11b. After winning the bid: Weeks 2 through 6
11c. Important Don't's
Read the full Chapter Eleven in one page
After submitting a bid, buyers often feel anxious while waiting to find out if they won the bid. Buyers find it exciting to find out they have won the bid on the home. While celebration is in order, plenty more must be done before the settlement of the property is completed. As soon as the bid is signed and accepted, the countdown begins towards settlement. After signing the contract, buyers have 45 days to settle the property. To ensure a successful transaction, certain events must take place within that 45 days allowed. Keep in mind that requiring extra time to settle the property will result in penalties, which buyers should avoid.
To help buyers ensure a successful transaction, the following steps can be followed after winning the bid to ensure everything is taken care of on time.
Within the first seven days after the bid is accepted and signed, buyers should submit a formal mortgage application. Submitting complete documentation is essential too. Buyers may ask lenders for a checklist of documentation needed. Once buyers know what lenders need, delivering that information quickly is essential to ensure that everything is approved in a timely manner.
During this time, buyers must also provide to the lender a copy of the HUD agreement of sale sent off to HUD. Once HUD returns an executed agreement of sale, provide the lender with a copy of it as well.
Start the interview and selection process for hiring a home inspector at this time. Certain inspections will be important at this point. Some inspectors provide home inspection packages that offer several different services. Once an inspector is chosen, the services should be conducted within 15 days after HUD signed the contract. Those financing with the FHA may be able to include the cost of home inspections in the mortgage amount. Some of the important inspections that may need done include:
- General Home Inspection
- Well Inspection
- Roof Certification
- Radon Inspection
- Mold and Air Quality Testing
- Septic Inspection
- Lead Paint Testing
- Municipal Inspection and Code Report
- Termite Inspection
- Structural Certification
Title work will need to be done as well and should be ordered through a title attorney or title company.
For buyers using rehabilitation financing, the first week is the perfect time to start getting estimates from contractors on any repairs that must be done.
Buyers should be present for any home inspections. Keep in mind that the real estate agent must be present to provide the inspector with access to the property.
Check with the lender to ensure that the loan file is complete. For conventional financing, an appraisal should be ordered. However, FHA financing will not require another appraisal as long as the appraisal has been done in the past 150 days or less.
If the inspections show significant damage to the home, buyers must decide whether to proceed with the sale. HUD homes will not be reduced in price and repairs will not be completed. In the event that serious property deficiencies are revealed, buyers may have their earnest money returned to them.
At this point, take time to check with the real estate agent and the lender to ensure everything is going as planned. Everyone should know have the signed HUD contract.
Talk with the title company, real estate agent and lender to find out how everything is progressing. If the lender needs extra time for the loan processing, this is the point where a Contract Extension should be filed. These extensions must be filed 10 days before the contract expiration date, so buyers should never leave them later than the fourth week.
This week the time for settlement should be scheduled.
Prior to settling the property, a walk-through inspection should be conducted. Try to take care of this on the same day as the property settlement. Buyers may want to bring along padlocks for the home to replace the HUD padlocks on the home. Real estate agents may remove the HUD padlocks. Remember, various real estate agents may have HUD keys that fit the padlocks on the home. To avoid unauthorized entry, replacing those padlocks with new ones is important.
- DON’T ask for a key to HUD homes before closing on the home
- DON’T ever enter the home without the presence of the real estate agent
- DON’T repair anything before closing on the home
- DON’T keep any personal belongings in HUD homes before closing
- DON’T move into the home before closing is complete