Start
The process starts with your phone call, Email or walking through the door at our Port Orchard offices. Our goal is to make the purchase of real property as simple and trouble free as we can.
Initial Interview
The first thing we'll do is sit down and discuss your objectives. It's important for me to understand your goals, needs, wants, resources and schedule. At the same time you will become familiar with the current market, including an initial look at what's available in your price range, and the availability of financing and at what cost.
Get Pre-Approval
The first, and possibly the most important, action you will need to take is to contact the lender of your choice and provide financial information to determine the limits of your borrowing power. I can provide you with a list of lenders that have provided excellent service to other customers, and a list of information you'll need to give them. Generally, written evidence of income, assets, and liabilities will be required.
Show Property
At this point we'll be ready to head out to tour the area and look in more detail at the land you've picked out from the Multiple Listing System. These days, buyers have much more access to information about homes for sale via the Internet. At first you may have dozens of lots to look at using photos, maps and Virtual Tours. Then as time goes by there will be new listings that come up periodically. As you become familiar with the market, you may want to adjust your goals to meet the realities of the market. We can adjust the MLS search as often and as much as you wish.
Write Offer
When you find the lot that meets your needs, it's time to write an offer. We will use NWMLS Forms to structure a Purchase and Sale Agreement that will give you the best chance of getting the lot at the price, terms and conditions you want. The agreement will be prepared carefully and shouldn't be rushed, but in this market we must make decisions in a timely manner and move quickly towards getting a "Mutually Accepted" agreement.
Negotiate Offer
The offer has no effect until both Buyer and Seller agree to it. The Seller may agree to the offer or enter into a negotiation process that can involve any aspect of the agreement.
Contract Acceptance
If both parties agree, the Purchase and Sale Agreement is said to be "Signed Around." At that point the agreement becomes an enforceable contract.
Earnest Money
On contract acceptance the agreed to Earnest Money becomes due, and is processed in accordance with the agreement. This money is held in Escrow until closing, at which time it is returned to the Buyer. If the Buyer withdraws from the agreement without "legal excuse" the Earnest Money is paid to the Seller. We will discuss in detail what constitutes a "legal excuse" to prevent any possibility of forfeiture.
Refer to point B on the graphic. At this point, two branches of the flow chart are initiated simultaneously.
Feasibility
A Purchase and Sale Agreement for vacant land is written with a “Feasibility Contingency.” This is a period of time when the buyer may study the feasibility of the intended use of the property. The study can include the availability and cost of utilities (power, water/well, gas/propane, sewer/septic), the costs of clearing the land and site preparation for building, the costs of improving or developing roads and driveways, and verification that proposed construction is feasible and at what cost. Depending on the property, other factors may come into affect such as the Shoreline Management Act (docks, bulkheads, ramps, etc), wetlands delineations, other environmental considerations (creeks, ponds, rivers, etc.), or geotechnical analysis and engineering. Here is a guide to help you estimate the time and expense involved in this process.
UTILITIES:
Power is usually provided by the appropriate public utility for the area in which your land is located. The buyer is responsible for the costs of getting power to the building site. The cost to connect depends on the distance to the nearest transformer. The current rate is: Less than 250 feet - Overhead: $793 Underground: $530. Over 250 to 400 feet - $3 per additional foot. Over 400 feet - $22.40 per additional foot. (Includes an additional transformer) Note: A heat pump requires a larger transformer, and costs $1500 to $2000 more.
Public water may be available, and is provided by the appropriate public utility. The buyer is responsible for the cost of getting water to the building site. The current charge is $22.50 per foot in addition to the connection fee of $2300 and the meter fee of $1600.
Water may also be obtained through a private well, a shared well, or a community well. Each of these types have associated expenses. You may be able to “Buy in” to an existing well. If a well needs to be drilled, and if a septic system is needed, the septic design must be completed before the well permit can be obtained due to setback requirements.
The current cost to sink a well is $36 to $40 per foot, plus additional charges as follows:
-State Permit: $100
-Mobilization Fee: $200-300
-Environmental Seal (Betonite): $350
-Stainless Screen: $750
-Pump (depends on depth): $2400-3600
-Pump Installation: $200
-Pump House: $800-1000
-Pipe: ($4-5/foot for 100 feet) $400-500
Estimated Total: $5200-7000
150 foot well= $10,600-13,000
200 foot well= $12,400-15,000
If you are considering a well that can be shared among 3 or more building sites, there are additional costs for a water manager, additional pressure tanks, and larger pipe size.
Public Sewer may be available in certain limited areas of Kitsap County. Where available, there is a connection fee and a monthly service charge.
A Septic System is more common, particularly in rural areas. These systems are site specific. Depending on the soil condition and terrain, you may require a simple gravity system or a more complicated and more expensive “engineered” system. The first step is a Soil Test to determine soil conditions. In some cases the cost to design a suitable septic system may be prohibitive. Several companies conduct soil tests and provide septic system design services. The cost of a soil test is about $200. The cost to design a system will range from $625 to $800. Costs to install a septic system may range from $4,000, for a simple gravity system, to $20,000 or more. If a well is going to be drilled as part of your site development, the septic design must be completed before the well permit can be obtained. Natural Gas may be available in certain areas of the county. The cost varies widely (from $0 to several hundred dollars) depending on the proximity of the gas line and your usage requirements. The management company will help you determine if propane would be more cost effective.
Propane tanks and services can be obtained from several vendors. The initial cost depends on whether you lease the propane tank, or buy it. The cost is: Lease - $99 for a typical 250 gallon tank installation which includes the first years rent of $60. Buy - $650 for the same tank. The propane is sold by the gallon. Refurbished tanks may also be available.
SITE PREPARATION:
For the most part site preparation will be done with your builder. During the feasibility contingency you need to verify that you can build the house you want on the property you are buying. Your builder, together with the Kitsap County Department of Community Development can help you make this decision. In some instances, you may need to hire a Geological and Geotechnical Consultant to make this determination. A list of consultants is available from the County. They are also listed in the Phone book under Geologists.
Clearing the property may also be needed. If the removal of trees is contemplated, permits from Kitsap County will be required. The specific process depends on your intentions. Clearing trees from the building site to build in the near future, or harvesting trees require different permits. In some cases a construction moratorium may be in place as a result of tree harvesting. Work closely with the Department of Community Development.
When it comes time to build; you, or your builder, will need to obtain permits, and pay the applicable fees. In addition, you will be charged a mitigation fee. The current fees are:
Stick-built home permit fee varies with the value of the home
$100,000 home: $994
$500,000 home: $3,234
Manufactured home permit fee: $300
Impact fee: $2,000
Mechanical Permits: $100 - $200
As with most feasibility related issues, start at the:
Kitsap County
Department of Community Development
614 Division Street, MS36
Port Orchard, WA 98366
(360)337-7181
Mortgage
Immediately after a “signed around” agreement is reached, the Borrower must initiate action to get the loan to fund the purchase, if not already done. In most cases, Buyers will have done this in advance and become pre-qualified (talk to a lender and tell them your income, expenses, and total assets) or pre-approved (provide documents to the lender to show your financial condition). Taking these steps in advance facilitate the purchase and improve your chances of being successful. While the mortgage is being applied for and processed, you are under a Financing Contingency. This contingency provides that if you fail (after a good faith effort) to obtain a loan, you may withdraw from the agreement without penalty. If you get loan approval, the contingency is waived and you can proceed to closing. This contingency also provides for you to get Homeowners Insurance.
If you are buying land to immediately build a home, a Construction Loan might be appropriate for you. Many lenders have programs where the land purchase is included in the construction loan as the first draw. Later when the house is complete, the loan is rolled into a normal long-term mortgage with little or no additional fees.
Credit Report
During the mortgage application/approval the lender will run a credit report on the Buyer(s). Credit history is a big factor in determining the amount you can borrow, the type of loan, and the costs associated with the loan including the interest rate.
Verifications
Prior to final loan approval the lender will verify all information used to substantiate the loan including employment, account balances, and asset ownership.
Appraisal
An important part of the loan approval process is validation of the house value. The lender will hire a professional appraiser, of their choosing, to conduct a formal appraisal of the property. A low appraisal can cause adjustments to be made in the agreement, or a second appraisal may be warranted.
Underwriting
The “underwriter” is the person or agency that will fund the loan and have ultimate approval. In some mortgage companies and banks underwriting can be done “in house”, but in many other cases there are layers of approval such as with FHA, VA, or with FNMA “conforming” loans.
Loan Approval
The process may vary, but ultimately the lender will approve the loan, forward the loan documents, and issue instructions to the Escrow Company to proceed to closing.
Title Search
The loan approval also encompasses verification of Title to insure that the property is not encumbered. The listing office will provide “Preliminary Title”, but the buyer will share in the cost of hiring a Title Company, obtaining an appropriate title search, and paying for the title insurance.
Title Company
The Title Company is typically a Buyers option; although, it’s not unusual for the Seller to ask a title company for preliminary title and then request that Buyers use the same company. The title company may also serve as the Escrow Agent, because it’s often easier than using a separate company.
Assemble Papers
The Escrow Agent assembles the documents related to the agreement and manages the signing, closing and recording of the sale.
Closing
In Washington, signing takes place 24 to 48 hours prior to closing. Following signing of documents by both parties, the documents are recorded, the lender grants final approval, and the deal is closed.
Possession
Once the deal is closed, the new owner may take possession unless some other arrangement has been made. Now you can move forward with confidence knowing that the home you intend to build is feasible. |