Okay. So you’ve made a purchase offer on real estate, negotiated the terms and the seller has accepted your offer. Other than the customary bout of “buyers remorse,” what happens next?
Well, in short, everything that has been contractually agreed upon between buyer and seller now begins playing out. First, the home is withdrawn from the open real estate market and enters “escrow” when the buyer deposits “good faith” money into an escrow account. These funds, managed by an escrow company selected by the buyer, will eventually be applied to the home’s purchase price unless certain contractual contingencies fail to be satisfied.
These contingencies, negotiated up-front between buyer and seller, include the following points:
The buyer must secure mortgage approval. This can be a time-consuming process and the buyer should start shopping for a loan immediately after a purchase contract is signed. Getting pre-qualified from a lending institution before looking for a new home is always a good idea and can speed the lending process.
If a loan is to be considered for approval, the lending institution usually wants to see the property appraised at the sale price or higher.
The house must be examined by a licensed property inspector. An inspection that turns up serious defects in the home could be grounds for nullifying the purchase agreement.
The property must have a clear title for a clean exchange of ownership. Experts strongly recommend consulting with an escrow officer or real estate attorney who can explain the title report to you.
If these contingencies (or any others listed in the purchase contract) are not met, the deal can be nullified and the good faith money returned to the buyer.
Tie Up Loose Ends
During the escrow period, the buyer should be busy tying up loose ends that might stall or prevent the transfer of property. Homeowner’s insurance, required by the lending institution, must be purchased, local and state regulations pertaining to property transfer must be met and a final property “walk-through” needs to be arranged.
This walk-through, assuring the buyer that the property is in the condition contractually agreed upon, comes just prior to the “closing date.” The closing date, mutually decided between buyer and seller in the purchase contract, is when all final documents are signed, closing costs paid and ownership of the home legally changed. The final step, “possession”, is when the buyer actually moves into the home.