7 Surprises for First-Time Wisconsin Home Buyers

On its surface, purchasing a home seems like a pretty straight-forward task. Don’t you just find a house, put in an offer, get a loan and cozy up to your new fireplace by the end of the week? Unfortunately, this isn’t how homebuying in Wisconsin works, and for good reason. First time homebuyers in Wisconsin are often surprised to learn these seven facts (click to learn more):

• The appraiser needs a copy of your Offer to Purchase — Including the sales price!
• You might not get a say in how defects are fixed. 
• It costs a lot to get out of an Offer to Purchase. 
• Your student loans factor into your mortgage…but not how you’d think. 
• Buyers are responsible for certain assessments before closing.
• Defaulting on a purchase puts thousands of dollars at risk (and maybe more)
• Buyers don’t get their earnest money back automatically if they terminate a contract 

At Accunet Mortgage, we meet with bewildered prospective homebuyers all the time; they can’t believe how much actually goes into the process. Luckily, that’s what we’re here for. And, with that in mind, we have compiled our Top 7 Surprises for Wisconsin Home Buyers in hopes that it will prepare for buying your first home.

1. The appraiser needs a copy of your Offer to Purchase — including the sales price!

Providing the appraiser with the complete purchase contract, including the selling price, is a standard requirement for all mortgage programs. About half of homebuyers assume otherwise, which can result in time-consuming back-and-forth.

Why can’t the sales price just be blacked out? It’s a matter of saving time and stress. On each sale, the appraiser determines a “range of value,” and the “most likely value.” If the appraiser didn’t know the actual sales price and concluded a home was most likely worth $2,000 less than the agreed-upon price, there would be a lot more renegotiations of purchase prices. Letting the appraiser know the price to which the parties agreed to simply helps get to closing with the least hassle.

Learn more about being a first-time homebuyer in Wisconsin.

2. You might not get a say in how defects are fixed.

When you buy a home, there are probably going to be defects — cracks in the walkway, damaged drywall, etc. The buyer has the right to ask the seller to fix these defects before closing. Most commonly, this is included in the sale with a Right to Cure Defects (Lines 429-430). If the buyer gives the seller the standard Right to Cure Defects, the buyers don’t get to dictate (or even participate in) how home defects get fixed.

The only two ways a buyer can participate or have a say in curing defects in this scenario:

• Not giving the seller the right to cure defects (in which case the buyer can propose in an amendment how the defects will be cured.)
• By giving the seller the right to cure but also having their real estate agent insert additional language into their initial offer that specifically gives the buyer the right to participate in determining how any defects are cured.

3. It costs a lot to get out of an Offer to Purchase.

If you decide to rescind an Offer to Purchase, you’re looking a pretty substantial financial loss.

• Home inspection with a radon test — $400 and $550
• Structural engineer’s report — $300 to $500 

If you wind up needing both, it could literally cost between $700 and $1,000 total to prove to the seller that a bona fide defect exists, thereby allowing the contract to be legitimately terminated.

Are you buying your first home? Contact Accunet’s realty experts for step-by-step guidance and advice.

4. Your student loans factor into your mortgage…but not how you think.

We can now use income-based payments on student loans as the qualifying payment on most loan programs. The exception is on FHA loans, VA loans and some jumbo loans (loans over $510,400) where we have to use the GREATER OF the actual verified loan payment or 1% of the current student loan balance.

Translation: If you’re paying $100 a month on a $50,000 student loan, and you’re applying an FHA mortgage, we must use a theoretical monthly payment equal to 1% of the loan balance. In this example $500 per month.

5. Buyers are responsible for certain assessments before closing.

Buyers are responsible for special assessments by taxing authorities and/or homeowners associations if those assessments are levied on or after the accepted offer date and before closing. This is not a typo (see Lines 360-362). The only way to protect yourself as a buyer from this risk is to instruct your real estate agent to modify the standard language to make the seller responsible.

6. Defaulting on a purchase puts thousands of dollars at risk (and maybe more).

The buyer is at risk for a lot more than their earnest money (the money the buyer pays as a gesture of buying intent). If they default on the offer to purchase,  Lines 281 to 284 of the Wisconsin Residential Offer to Purchase clearly state:

• A judge may order the buyer to follow through with the contract, and request the earnest money as a partial repayment of the purchase price.
• A seller may terminate the offer and have the option to request the earnest money as liquidated damages or sue for actual damages.

Example: Let’s say you offered $250,000 for a property and decided to walk away from the deal for no reason. If the seller later sells the home for $225,000, they could sue you for  the $25,000 difference in price plus the costs of holding onto the property for the additional time it took to sell and close.

Don’t wait until it’s too late — Call (262) 781-1100 for help buying a home, defaulting on a purchase or finding the best mortgage for you.

7. Buyers don’t get their earnest money back automatically if they terminate a contract.

The buyer and seller have to sign a Consent and Mutual Release in order for the earnest money to be returned to the buyer. If there is a dispute that cannot be negotiated, buyers and sellers have to go to small claims court for all earnest money disputes arising out of the sale of residential property with 1-4 dwelling units.