Where do I Begin?

Begin by deciding not to take the advice of those who are not experts. Your attorney and your accountant are professionals. Unfortunately, tradition has homebuyers going to the local realtor before they even select an attorney. I do not think this is the best course of action.

If you have decided to buy a home, do not do what those who have lost their homes in foreclosure have done. Many wonderful people have lost their homes because they took the advice from those who either did not know best or who were acting in their own self-interest. Mortgage lenders and real estate brokers work on a commission basis. Additionally, they have no fiduciary obligation to act in your best interests.

However, an attorney and an accountant have ethical obligations and are legally bound to act in the best interests of their client. Therefore, to pay an attorney or an accountant a few hundred dollars to consult with you regarding your plans is money well spent. I have had many clients who tried to call their realtor when the lender started to foreclose only to find out that the realtor was in another business or had no time to talk to them because there was no commission to be made. Do not end up a victim!

Decide now that you will either become your own expert or that you will listen to your attorney and/or accountant. If your attorney or accountant does not listen to you, go find one who will! Many accountants and attorneys have been brainwashed by the real estate industry to believe that they should charge ridiculously low fees and not to get involved in the pre-contract stages of buying a home. Hogwash! These attorneys let their secretary or paralegal "handle" the transaction and then when a mistake is made, it is the client who suffers. By charging ridiculously low rates, the attorneys cannot make a profit if they actually do the work themselves. So, they hope and they pray that their assistant does the right thing and they tell you that "the realtor handles the negotiations". It is fine to have the realtor make the offer, but if there are issues as to the property's condition, repairs, fixtures, alterations done without permits, the attorney should be in the middle fighting for you, even if fighting simply means discussing your situation with the realtor that is handling the negotiation.

Therefore, if you are thinking of buying and selling a home, you should consult with your attorney or your accountant before you ever list your home with a broker for sale or before you ever go look at a home you are thinking of buying. The attorney and accountant should generally sit with you for thirty minutes to one hour and go over your goals, your needs and desires, and after listening to you, state their professional recommendations in this time frame; as well as pointing out other items for you to consider.

You may even find that your accountant or attorney does not charge you for this consultation, in that the attorney will consider this consultation as part of the overall time to be spent to properly represent you. Likewise, if the accountant does your tax returns every year, he may view this as part of his professional obligation to provide his clients with financial advice from time to time. Even if they both charge, the money is well spent as your transaction is likely to go smoother as you are now a well-informed purchaser or seller.

If you find an attorney or accountant who does not want to take the time to speak with you, then search for one who will. Attorneys and accountants have been brainwashed by the realtors associations to believe that residential real estate transactions are beneath them. As a trained professional, they should focus on more profitable things, such as a client arrested for drug trafficking or a client who is purchasing a business. However, by consulting with an attorney or accountant before you make an offer or list your home, you are preventing problems before they occur. This saves money!

Once you get this advice, follow it. In states where attorneys represent clients in real estate transactions, your attorney will have a head start in understanding your needs and desires, as well as the overall framework of the transaction. For home sellers, it is now time to list your home. For home buyers, after you have spoken with a professional advisor, it is now time to determine how you will pay for the home. If you cannot pay for the home by taking the money from your bank account and writing a check for the full amount, then you require a mortgage loan, and the rest of this article is for you.

Selecting the Right Loan

First, I want to clarify the terminology as many people get confused by loan officers that use the words loan and mortgage interchangeably. You will be applying for a mortgage loan. This is a secured loan. The bank will be giving you money in exchange for your promise to pay them back, with interest, in a certain amount of time (usually 15 or 30 years). If approved, you will give your promise in writing by signing what is called a Note. This document is your promise to pay. If you break your promise, all the bank can do is take you to court and get a judgment against you. When you sell the home, unless they can find money in a bank account or take your other assets, the bank gets paid first. But the bank cannot force you to sell the home! This is a bad deal for the bank. Thus, the bank makes you sign a second document called a mortgage.

The reason I am being so careful in explaining these terms is that most people have such anxiety over this process because it was never explained to them and they do not understand what is going on. Once it is explained, most people understand everything that occurs because they now understand the terms that are being used and what each step of the process is.

The second document that the bank makes you sign is a mortgage. A mortgage (often called a deed of trust in other states) secures the property you are acquiring as collateral for the loan. Language in the mortgage document states that if you default on the loan and the bank has to sue you to enforce their rights (get their money back), that the bank has the right to "foreclose" on the property and sell the property to get their money back. This means that you can be evicted from the property and the property transferred to another individual by a "referee". A referee is normally an attorney appointed by the Court facilitate the foreclosure.

Thus, what you are really applying for is a mortgage loan. A mortgage is what you give the bank. You give them a mortgage on your property. What the bank gives you is a loan which is collateralized by the mortgage. The Note that you sign is your promise to pay back the bank. Unlike an unsecured promissory note that you sign when you borrow $1,000 from Uncle Joe, you are giving the bank security or collateral by pledging the home in exchange for the loan. The purpose of this section is to relax your fears by clearly explaining the terms that most loan officers, realtors and attorneys throw around during a transaction without ever explaining to the first time homebuyer.

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