So you’ve been out looking at houses, looking for that right fit in a next home, and wondering what’s next after your offer gets accepted. As I tell people all the time, once you go under contract, now the real work begins.
After all the back-and-forth on price and haggling over seller paid concessions and an agreeable closing date, it’s finally over and your offer to purchase the home was accepted.
For the most part, this is the point where real estate agents really earn their money and a good one proves that he or she is worth every penny.
Once you sign the purchase agreement for your agent, he or she will check it over for accuracy and ensure signatures and initials are in the proper places and then get going on all the time-sensitive duties.
Quite simply, escrow is defined as a holding of funds or other items by a neutral third party to a transaction until they are distributed according to the principal parties’ instructions.
In the typical residential real estate transaction, the principals include the seller, buyer, and lender.
Upon receiving a binding contract, which begins the escrow period, the agent or their transaction coordinator sends a copy of the bound contract over to the buyer’s lender, closing attorney, and the other agent in the transaction. Per the timeline in the contract, within the first few days after binding the buyer will also provide a good faith or earnest money deposit with the holder as noted in the contract. The ‘holder’ is normally one of the real estate brokerage companies or the closing attorney.
The point where the contract is bound, meaning all signatures and initials have been provided by both parties (i.e. sellers and buyers) is the point at which the clock begins ticking toward the closing date specified in the purchase agreement and all those contingencies timeframes.
Next, a title search will be ordered. This is, in a nutshell, a search of the home’s chain of title (from the present owner back to the original owner).
The title company is looking for any problems with the home’s title, now or in the past. An example would be a lien against the property, or an additional loan against it.
The title company will issue what is known as a Preliminary Title Report and deliver it to the escrow holder.
It’s up to the seller, however, to clear any problems. If he or she can’t or won’t, you can cancel your agreement to purchase the property.
Appraisal and Loan Process
While all of the above is happening, your lender will send out an appraiser to determine the value of the home and begin processing your loan.
It’s important to return your lender’s phone calls as soon as possible as they will have a new round of documentation and items that they’ll need – after the initial pre-approval process – to get your loan going more formally through underwriting.
The Home Inspection
You’ll order a home inspection (or your agent can do it for you). Take your time when reviewing the inspector’s report and get all of your questions answered. Your agent should be with you every step of the way.
A good agent will actually be at the home inspection. Think about it. If an agent doesn’t “have the time” to attend a 3-4 hour home inspection, listening to what the inspector says and seeing what they find firsthand, how could an agent know how to advise you about the findings of a 50-85 page home inspection report and do it adequately? When interviewing buyer’s agents, make that question a must to run by those potential agents who claim they want to represent you!
Any adverse conditions revealed in this report, which may require repairs, will have to be negotiated with the seller.
It’s time to remove the contingencies in the purchase agreement. Contingencies are events that must occur, according to the date listed in the contract, before the sale can close. Typical contingencies include:
- Final loan approval – failure to obtain a loan will kill the deal.
- Inspections – repair issue that arise from the home inspection are typically open to negotiation between the sellers. If the seller refuses to remedy any concerns you have the right to cancel the contract with the full return of your earnest money deposit.
- The successful sale of your current home.
- Appraisal – if the home fails to appraise for the amount you are borrowing from the lender you can negotiate with the seller for a lower price, pay a larger down payment or walk away from the sale.
Once the contract contingencies are removed you can still walk away from the deal, but you may forfeit your earnest money deposit and possibly be liable for damages if your contract includes such a clause.
Just two more steps and we’ll be at the closing table!
If you haven’t yet shopped for homeowners insurance, it’s time now to take care of it. Ask friends and family which broker they use, if they’re happy with the price they pay and the service they receive. The best advice possibly is to start out though with whichever insurance company is handling your auto insurance. Through multiple policies with the same company you may be able to get multiple policy discounts that will help lower both your homeowner’s insurance and your auto insurance premiums as well!
Final Walk Through
You have one final chance to walk through the home to ensure that it is in the same condition (or better) as when you agreed to purchase it.
This is when we ascertain that all the agreed-upon repairs were performed and that no damage was done to the home during the seller’s move.
Remember though, this is not a new due diligence period to find ‘new issues.’ I had a buyer’s agent text me recently with a photo of a hole in a window on a listing of mine that we were about to close.
She said the buyer had seen it and assumed it was new damage. I explained to her that the broken window was there since before I listed the home for sale. During the two times she showed this home to her buyer that broken window was there to see. Nothing new here! The broken window was even something you could see in one of the listing photos on Zillow.
Make sure you do a thorough job during due diligence to evaluate and inspect the home because you can’t use a final walk through to find ‘new’ repairs that were missed earlier in the process.
At closing you’ll sign a mountain of paperwork, but when all is said and done, you’ll be a homeowner. With most home sales, unless there is some delayed occupancy within your contract for the seller after the closing, once you walk away from closing you will have keys and garage door opener in hand and can start moving in immediately! Congratulations, you’re now a home owner!