Last time we talked about buying your home we were making an offer. The fine tuning of getting an accepted offer is strategy and that may differ for each property. Today we are assuming you are now under contract and moving on to the next steps.
Here in Northern Illinois, Attorneys are engaged at this point to take over the transaction’s legal aspects and get you to closing. Realtors and Attorneys work together with the buyers and sellers to move through all the aspects of your contract. If you are financing with a mortgage, the loan officers, processors and money lenders are involved too. That brings up the most recent change in lending practices which I’ll refer to as TILA-RESPA. That stands for Truth in Lending Act and Real Estate Settlement Procedures Act.
There have been a lot of changes in the lending procedures in the years since the era of real estate values plummeting, mortgages defaulting, short sales increasing and foreclosures being common place. It was deemed to need an overhaul and it got one. Do any of us in the business think it’s any better? Maybe from the standpoint of not lending to anyone who could walk, but the rest is debated every day!
- Changed – Yes.
- Better – More confusing!
So here’s the next change.
Supposedly from August 1st 2015 the newly created Consumer Protection Act will instigate these new rules, but there has been some indication they are not ready and it will be postponed. Who cares right? Well as a buyer you will and so will I.
Why? The simplest version is this. If you are getting a mortgage, the lending side of things will take longer, there’s more paper for you to understand, and the closings will slow down. A 30 day closing is going to be impossible, 45 days will be pushing it, 60 days is more like it.
Borrowers will be served with more notices. You’ll be getting a Loan Estimate and before closing a Closing Disclosure. If there are changes that result in differences outside of the mandated allowances, these notices must be served again so you understand what you are paying for and how much it will cost.
OK enough about that. I may write a longer version soon, I may not, it’s pretty boring stuff and most borrowers just want to buy the house!
Why did I mentioned TILA-RESPA? Actually not to make you aware of the existence of the changes but more that it may affect some of your contingency periods, starting with the Attorney review period, which is the main subject of this article. Let’s dive into that. Once you have a signed contract the clock starts ticking. Our contract have things that need to be completed by certain times. One of the most important for both buyers and sellers is the Attorney review period. The contract allows 5 business days for this to be complete. It runs concurrently with the home inspection period, also 5 business days. Here’s how it plays out.
- Your contract paperwork is sent to your Attorney for review, so the sooner you appoint an Attorney the better.
- You arrange for your general home inspection, a mold inspection, lead based paint, any other inspections you want.
- You advise your Attorney what if any, remedies you require as a result of these inspections.
- Before day 5 is complete, your Attorney will send a letter to the sellers Attorney requesting your remedies and any modifications the Attorney requires to the contract.
The other side then has another 5 business days to discuss in their camp and respond.
Oh if it were as simple and as fast, the reality is this can become protracted.
For the purposes of TILA-RESPA let’s look at the new issue! Under these new rules there are certain procedures that HAVE to occur relative your new loan. Should the Attorneys agree to a change in your contract that affects your loan, a new Loan Estimate may be required and this will slow down the review period considerably.
Example: Let’s say your home inspection has revealed an expensive item to be repaired. Rather than the seller taking care of it, you both agree to a reduced purchase price. This may well affect your Loan Estimate. A new one is now needed. You cannot waive it, it’s required by law.
Tip: Your Attorney may have to cancel your deal once you have viewed the new Loan Estimate costs. There is a finance contingency which is further down the line, that’s not what this is, not at all. I have no doubt that some loan officers, agents, borrowers are all going to get confused by all these dates etc and I don’t want to confuse you all. At the end of the day you need competent Counsel, Realtors and Loan Officers. Use Local Attorneys, Local Realtors and IMHO most importantly of all use Local Loan Officers.
Attorneys, Reviews, Inspections
OK enough of the new TILA-RESPA rules, they are enough to make as all shudder. The reality is they will affect the lenders and closing officers more than the buyers, sellers, Attorneys and agents, but we all need to understand things will slow down. Let’s get back to the Attorneys, Reviews, Inspections part of this post.
- Attorney reviews you now know are 5 days to ask and 5 days to respond. Your Attorney and the sellers Attorney can request modifications to a contract with one exception. Price. That’s been negotiated, agree upon and signed. This is not a time for renegotiating the deal. Most changes are of a legal nature and common.
- You the buyer can have whatever inspections you desire before deciding to either proceed or cancel the deal. A general home inspection is the most common and highly recommended. Don’t ask Uncle Jim, hire a licensed inspector. You may then request remedies or credits. With Uncle Jim, you cannot. Radon testing is one I highly recommend, we can discuss the why together so you fully understand. Lead based paint did not exist after 1978 but we have many homes in Barrington older than that; they may have Lead Based Paint. The danger is Carcinogenic, especially because as it ages it flakes, and young kids love to put things in their mouths. You might also consider a structural survey, Termite infestation inspection, (although rare in our climate they do exist here), Mold testing and anything else you want that is related to the property.
You and I will discuss all of these when you find a property to buy but it is ultimately your decision what you have. Your purchase agreement allows and permits you to have any inspection you deem necessary to accept the property condition. Now it’s not the time to be silly and pull out because a few items like switch face plates need replacing. We are looking for things your eyes and knowledge can not establish. For example, Radon gases are unseen and not detectable by our noses. A water heater at the end of it’s life. A roof that needs replacing now. Those kind of issues.
As you see a buyer is under the gun to get a lot of things accomplished in the first days after the contract is signed and delivered. Contact a top Barrington Realtor who also has connections with the top loan and attorney companies locally as well. Call Corinne 847-363-3686.