The bank sends out a third-party appraiser, which the buyer pays for, to confirm that the contract price is in line with the neighborhood's comparable sales. If it's not, the bank can deny the loan or change the terms.


A home is a huge purchase - likely the biggest of your lifetime. And so, as part of the real estate contract, you have the right to a property inspection.

The most common is a "general" property inspection. The inspector will check the home from the foundation to the roof and investigate all major systems and components. You, as the buyer, should follow alongside the inspector to learn more about the property. You'll want to know about the components (such as the water heater) and have a plan in place for maintenance.

As a result of the general property inspection, the inspector may suggest having a specialist come out. This could be a roofer, electrician, HVAC specialist or even an engineer. Listen to the inspector and have any follow-up inspections as necessary. This is your one chance to approve the property from top to bottom. If issues arise, you might go back to the seller and negotiate some sort of fix or credit. If something major arises and it's just not what you signed up for, you can exit the contract via your inspection contingency.

Loan approval or commitment

In addition to making certain the property appraises at no less than the contract price, the bank will want to fully approve your credit, debt and income history. It'll also want to approve the property's preliminary title report to make sure there aren't any liens recorded against the property that might affect its value. The bank can take up to a month to do its full review, which should result in a loan commitment or full loan approval. Once that's completed to the bank's satisfaction, you're guaranteed a loan, and you're one step closer to closing.

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