From Contract to Close

Finding the right home and having your offer accepted is a big step towards buying your next home, but it's not the only one. In fact, there are many more important steps that must happen to get From Contract to Close. Here is a brief description of each step:

1) Escrow is Opened

The seller's agent sends the fully executed (signed) contract and any counteroffers, amendments and addendums to the Title company. The buyer's broker takes the earnest money check to the title company. The title company will be cashing the check and putting the finds into an escrow account. Once the earnest money check is turned in to the title company the house listing is changed to pending status in the MLS and it should no longer be shown to other prospective buyers.

2) Property Disclosure, Tax Levy Disclosure and non-Foreign seller Affidavit are Read and Signed

Sometimes these documents are read and signed at the time the offer is written. Other times they are done within three first three days after the acceptance of the offer. If anything on the disclosure statements raise concerns the buyer's broker can ask for clarification or ask for a cure (repair) on an "Objections, Waivers and Resolutions" form.

3) Inspections are Ordered

This should be done on the first day after the offer is accepted. The inspections should then be performed within the first 7 to 10 days so there is plenty of time for any repairs to be completed. There are many types of inspections a buyer can request, but at the minimum every buyer should request a Full Home Inspection and Wood Destroying Insect (Termite) inspection.

4) Loan Application is Completed

There is short window of time-usually five days-for you to complete the loan application process if you have not already done so. If it has been awhile since you were prequalified then the lender may ask for more recent pay stubs or new tax forms to be provided at this time. Other supporting documents may be asked for at any time during the process, sometimes up to the day before closing.

5) Inspection Reports are Received and Repairs are Requested

Once the inspection reports are received we will have three days to read through the report and write up our request for repairs on the "Objections, Waivers and Resolutions" form. The seller then usually has three days to consider which repairs they agree to perform. If the amount of repairs is less then the repair allowance negotiated in the contract then the seller is obligated contractually to perform the repairs. If the amount of repairs exceeds the repair allowance then buyer and seller need to negotiate which repairs will be completed and who will pay for them.

6) Title Company Sends the Title Binder

The title binder or title commitment is usually completed around the 10 to 14 day mark. The title binder alerts everyone if there are any problems with transferring "clear" title. Once the title binder is received the buyer usually has three days to review the document and request the seller to cure any objections that they may have.

7) Appraisal is ordered

This usually happens around day 14 to 21. The appraiser searches for recent comparable sales and then prepares a report stating their opinion of value after viewing the house. The purchase agreement contains an appraisal contingency. The contingency states that if the appraisal comes in for less than the purchase price the buyer may elect to purchase the house for more than the the appraised value and continue with the transaction if they can make up the difference in cash. If the buyer chooses not to then the contract will terminate and the buyer is entitled to receive a refund of their earnest money.

8) Re Inspection is Ordered

If there were repairs requested the inspection company will go out and perform a reinspection to make sure any repairs requested were performed adequately. If the buyer is receiving a home warranty the inspection company will have to sign off on all repairs items to insure they are warrantable.

9) Lender Prepares Documents for Closing

Once the title binder and appraisal are received by the lender your file will go back to underwriting for final approval. Once approved, your file is sent to the lender's closing department where the documents required for closing are prepared. The loan package is then sent to the title company.

10) Title Company prepares HUD Settlement Statement

Once the loan package is received by the title company the escrow officer will prepare the HUD Settlement Statement for closing. This document is a detailed accounting of the costs of closing on the purchase. Once it is prepared they will send it to the lender for approval and also to the brokers for double checking. This is when you will get the exact amount of funds you will need to bring to closing.

11) Closing

This is your appointment at the title company where you sign important documents including the deed and your new mortgage. Buyers and sellers schedule separate appointments, so you will be sitting down with the escrow officer, your real estate broker and sometimes your lender. Expect closing to take around one hour. You will need to bring your drivers license and a cashier's check for the funds required to close.

12) Funding and recording

Closing is not complete when you leave the title company. There are a couple of steps left. First, the loan documents are sent back to the lender for final approval. Second, the deed is recorded with the county. Once the deed is recorded the funds are released to the title company and disbursed to the seller and the loan is "funded." This is when the keys are made available to the buyer. Funding usually happens on the day after closing, but it can take up to two business days.

I know that was a lot of information, but remember I will be guiding you through every step in the process.  Please ask me any questions you have and be quick to let me know your concerns!