July 13, 2016 – Military families can avoid losing due diligence and earnest monies by understanding the four primary risks involved with the home purchase process:
1) Earnest money and due diligence deposits (cash paid directly to the seller from the buyer as well as cash held in escrow);
2) Time wasted (opportunity cost);
3) actual costs to inspect and appraise the property; and:
4) poor decisions on the real value of the property. Anthony Powell, Vice President of Operations of AAFMAA Mortgage Services (AMS), a 25 year veteran of the mortgage industry and a state-licensed loan officer, explains how to avoid the above four risks.
In North Carolina, a buyer beware state like many other states, military home buyers bear the brunt of any mistakes made during the home buying process. The home buyer’s vendors and entities hired rarely are responsible for mistakes, and therefore the consumer must make sure the vendors hired are licensed, professional, and educated. Military families must research vendors selected in the home buying process to protect earnest money and due diligence deposits.
The process of purchasing a home involves the hiring of a Realtor. Before the military home buyer signs a contract with a Realtor, speak with AAFMAA Mortgage Services regarding the above four risks. Some Realtors have controlled business arrangements (CBA). CBAs are legal documents that are filed with HUD explaining certain business relationships; which are supposed to be explained through a disclosure at time of closing. A CBA may affect the service received and the costs charged to the military family. An AMS state-licensed loan officer can explain the impact such arrangements may have, before signing a contract with a Realtor.
When a home buyer makes an offer due diligence money is given to the seller from the buyer. The seller cashes the check from the buyer and keeps it, as payment for entering into the home purchase contract with the buyer (regardless of outcome). Two to three weeks after entering the home purchase contract the seller “vests” in the buyer’s earnest money check and may keep this money as well. Earnest money, which can be as high as 1% of the purchase price, and due diligence monies return to the home buyer at time of closing. If the transaction falls through, the seller may keep the buyer’s due diligence and earnest monies. On a $200,000 home this can equate to $2,000.
Be aware of costs involved in the home purchase process simply to review the purchase of a home. A typical property appraisal costs $450 to $500 (home sizes greater than 5,000 square feet cost more to appraise). An inspection costs $350 to $400, plus other minor costs (for example, radon tests may cost less than $100). If the first home evaluated falls through (the military family doesn’t acquire the home), the buyer may incur these costs a second time.
Finally the military buyer will encounter general home risks, which includes maintenance, price decline and upkeep. Military home buyers can stay ahead of the complexities involved in purchasing a home and reduce stress through education and information. AMS’ educated and state-licensed loan experts can help the military family before encountering these pitfalls.
As discussed previously, CBAs may be the buyer’s first indication of an underlying risk (cash or other payments may influence the CBA participant). Military home buyers should always ask the Realtor or mortgage company if a CBA exists. Above all, make sure the military home buyer hires an experienced team of professionals.
Anthony Powell, licensed loan officer (78385) and Vice President of Operations of AAFMAA Mortgage Services, proudly represents military families interested in purchasing or refinancing residences. The seasoned professionals at AMS take the military mortgage buyer’s concerns seriously. AMS competes on rates and service and takes pride in continuing its tradition of zero BBB complaints to date. Get the most value out of a home refinance or purchase by working with state-licensed mortgage professionals with significant experience and education.
AAFMAA Mortgage Services. 844-422-3622. http://www.aafmaa.com/mortgage. Physical location 639 Executive Place, Suite 203, Fayetteville North Carolina 28305. NMLS 1423968. MLO 78385.