House Hunting Part 8 – The Option Period
The negotiations went on for what seems like forever when the day everyone waited for finally arrives. The hunter gets the call from his house-hunting guide the offer is accepted. Soon the Buyer has a copy of the signed and executed contract, victory! The hunt is over…yes, but now the real work begins, time to reel in the catch. The earnest money and option fee is collected, earnest money goes to the Title Company, and the option money goes to the Seller. The typical stretch to close a contract is twenty days; this stage varies depending on many things such as time needed by Lender or the Seller’s requirements. The Lender, Title Company and Buyer have quite a bit of work to do before the deal is closed. The first thing that occurs is the Buyer’s option period begins immediately after the executed contract and lasts usually ten days. The house-hunter paid a nominal fee for this option and it allows the Buyer to terminate the contract for any reason without losing the Buyer’s earnest money. This provides the house-hunter with ample time to hire home and termite inspectors to find any damage not readily obvious. Inspectors are meticulous, going over nearly every reachable item, which is part of the home. Sometimes it is wise for the Buyer to hire specialty inspectors; if you suspect foundation problems, a structural engineer might be required or if buying an older home an electrical engineer will make the perspective owner comfortable about the wiring.
When the inspection is over, he/she issues a report. The report contains each deficiency in the home and used to negotiate repairs. Health and safety are the first concern and the Seller should be willing to make or compensate for the required renovations, if not the Buyer should walk. Other items such as cosmetic or code upgrades are also negotiable however; each item the Seller pays for will lessen the Seller’s final sales amount. Code upgrade items can be hard to request because they could have been within code when the home was build but are now not, and if the item is working as intended then the Seller may not agree. Never hurts to ask. Depending on how much the Buyer’s Realtor beat down the sale’s price will affect the amount of negotiation room the Seller has for repairs. The option period gives the Buyer leverage during this stage because the Seller knows the Buyer can walk away from the deal with no penalty.
This is also the moment for the Buyer to contact their lender to start the loan process. Talk to your Lender, present them the signed and executed contract, and begin collecting the necessary documentation. The Lender will ask for two consecutive years of income tax returns, sometimes three depending on the situation. They will also ask for proof of income, W2 forms, or pay stubs will work. Bank statements for the past 30-90 days for each account, including savings and brokerage accounts is required. The loan officer will also request proof of paying your rent on time for a year as well as credit account information, a paper trail for money gifted, address history, and divorce decrees. If the Buyer is self-employed then add in copies of checks from clients, credit card statements and a profit and loss statement for the current year. It is much better to get this information to your Lender fast to close your home on the scheduled closing date.
Yes, the house-hunter’s work is far from done when the home goes under contract. Your Realtor can help you with these steps. See ya down the road. http://www.djlyons-realtor.com