Heather Morris Realtor Expert for Cedar Rapids, Marion, Hiawatha & Robins

Pending Does Not Mean Sold

          In today’s changing market, sale pending does not mean sold.  Most real estate purchase contracts have contingency (escape) clauses for the buyer and seller to perform specific tasks.  Whether you are the seller or buyer of the purchase contract, there are specific dates for the contingencies to be released.  These dates and results determine if you will close your sale.

          All contingency escape clauses are important. The financing commitment is one of the most crucial to be released.  Federal lending regulations have changed buyer and house qualifications.  Credit score, tax returns, job time, and down payment need to be verified in writing.  If the buyer qualifies, the house requirements are then determined by an appraiser.  The appraiser determines the bank’s risk for default by comparing the subject house to the three closed similar house sale prices.  The house also needs to be in good repair to pass the appraisal conditions. 

          Inspection contingencies are the next step toward closing.  Within 10 days from the accepted offer the buyer may perform inspections of concern with the house.  They may included radon, termite, septic, well, home inspection, lead paint, and mold inspections.  Any concerns will need to be negotiated between the buyer and seller.

          Transferring a clear title is usually the last contingency to be released.  Extension of the abstract and review of any unpaid liens or encumbrances will need to be released prior to recording the warranty deed.  Liens may be a mortgage, tax liens, or unpaid judgments.  Any title objections will halt the sale. 

          Both buyer and seller have a commitment toward following the purchase contract contingency deadlines.  Having the legal releases from the sale may effect whether the sale moves from pending to sold.  The earnest money holds the buyer to the commitment to close while moving through the sales contract.  To ensure your houses closes, hire a full time professional Realtor or legal representative to handle one of the most important financial agreements of your life. 

Heather Morris CRS, GRI, ABR, CLHMS

Broker Associate Skogman Realty

          Two new federal lending regulations effective July 30, 2009 will tighten the belts on banks, brokers, and credit unions. In an attempt to protect home buyers from predatory lending practices, the HERA and HOEPA laws were passed.  HERA, the Housing and Economic Recovery Act and HOEPA, the Home Ownership and Equity Protection Act will provide more information to home buyers prior to signing a mortgage.

          When interviewing lenders for a mortgage, have them provide a GFE, Good Faith Estimate and a TIL, Truth in Lending Disclosure.  The Good Faith breaks down the out of pocket cost and monthly payment for the home.  The Truth in Lending Disclosure provides the actual cost of borrowing the money over the term.  The Final Truth in Lending Disclosure and costs must be given to home buyers 4 business days before closing or sooner.  The APR, annual percentage rate will now requires the lender to disclose their fees and all third party costs placed on the closing statement.

          The appraisal process has also been modified to protect you.  The lender you choose will not have knowledge to who will be selected to verify the value of your house purchase.  The appraiser will review the last six months of similar closed properties to establish value.  Any appraisal required repairs must be negotiated between buyer and seller, work completed, and re-inspected prior to closing. 

          The new lending regulations are designed to help you avoid surprises at the closing table.  Comparing lenders payment options with the Good Faith Estimate, determining the true cost of money with the Truth in Lending Disclosure, and tightening the appraisal process to determine a more accurate value, and providing the final numbers before closing all make you a smart home buyer.  The state of Iowa is a leader in consumer protection.  Originating your new mortgage in Iowa through a local lender you trust is another smart buyer decision.