Joe Gallo
Joe Gallo

Buyer's Guide

Buyer's Guide - If you are a first time buyer or you have not been through the home buying process in many years, this section is a good introduction or refresher. The guide will take you from the start of looking for a home to the closing process.

Buying a home is one of the biggest investments you may ever make financially. While it is a major commitment and responsibility, it can also be a thrilling experience and a very exciting time in your life. With that said, we would like to congratulate you on your decision to buy a new home! It is always a privilege to hand the homebuyers the keys to their new home and to be there for that first moment of celebrating ownership!

Buying a new home can sometimes seem like a daunting process, but we want to assure you that our goal is to make that process as easy, carefree, and rewarding as possible.

This home buying guide was put together with that focus in mind. It will inform you on what to expect throughout the home buying process, and it will also tell you what others involved in the transaction expect from you as the buyer. You'll find many helpful suggestions to help you make informed decisions, as an educated buyer, at each step of the purchasing process.

You may find this booklet most helpful if you view it as a "tool" you can use every step of the way. Carry it with you so that it is quickly at your fingertips should you need to refer to something. I also encourage my clients to use the blank pages at the back of this booklet - or to maintain a separate notebook - for jotting down specific questions and notations as they come up. And, carry your notebook to each home that you view to make notes that you can refer to again and again.

Please review all of the information presented here carefully, and don't be afraid to ask questions about anything you don't understand. Although the information is covered as thoroughly as possible, every transaction is unique, and you may find that you have concerns or questions beyond the information presented in this booklet. That's why we're here - to assist you at each state of the transaction, to answer your questions, and to help you find the home you desire!

As you embark on your mission of finding the "perfect home," remember that I am with you every step of the way - I'm on your team!

Definitions of Real Estate Brokerage Relationships

Seller's Agent- A seller's agent works solely on behalf of the seller and owes duties to the seller which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the seller. The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to potential buyers or tenants all adverse material facts about the property actually known by the broker. A separate written listing agreement is required which sets forth the duties and obligations of the parties.

Buyer's Agent - A buyer's agent works solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to potential sellers all adverse material facts concerning the buyer's financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyer agency agreement is required which sets forth the duties and obligations of the parties.

Transaction Broker - A transaction broker assists the buyer or seller or both throughout a real estate transaction with communication, advice, negotiation, contracting and closing without being an agent or advocate for any of the parities. The parties to a transaction are not legally responsible for the actions of a transaction broker and a transaction broker does not owe those parties the duties of an agent. However, a transaction broker does owe the parties a number of statutory obligations and responsibilities, including using reasonable skill and care in the performance of any oral or written agreement. A transaction broker must also make the same disclosures as agents about adverse material facts concerning a property or a buyer's financial ability to perform the terms of a transaction and whether the buyer intends to occupy the property. No written agreement is required.

Buyer Agency

In the past, when you worked with an agent to find a home, the agent almost always was employed by the seller. That meant that while you and the agent may have worked closely together, he or she had a fiduciary responsibility to always act in the best interest of the seller. Now you can put the agent squarely and exclusively in your corner.

I can offer you the opportunity to have your own Buyer's Agent. The concept is relatively new, extremely popular, and could save you thousands of dollars. If you wish, I would be pleased to serve in that capacity for you. It would mean that I would enter into an agreement in which I become your agent in your quest for finding a home. I would be responsible only to you - not the seller. Under this relationship, I can and will be able to do all of the things listed below under Buyer Agent which, for legal and other reasons, I cannot otherwise do.

Services and Duties Provided Seller Agent Buyer Agent

  • Arrange property showings
  • Assist with financing
  • Provide property data
  • Explain forms and agreements
  • Monitor closing
  • Prepare a property value study
  • Provide access to the entire market, both listed and unlisted
  • Promote and protect buyer's best interest; advise the buyer
  • Negotiate the best price and terms for you
  • Point out reasons not to buy
  • Assist in the offer with buyer's best interest in mind
  • Keep buyer's bargaining position confidential
  • Research property for liens and original purchase price
  • Provide anonymity if desired
  • Put the buyer's interest first during the entire buying process

This comparison clearly demonstrates the value of the dedicated Buyer Agent representing the buyer, over the Seller Agent, who represents the seller only.

Home Financing

Finances First

Your initial impression may be that I have incorrectly placed the financing segment first. Actually, I've chosen to discuss finances at the beginning for good reason: The buying experience usually goes smoother if financing has already been secured before you begin searching for your home.

Most homebuyers find that they need to finance at least part of their home purchase. So, in many respects, owning your dream home hinges on your ability to get the financing you need, in the price range you can afford.

The very first step is ensuring that you are in an optimum buying position. This entails a careful review of your financial situation. Think of it as a means of pre-qualifying yourself.

Your Credit Report

A very basic - and yet extremely important - factor in your ability to get a mortgage is your credit rating. It is not a secret that the best interest rates, as well as the most flexible loan terms, are available only to those with the strongest credit scores. Your credit history is one of the principal measures used by a lender to determine your interest rate. Not only will your monthly mortgage payment depend on your interest rate, but the amount you qualify to borrow will be affected by it as well. A higher interest rate translates into a higher payment and may reduce the loan amount for which you can qualify.

You should be aware of what information the credit reporting agencies have regarding your financial situation by obtaining and reviewing copies of your credit report from the three main credit-reporting agencies. (Even if you are not planning to purchase a home, you may want to consider obtaining and reviewing your credit reports on an annual basis to make sure the information reported is accurate, and to catch any discrepancies that could damage your credit.) By making this task of the initial steps in your house-hunting venture, you may save yourself from unnecessary delays later in the purchasing process.

Credit Reporting Agencies

There are three major credit-reporting agencies: Equifax, Experian (formerly TRW), and Trans Union.

Rather than contacting only one of them, I strongly suggest that you request a credit report from all three. Since not all creditors report to all three agencies, it's not uncommon to find different information reported on each one. However, your goal in ordering all three credit reports is to make sure that all of the information stated on each report is accurate and correct.

You can request your credit report from these companies for a nominal fee. An annual report is free upon request for residents of Colorado, Georgia, Massachusetts, Maryland, New Jersey, and Vermont. Additionally, you may obtain a free personal credit report if you have been denied credit within the past 60 days.

Here is how to contact the credit reporting agencies:

Equifax Information Service Center
P.O. Box 740241
Atlanta, GA 30374-0241 1-800-997-2493.
You can also order your credit report from a secure section of the Equifax website at

Experian National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104 1-888-397-3742
You can print a credit report order form at

Trans Union
Trans Union Corporation, Consumer Disclosure Center
P.O. Box 390
Springfield, PA 19064-0390 1-800-888-4213
You can order a credit report online from Trans Union's website at

How much home can you buy?

Although it is early on in your plans to purchase, it is likely that you have wondered how much home you will be able to buy. The best way to determine your purchasing power is to speak with a lender. However, there are several rules of thumb that will give you an approximate idea of what you will be able to spend.

The first rule states that you can afford a home with a price tag that is 2.5 times your annual salary. For example, if your annual salary is $50,000, applying this formula would mean that you can probably shop for a house with a price up to $125,000.

The second rule says that you should be able to use 30% of your gross monthly income (before taxes and deductions) for a house payment. Assuming, for example, that your gross monthly income is $4,000 and using this formula as a guide, you may be able to comfortably afford a monthly payment of $1,200.

Upfront Fees and Expenses

Most homebuyers understand the concept of the down payment, but that is not the only upfront expense when purchasing a home. In addition to the down payment, money must be allotted for costs associated with the loan, which can range from 3-7% depending upon your lender, and closing costs. As the name implies, closing costs are paid at the time you close the transaction, otherwise known as settlement.

Lending Options

Once all of these costs are added up, you may become discouraged, thinking that you don't have the necessary funds to purchase the home you want. However, chances are good that there are other possible sources of funds available that you've not yet considered.

In addition to savings accounts and the proceeds from a home you already own, there are other less obvious sources of funding as well. These include:

  • Home Equity Loan- Your parents or other family members may have a considerable amount of equity built up in their own home that they were planning to borrow against in order to gift money to you for your upcoming home purchase.
  • Life Insurance - If you have a cash value policy, it may have accumulated an adequate amount of"available"funds from which you can borrow. More often than not, the interest rates on this type of loan are very favorable.
  • Stocks and Bonds - If you do not wish to sell your portfolio or feel this is an inappropriate market in which to do so, then perhaps you can use it as a form of collateral.
  • Company Profit Sharing or Savings Plan - Check with your employer to see about the possibility of withdrawing or borrowing from what you have in your account(s).
  • Retirement Savings Plan (401k) - If your employer offers this type of plan in place, inquire about the possibility of withdrawing or borrowing from this account as well.

If the above suggestions do not apply to you, there are still other possibilities:

  • Mortgage Insurance - Purchasing this form of insurance (usually through a lender) can reduce the down payment required. Private Mortgage Insurance (PMI) protects the lender in case of default and allows for an approval of a larger loan amount.
  • First-time Buyer Financing - If you have not held title to real estate in the past three years, you could qualify as a first-time buyer, which could mean special financing from your state or local housing agency. This usually means a smaller down payment or a lower interest rate, and in some cases both.
  • VA Loans - If you qualify for this loan type, many times you can get financing with "zero down." There are also many types of government-backed loans for various situations, and literally thousands of loan programs offered by different lending institutions. Your lender can tell you about the ones for which you may qualify.

Determining your target price for a house is dependent upon the financing terms available to you as well as the amount you have available for a down payment. The monthly payment usually consists of principal with interest, plus taxes and insurance, also known as P.I.T.I. Some lenders, however, also may require mortgage insurance when the down payment is less than 20%. When you consider these added expenses, you'll soon realize the term "affordability" means more than just the price of the house itself.

Banks vs. Brokers

While there are many people who prefer to deal only with their regular banking institution, it is suggested that you shop around to find a lender and a loan most suited to your needs. There are so many different options available to consumers today, and with today's competitive market, it may literally pay you to do as much homework as possible upfront. Banks are not the only source anymore for obtaining a loan to buy a home; there are plenty of other options available as well:

  • Mortgage Lenders - These lenders specialize in loans only for the purpose of purchasing or improving real estate.
  • Mortgage Loan Brokers- Sometimes these people are also referred to as third party providers. They are in the business of matching up buyers and homeowners with lenders that are likely to finance them. The buyer usually picks up the fee for this service.
  • Financial Institutions - Commonly known as traditional banks or "prime" lenders.
  • Private Lenders - Usually refers to sellers who are open to "owner financing."
  • Credit Unions - Some do issue mortgages for their members and generally can beat the rate of the bank, or at least offer the same.
  • Finance Companies- Most will issue mortgage loans, and, to stay somewhat competitive, usually offer "no prepayment penalty" as a selling point. Their interest rates may be slightly higher than that of a traditional lender, but finance companies are generally more lenient in qualifying borrowers.


Once you narrow down which type of lender can best meet your needs, the next step is to get pre-approved for a loan. Pre-approval is not the same as pre-qualification. What's the difference between pre-qualification and pre-approval? In the world of real estate, the terms "pre-qualification" and "pre-approval" are often used interchangeably. But they have different meanings.

Pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based upon the information provided by the borrower, which will later be subject to the approval process and additional information, including a credit report, appraisal, and income verification. The information provided by the borrower is not routinely verified as part of the pre-qualification process.

Pre-approval, on the other hand, is a firmer commitment on behalf of the mortgage company. Obtaining pre-approval is a more formal process that includes a credit check and employment verification. During a pre-approval, the mortgage company does all the work of a full approval except for the appraisal and title search. The lender obtains a credit report to verify monthly payments on installment loans and credit cards, and to check payment history on these loans. If you've been pre-approved for a loan, you can shop for a house with more certainty and less anxiety because you'll be able to sail through the entire process without having to worry about whether the mortgage will be approved. Additionally, the seller is likely to view you as a more capable buyer. This can give you an advantage as a buyer in the marketplace, especially when the seller is considering multiple offers.

However, neither a pre-approval nor a pre-qualification means you are guaranteed a mortgage. Lenders still need to look at property appraisals, verify information, and, in many cases, re-check credit before agreeing to make a loan. Still, it's worthwhile to obtain pre-approval at the beginning of the buying process to know how much home you can afford and to avoid the headaches and embarrassment of not qualifying for a home you have under contract.

If you intend to obtain a pre-approval, you should begin rounding up information that the lender will need in order to process the loan. The checklist on the next few pages may be useful to you as you compile this information.

  • Copy of purchase sales contract, or offer to purchase and all addenda, signed by the buyer and seller.
  • A deposit for credit report and appraisal fees will be required at time of application.
  • Property information listing sheet, or multiple listing service sheet.
  • W2 forms from the previous two years.
  • Pay stubs from the most recent month.
  • Employment history: Include name and address of employer(s) for the last two years, dates of employment, and income. Provide explanation of recent gaps in employment, if one month or longer.
  • Social security number(s) for both borrower and co-borrower(s).
  • Bank statements for checking and savings accounts from the past three months, include names, addresses, account numbers, and balances of depository institutions (banks, credit unions, and savings banks); all pages of all statements are needed, even if blank.
  • Credit information: For each open credit card account, provide the creditor name, address, account number, payment amount, and current balance; include letter of explanation for any credit problems.
  • A list of any debts you have which have a balance: The name of the creditor, their addresses, phone number or creditors account numbers, monthly payment and balances should be documented.
  • Tax returns: Provide previous two years' personal federal income tax returns and all schedules if you are self-employed; employed in a family business; a tradesman; receiving all or a large part of income from bonus, commission, partnership, or trust income; own rental property; or have income from an otherwise non-verifiable source, such as corporate ownership, installment sales, or tips. And three years on KHC loans.
  • A list of assets: Including furniture and estimate of value R Stocks, bonds, and investment accounts. 
If these are being used for your house purchase, you must supply the name and address of broker and previous three months' statements or copies of the stock certificates. A list of serial numbers and issue dates may be acceptable for verifying bonds. All pages of all statements are needed, even if blank.
  • IRA/Retirement plan: Approximate value of vested interest and copy of most recent statement.
  • Life insurance policies: Name of insurance company, policy number, face amount, and approximate cash value of each policy.
  • Automobiles owned: Make and year of each automobile owned and current market value. (Evidence of clear title may be required if owned free and clear).
  • Construction loan: Signed construction contract with cost breakdown and builder plans.
  • Gift letters: If part of your down payment or closing costs is from a gift, a signed letter is needed from the donor to verify that the borrower is not required to repay the funds. Your lender may give you a copy of a form letter that you can use. Always talk to your lender prior to the movement of gift funds.
  • Other income: Documentation of the income received for the past 12 months if such income is used to qualify (for example, interest or dividend income).
  • VA loan: Provide your certificate of eligibility, if you have one; or you will need a Statement of Service (DF2496) or Discharge Paper (DD214). If you are currently in the military, you will need a DD1747 (permission to live off post)
  • Military service: If you are presently a member of any military reserve unit, give address.
  • Bankruptcy: Provide any bankruptcy judgement papers as well as copies of discharge and original papers filed.

And, if you are:

  • Renting: Provide landlord's name, address, and phone number and/or previous 12-month rental payment history (canceled checks and rent receipts are acceptable).
  • Self-employed: Provide previous two years' and current year-to-date Profit and Loss Statement and Balance Sheet.
  • Divorced or separated: Provide a copy of divorce decree or maintenance agreement, along with any amendments and a 12-month payment history of alimony/child support payments, if payments are provided or received and are needed to qualify. Be sure to provide either check stubs or copies of both the front and back of the checks.
  • A student: If you do not have two years of employment history due to attending school, then school transcripts or your diploma will be needed.
  • Presently own or have owned a home in the last three years: Provide the name and address of the mortgage company or lending institution, the mortgage loan number and balance.
  • Obtaining Equity: If you are obtaining equity from the sale of your previous residence, a copy of your closing statement or HUD-1 Uniform Settlement Statement is required.
  • The owner of rental properties: Provide federal tax returns (signed), along with a schedule of all real estate owned and the account number and address of the mortgage company that holds the properties.

In addition, if the real estate owned is:

  • Currently rented - Provide a copy of the current lease or rental agreement.
  • Listed for sale - Provide a copy of the listing agreement.
  • Sold, but not closed - Provide a copy of the sales contract and escrow number.
  • Sold, closed and proceeds will be used for down payment - Provide a copy of the HUD-1 Uniform Settlement Statement.

Affordable housing

Loans underwritten using liberalized guidelines under affordable housing programs may require counseling certificate or inspection certificate (or equivalent).

Acceptable Sources of Income

Acceptable Sources:

  • Gross earnings from employment (2 year work history)
  • Net earnings from self-employment (2 year work history)
  • Overtime (2 year history documented)
  • Bonus' (2 year history documented)
  • Part-time job (2 year work history)
  • Commissions (2 year history of receipt)
  • Note income, child support, alimony (requires at least 3 years of future income)
  • Rental income (75% of rents less P.I.T.I)
  • Interest income (2 year history of receiving interest verified via tax returns)
  • Other (ask lender)

Non-Acceptable sources:

  • Roommate/boarder income
  • Baby-sitting income (unless it's a business with 2 year history)
  • Capital gains
  • Parental financial support (unless reported on tax returns)
  • Any non-verifiable income which is not shown on tax returns such as cash, tips, gift, etc.

Negotiating a Contract

Now that you've found your dream home, what is the next step?

First, we'll sit down and work up an offer, otherwise known as a contract. You will want to review it carefully to be sure it states your terms exactly, how much you want to offer, and any applicable contingencies. Once you, as the buyer, and the seller reach an agreement and sign an offer reflecting that agreement, you have a legally binding contract.

Before we get out the pens and pencils, it is important to be aware of the possible scenarios that can arise while negotiating with a seller: The seller can accept your offer, reject your offer, or execute a counter offer. Don't be surprised if you and the seller initially do not see eye-to-eye on every issue. The seller may deliver back to you a counter offer modifying certain terms that are not acceptable to him. Typical counter offers include modifications of the purchase price, closing date, possession date, and/or inclusions, although any term(s) of the contract can be countered. You will then have to decide whether the new terms will be acceptable to you. It is not uncommon for negotiations to go back and forth several times before both parties agree to the terms.

Generally, you are in a stronger bargaining position if you have already been pre-approved for a mortgage, are not selling a house at the same time, and have not loaded your offer with contingencies. If we are experiencing a"seller's market,"you may have to offer at least the list price and possibly more to come in at the top among multiple buyer offers. If we are experiencing a "buyer's market," the seller may have to bend on price or terms.

Your offer will need to be accompanied by earnest money as well as a letter from your lender indicating your qualification to purchase. Earnest money typically equals between 1% and 3% of the purchase price. Not only does earnest money indicate your sincere interest in buying but also is often necessary for a contract to be legally binding. Buyers often ask if they are at risk of losing their earnest money, and, no, your earnest money cannot be lost as long as you do not default on your contract. Your earnest money will be credited to you at closing or returned to you if the contract is terminated in accordance with its terms.

When an agreement is reached on all the issues, and both the seller and you as the buyer have signed the offer, you are both under a legally binding contract. The search is over and now it's time to take the necessary steps to ensure the smooth and successful closing:

  1. Order title insurance
  2. Hire a professional home inspector
  3. Order an appraisal

Title Insurance

What is title insurance?

Title insurance is the best way to protect yourself against title defects that have occurred in the past, which may not appear until after you've taken ownership of the property. Before a title insurance policy is issued, a title report is prepared based on a search of the public records. This report gives a description of the property, along with any title defects, liens, or encumbrances discovered in the course of the title search. Title insurance protects you against title defects that were not discovered in the course of the title search (for example, forged signatures). If such a defect were discovered later, your title insurance would cover you. Title insurance is different than casualty insurance (auto, life, health) in that you pay a one-time fee (which can vary from state to state as well as between insurance companies) and that it protects against past (as opposed to future) events.

Simply explained,"title" is the right to own, possess, use, control, and dispose of property. When you buy a home, you are actually buying the seller's title to the home. A deed is the written legal evidence that the seller has conveyed his or her ownership rights to you.

Before the closing meeting when the actual transfer of ownership occurs, an attorney or title specialist generally conducts a title examination. The purpose of the title examination is to discover any problems that might prevent you from getting clear title to the home. Generally, title problems can be cleared up before settlement. But in some cases, severe title problems can delay settlement, or even cause you to consider voiding your contract with the seller.

How does title insurance protect you?

If title problems are severe enough and not covered by insurance, you could actually lose your house. A title insurance policy protects you and your heirs against title defects for as long as you own the property. The policy represents the title insurance company's responsibility to compensate you for any covered loss caused by a defect in the title, or any lien or encumbrance that was not discovered in the title search. Most title insurance policies do have exceptions, however, so it is important to read and understand the policy. Be sure to call the title company if you have any questions about what is covered in your particular policy.

What are some common title problems?

Title problems come in all shapes and sizes. Following are just a few examples of situations that can create a title problem:

  • The home to be purchased was owned by the seller's parents, who intended to use it for their retirement. The seller's father died several years ago, and the mother just recently passed away. A title search reveals that the property is titled in the mother's name, but there is no will on file to indicate how she disposed of it.
  • You are buying a house to which an addition was made several years ago. The sellers of the home took out a home improvement loan and did the work themselves. They have repaid the loan, but the lien was never removed from the title.
  • The seller of the house added central air conditioning several years ago. The seller and the contractor had a dispute over the workmanship, and the seller withheld the final payment on the contract. The contractor filed a mechanic's lien on the property, which has never been removed.
  • You are buying a house with a newly paved driveway. The seller of the house bought his neighbor's share of their shared driveway and converted it into a private driveway when the neighbor built a new driveway on the other side of his house. Unfortunately, ownership of the expanded driveway doesn't appear in the public records. 

Some "clouds on title" can be corrected relatively easily, like most of the examples listed above, while others can become quite complicated to remove. You should insist on being kept informed of every step in the title examination process. If title problems are uncovered, it is important for you to understand your legal rights.

The Home Inspection

The next step is the home inspection. You will have the opportunity to hire an inspector to evaluate the condition of the home. The goal of a home inspection is to give the client a better understanding of the physical condition of the structure and the systems than would otherwise be known.

Typical homes take 2-3 hours to inspect. When the client arrives the inspector often presents a pre-inspection agreement to be signed followed by payment. A good inspector then gives the client an overview of the inspection process and invites the client to accompany him.

Though the order may vary, the inspector, at minimum, visually inspects each of the following:

  • Interior (non-cosmetic)
  • Attic
  • Foundation
  • Chimney
  • Framing
  • Kitchen Appliances
  • Roof
  • Windows
  • Laundry
  • Bathrooms
  • Plumbing System
  • Electrical System
  • Heating System
  • Air Conditioning System

Additional items such as pools, spas, barns and other outer structures, docks and sea walls, well flow, wood destroying insects, lawn sprinkler systems, fences and gates, and EIFS (exterior insulation & finish systems) may be offered by the inspection company, sometimes at an additional fee.

The inspection company may also offer environmental services such as water testing, radon testing, lead testing, or asbestos testing.

Upon completion of the inspection, the inspector should give the client a summary of what was discovered and an opportunity to ask questions. The client then receives a signed written report of the findings.

The Appraisal

Once you have determined that there are no defects on title and all inspection concerns have been resolved, it is time to order an appraisal.

An appraisal is an estimate of the value of a property, made by a qualified professional called an appraiser. An appraisal of the property you're going to purchase is as important as your credit history in obtaining a mortgage, and it is also a critical factor in determining the size of the loan the bank or mortgage company will approve. After all, the property you are purchasing serves as collateral for the loan. Although the primary goal of the appraisal is to justify the lender's investment, it also protects you from overpaying. The lender usually hires the appraiser and charges the buyer a fee for the service.

You will be refused a mortgage, or offered a smaller amount on the mortgage, if the appraisal falls short of the amount you wish to borrow. Your contract will be contingent on whether the property's appraisal comes in at or above the purchase price you and the seller have agreed upon.

If possible, you will want to complete your home inspection prior to ordering the appraisal. There is no sense in paying an appraisal fee if issues resulting from the inspection cause the contract to be terminated.

Closing or Escrow

After the searching for a home is done, the negotiations have been completed, the house has been inspected, and the mortgage has been applied for and committed to, the focus suddenly turns to the closing, which may also be called "settlement" or "escrow," depending on your locality.

Closing is the legal transfer of ownership of the home from seller to buyer. It is a formal meeting that most parties involved in the transaction will attend. Closing procedures are usually held at the title company or lawyer's office. Your closing officer will coordinate the signing of the documents and the collection and disbursement of funds.

In order to ensure a smooth closing you will want to spend some time preparing for the big day:

  • It is a good idea to conduct a "walk-through" of the home prior to closing. This will give you an opportunity to see that the condition of the home is the same as it was at the time of contract. Additionally, you will be able to ensure that any repairs agreed to by the seller, based on the inspection, have been completed.
  • Prior to closing, you will have obtained a homeowners insurance policy and provided this information to your lender and/or closing agent.
  • One or two days before closing, the closing agent will provide you with a Settlement Statement or a HUD-1. These documents will contain a detailed description of all costs associated with the transaction, including the exact dollar amount you will need to bring to closing. Prior to closing, you will go to the bank to obtain a cashiers or certified check in this amount.
  • Ask your closer what other items you may need to bring to closing. Many states require a valid driver's license or other acceptable form of identification. If you've recently married or divorced, you may need to bring additional documentation as well.

With all the preparations in place, you are just a few signatures away from owning your home!

Guide to Expansive Soils Characteristics

Swelling soils contain a high percentage of certain kinds of clay particles that are capable of absorbing large quantities of water. Soil volume may expand 10 percent or more as the clay becomes wet. The powerful force of expansion is capable of exerting pressures of 20,000 psf or greater on foundations, slabs or other confining structures. Subsurface Colorado swelling soils tend to remain at a constant moisture content in their natural state and are usually relatively dry at the outset of disturbance for construction on them. Exposure to natural or man-caused water sources during or after development results in swelling. In many instances the soils do not regain their original dryness after construction, but remain somewhat moist and expanded due to the changed environment.

Consequences Swelling soils are one of the nation's most prevalent causes of damage to buildings and construction. Annual losses are estimated in the range of $2 billion. The losses include severe structural damage, cracked driveways, sidewalks and basement floors, heaving of roads and highway structures, condemnation of buildings, and disruption of pipelines and sewer lines. The destructive forces may be upward, horizontal, or both.

Aggravating Circumstances Design and construction of structures while unaware of the existence and behavior of swelling soils can worsen a readily manageable situation. Where swelling soils are not recognized, improper building or structure design, faulty construction, inappropriate landscaping and long term maintenance practices unsuited to the specific soil conditions can become a continuing, costly problem. Design problems might include improper foundation loading, improper depth or diameter of drilled pier, insufficient reinforcing steel, and insufficient attention to surface and underground water. Miscalculating the severity of the problem for a particular clay soil can result in damage although some mitigating measures were taken.

Construction problems related to swelling soils include lack of reinforcing steel, insufficient or improperly placed reinforcing steel, mushroom-topped drilled piers, and inadequate void space between soils and grade beams. Allowing clays to dry excessively before pouring concrete and permitting the ponding of water near a foundation during and after construction also are contributing factors in swelling-soil related construction problems. Building without allowance for basement or ground floor movement in known swelling soils areas is a very common source of property damage. Improper landscaping problems include inadequate management of surface drainage and planting vegetation next to the foundation so irrigation water enters the soil.

Legal definition H.B. 1041, 106-7-106 (6):"Expansive soil and rock"means soil and rock which contains clay and which expands to a significant degree upon wetting and shrinks upon drying.

Descriptive definition Sedimentary rocks and surficial soils are composed of gravel, sand, silt, and clay particles. In order to visualize the relative grain sizes of these particles, an example using familiar objects can be given. Although the average diameter of a gravel particle is approximately Ÿ in., suppose an average gravel particle were the size of a basketball. An average sand particle would then be the size of a baseball and a silt particle the size of a pea. The average clay particle, however, would be almost invisible, with a pencil dot representing a large clay particle. These clay particles may consist of a variety of minerals¿quartz, feldspar, gypsum, and clay minerals. Common clay minerals in Colorado are montmorillonite, illite, and kaolinite. To return to the previous analogy, gravel, sand, silt, and some clay particles are often round, three-dimensional objects. Clay minerals, however, are generally flat, nearly two-dimensional plates just as the above mentioned pencil dot is flat and two-dimensional.

The clay minerals in rocks and soils are responsible for their expansion, or "swell", as it is generally called. This swelling is caused by the chemical attraction of water to certain clay minerals. Layers of water molecules can be incorporated between the flat, submicroscopic clay plates. As more water is made available to the clay, more layers of the water are added between the plates, and adjacent clay plates are pushed farther apart.

This pushing apart, or swelling, occurs throughout the mass of soil that is being wetted, and causes increased volume and high swell pressures within the mass. The opposite effect, called shrinkage, may occur if a previously wet swelling clay is dried. Although no large positive pressures are exerted, shrinkage will cause a volume decrease of the soil mass. These processes of swelling and shrinkage may occur any number of times for a single soil mass. Either swell ore shrinkage may cause damage to streets and buildings, but swell accounts for nearly all such damage in Colorado.

The clay mineral responsible generally for swelling is montmorillonite, often called"bentonite". A sample of pure montmorillonite may swell up to 15 times its original volume. However, most natural soils contain considerably less than 100 percent montmorillonite, and few swell to more than 1 Å“ times their original volume (a 50 percent volume increase) (Jones and Holtz, 1973). A small load may decrease the actual swell to less than 1 Å’ times the original volume (a 25 percent volume increase). However, as 25 percent increase can be extremely destructive because volume increases of 3 percent or more are generally considered by engineers to be potentially damaging and require specially designed foundations.

Severity of problem Swelling soils are a nationwide problem, as shown by Jones and Holtz (1973): Each year, shrinking or swelling inflict at least $2.3 billion in damages to houses, buildings, roads, and pipelines -- more than twice the damage from floods, hurricanes, tornadoes, and earthquakes...Over 250,000 new homes are built on expansive soils each year. 60 percent will experience only minor damage during their useful lives, but 10 percent will experience significant damage-some beyond person in 10 is affected by floods; but one in five by expansive soils.

Swelling is generally caused by expansion due to wetting of certain clay minerals in dry soils. Therefore, arid or semi-arid areas such a Colorado with seasonal changes of soil moisture experience a much higher frequency of swelling problems than eastern states that have higher rainfall and more constant soil moisture.

Rocks containing swelling clay are generally softer and less resistant to weathering and erosion than other rocks and therefore, more often occur along the sides of mountains.

Valleys and on the plains than in the mountains. Because the population of Colorado is also concentrated in mountain valleys and on the plains, most of the homes, schools, public and commercial buildings, and roads in the state are located in areas of potentially swelling clay. Swelling clays are, therefore, one of the most significant, widespread, costly, and least publicized geologic hazards in Colorado.

Criteria for Recognition Although several visual methods for identification of potentially swelling clays exist, only a competent, professional soil engineer and engineering geologist should be relied upon to identify this potential hazard. Some warning signs for swell might include: a) soft, puff, "popcorn" appearance of the surface soil when dry; b) surface soil that is very sticky when wet; c) open cracks (desiccation polygons) in dry surface soils; d) lack of vegetation due to heavy clay soils; e) soils that are very plastic and weak when wet but are "rock-hard" when dry.

Engineering soil tests include index tests and design tests. Rapid, simple index tests are used to determine whether more complex design tests are necessary. Some index properties that may aid in the identification of probable areas of swelling clay include Atterberg limits, plasticity index, grain size determination, activity ratio, dry unit weight, and moisture content (Asphalt Institute, 1964). The primary design tests for swelling soils are the consolidation swell* test for buildings, and the California Bearing Ratio* swell test for roads (Asphalt Institute, 1964).

Consequences of Improper Utilization Damage from swelling clays can affect, to some extent, virtually every type of structure in Colorado. Some structures, such as downtown Denver's skyscrapers, generally have well engineered foundations that are too heavily loaded for swelling damage to occur. At the opposite extreme are public schools and single family homes, which are generally constructed on a minimal budget and which may have under-designed lightly loaded foundations that are particularly subject to damage from soil movements. Homeowners and publish agencies that assume they cannot afford more costly foundations and floor systems often incur the largest percentage of damage and costly repairs from swelling soil.

In 1970, the state of Colorado spent nearly $1/2 million to repair cracked walls, floors, ceilings, and windows caused by swelling-clay damage at a state institution near Denver. In 1972, a state college library in southern Colorado required $170,000 to repair swelling-clay damage. A 6-yr-old, $2 million building on the same campus was closed pending repairs to structural components pulled apart by swelling clay. A college building in western Colorado and a National Guard armory near Denver are among the other state buildings severely damaged by swelling clays. These examples of damage to public buildings do not include the hundreds of thousands of dollars spent for repairs by local school districts. One school district near Denver is attempting to circumvent these expensive repairs by spending an additional $42,000 per school on structural floors. No figures are available for the total damage to homes in Colorado from swelling clays. However, several examples are known where the cost of repairs exceeded the value of the house. Cracked and heaved sidewalks, patios, driveways, and garage and basement floor slabs are very common indicators of swelling clay throughout Colorado.

Highways in some areas of Colorado have required frequent and very expensive reconstruction or maintenance due to damage from swelling clay. As much as one foot of uplift from swelling clay forced the repair of two concrete lanes of interstate highway in eastern Colorado only six months after completion of paving. In the same area, additional right-of-way had to be purchased, and the highway design had to be revised to eliminate cuts and fills in order to prevent similar problems with the two remaining lanes.

Colorado Geological Survey 1313 Sherman St., Rm 715, Denver, CO 80203 303-866-2611

Radon Gas

Radon is a gaseous radioactive element having the symbol Rn, the atomic number 86, an atomic weight of 222, a melting point of -71ºC, a boiling point of -62ºC, and (depending on the source, there are between 20 and 25 isotopes of radon - 20 cited in the chemical summary, 25 listed in the table of isotopes); it is an extremely toxic, colorless gas; it can be condensed to a transparent liquid and to an opaque, glowing solid; it is derived from the radioactive decay of radium and is used in cancer treatment, as a tracer in leak detection, and in radiography.

Sources of Radon Earth and rock beneath home; well water; building materials.

What are the Health Effects From Exposure to Radon No immediate symptoms. Based on an updated Assessment of Risk for Radon in Homes, radon in indoor air is estimated to cause about 21,000 lung cancer deaths each year in the United States. Smokers are at higher risk of developing Radon-induced lung cancer. Lung cancer is the only health effect which has been definitively linked with radon exposure. Lung cancer would usually occur years (5-25) after exposure. There is no evidence that other respiratory diseases, such as asthma, are caused by radon exposure and there is no evidence that children are at any greater risk of radon induced lung cancer than adults.

What is the Average Level of Radon Found in a Home? Based on a national residential radon survey completed in 1991, the average indoor radon level is 1.3 picocuries per liter (pCi/L) in the United States. The average outdoor level is about 0.4 pCi/L.

For more information you can order publications via EPA's National Service Center for Environmental Publications (NSCEP) ( web site. Your publication requests can also be mailed, called or faxed directly to:

U.S. Environmental Protection Agency
National Center for Environmental Publications (NSCEP)
P.O. Box 42419
Cincinnati, OH 42419
1-800-490-9198/(513) 489-8695 (fax)

Introduction to Molds

Molds produce tiny spores to reproduce. Mold spores waft through the indoor and outdoor air continually. When mold spores land on a damp spot indoors, they may begin growing and digesting whatever they are growing on in order to survive. There are molds that can grow on wood, paper, carpet, and foods. When excessive moisture or water accumulates indoors, mold growth will often occur, particularly if the moisture problem remains undiscovered or un-addressed. There is no practical way to eliminate all mold and mold spores in the indoor environment; the way to control indoor mold growth is to control moisture.

Ten Things You Should Know About Mold

  1. Potential health effects and symptoms associated with mold exposures include allergic reactions, asthma, and other respiratory complaints.
  2. There is no practical way to eliminate all mold and mold spores in the indoor environment; the way to control indoor mold growth is to control moisture.
  3. If mold is a problem in your home or school, you must clean up the mold and eliminate sources of moisture.
  4. Fix the source of the water problem or leak to prevent mold growth.
  5. Reduce indoor humidity (to 30-60% ) to decrease mold growth by: venting bathrooms, dryers, and other moisture-generating sources to the outside; using air conditioners and de-humidifiers; increasing ventilation; and using exhaust fans whenever cooking, dishwashing, and cleaning.
  6. Clean and dry any damp or wet building materials and furnishings within 24-48 hours to prevent mold growth.
  7. Clean mold off hard surfaces with water and detergent, and dry completely. Absorbent materials such as ceiling tiles, that are moldy, may need to be replaced.
  8. Prevent condensation: Reduce the potential for condensation on cold surfaces (i.e., windows, piping, exterior walls, roof, or floors) by adding insulation.
  9. In areas where there is a perpetual moisture problem, do not install carpeting (i.e., by drinking fountains, by classroom sinks, or on concrete floors with leaks or frequent condensation).
  10. Molds can be found almost anywhere; they can grow on virtually any substance, providing moisture is present. There are molds that can grow on wood, paper, carpet, and foods.

For more information visit Antimicrobial Information Hotline (703) 308-0127 / (703) 308-6467 (FAX). Monday-Friday 8:00 AM - 5:00 PM EST


Hopefully you have found this guide to be helpful in preparing for your purchase. Although we have covered a great deal of information in a few short pages, our goal is to provide you with a well-rounded understanding of the overall process. Perhaps there are questions that remain unanswered or new questions that have surfaced, in which case, I look forward to answering your questions and working closely with you to ensure that your home buying experience is not only successful but also enjoyable!

Personal Philosophy

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It is my belief that any accomplishment in life can be obtained if you 1) accept your goal as being extremely important to you 2) constantly visualize yourself reaching that goal and 3) have the sincere desire and will to always be a winner.