Years ago, I had a column in business section of The Montgomery County Courier. I was looking through a few of the articles I wrote during my three year stint of writing the column and came across a few that might be helpful to buyers and sellers of real estate. Every once in a while, I will pull out one of those articles that are still relavant to the market today and share it with you. This one is a basic primer of the process between contract and closing
Many things are left to be done after a home buyer and seller have reached agreement
If you have a willing buyer and a willing seller and all have agreed on a price and terms...it seems that it would be easy to get the transaction closed...right? I'm sorry to let you know that the answer is...wrong! There is an incredible amount of expertise needed to navigate through the maze of a real estate transaction once the contract has been written.
As a buyer or seller, it may be helpful to have some understanding of what activities take place in the background as you prepare for the transaction's closing. This article is not meant to be "all inclusive." However, it will give you an overview of what you can expect.
According to Dave Jenks, Dean of Keller Williams University, a real estate agent has 161 tasks that are involved in the running of an agent's professional service business. He has summarized those tasks from years of data gathering and interviews. Thirty-two of those tasks relate specifically to the time period between contract and closing.
Fully executed contract
Once everyone has agreed on all the details of the contract, with signatures and initials to verify agreement, a contract is said to be fully executed. At that point, the document is reviewed carefully and a date is placed on the signature page. All deadlines that are specified in the contract work off of that date.
Open Title
Immediately, the agent calls the title company to pick up the contract along with the earnest money. This is called "opening title." The next day the title company normally delivers 2 copies of the fully executed and receipted contract back to both the buyer's and the seller's agents. Much paperwork and computer work is required to place the property into one of the pending statuses and to comply with the broker's policy for processing the sale.
Option Period
Today's buyers usually request an option period. During the option period the buyer usually arranges for a professional inspection to take place. A time is coordinated for both the buyer and seller convenience for any and all inspections. If the buyer finds things that need to be repaired, an amendment to the contract must be drawn and agreed by both parties to assure that repairs will be done. At the end of the option period, there is again a series of computer and paperwork to be done.
Title Insurance
One of the primary functions of a title company is to issue insurance to both the lender and the buyer giving protection against any claims of ownership. In order to issue the policy, an examiner researches the history of each owner to determine if title can be transferred. If any discrepancies show up, staff investigates and "cures" the issues. In almost all cases, the problems can be resolved and title insurance is issued at closing.
Lender Requirements
The contract specifies that the buyer will make loan application within a certain number of days. After the loan application paperwork is completed, the buyer will be asked to submit several documents and a loan application fee. Processing the loan application is a complicated system within itself and we will not go into detail in this column. Once full loan approval is received, the documents are drawn and sent to the title company.
The Closing
As a third party, the title company gathers all the funds and the documentation needed to close the transaction. Normally they must gather documents for the loan, loan funds, homeowner's insurance, a survey and any bills that have to be paid at closing. They then disburse the money and oversee the documentation according to written instructions, usually from the lender or from the contract itself. Although the stack of papers that everyone is expected to sign seems daunting, it is nothing compared to the weeks of work performed by the dedicated professionals in the real estate agent's office, lender personnel, and the title company. It is the goal of these service providers to make it look easy and it is my wish that your next real estate transaction will be a breeze.
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