So now you are in contract, what’s next?
Dear Buyer -
Be glad you have a good Real Estate Agent (or at least you should), because there are many things that take place, documents to sign and many deadlines that occur between the time a contract is signed and when keys are turned over to you.
As soon as we have a Contract where both Buyer and Seller have agreed to terms and have signed, dated and initialed all the appropriate lines on the contract; the Agents then submit the offer to their respective Brokers for review, to the Lender for funding and to the Title Company "open escrow" and to start researching the title history to make sure that the seller can deliver the property with clear title (to make sure that no liens or encumbrances are on the property).
It is required that the buyer take their earnest money to the title company within 1-2 business days after the contract is signed.
APPRAISAL & LOAN UNDERWRITING
The Lender will order the appraisal and will give you, the Buyer, a list of items that the Underwriter will need to "approve your loan". These items include: bank statements, tax returns, pay-stubs, W-2's, LLC or trust documents & perhaps a gift letter if you are receiving money from a family member for the down payment. The Lender will also need to pull your credit history to determine what type of loan package you may qualify for.
Once the Lender has ALL of the documents necessary from the Buyer, including the initial Disclosure Documents (Good Faith Estimate) signed and the appraisal returned, the Lender and Agent will discuss the negotiating terms of the contract regarding Appraised Value, Inspection Notice and perhaps change in Close of Escrow Date. Once all these components have been solidified, the Lender submits all the documents thus far to his Underwriting Department for review. They review to make sure everything is accurate and ALL Disclosures are included and ALL government regulations are met. Sometimes the Underwriters will come back with a list of more items that they may need from a borrower ie., verification of deposits, work history or money transfers etc. This process can go back and forth between the Buyer and the Underwriter and delay the process. The Underwriter is at the mercy of how quickly the Buyer will respond to requests and provide necessary documents timely.
Here is a list of "milestones" that we will receive notification from the lender so that we know where the lender is at during the process:
· Appraisal ordered
· Appraisal Scheduling/Due date
· Appraisal received with a copy of the report
· Loan submission to underwriting
· Loan Approval update with final conditions needed
· Loan final Approval
· Loan docs sent
· Loan funded
Cash Buyers get to skip the Underwriting and Approval Process making closings much easier and quicker.
Your Realtor will guide you through the inspection process -which begins the day following contract signing. The due diligence period (aka Inspection period) is typically 10 days; however this timeframe is negotiable while negotiating the contract. Your Agent may recommend and perhaps schedule for you all necessary Inspectors – a general inspector for sure, and then perhaps a termite inspection, and if necessary other qualified and licensed professionals may need to examine the property and give repair estimates and opinions on the condition of the property. Some additional inspectors that may be needed may include: electricians, plumbers, roofers, pool & or septic inspectors, A/C & Heating technicians and perhaps even a structural engineer.
You may want to determine the cost of new paint, new fixtures, new flooring, cabinetry, landscaping etc. during this time so you can make an educated decision about whether to stay in the contract or not. There are very strict timelines that must be adhered to during this inspection period and at the conclusion of the inspection period, the Buyer may give the Seller an opportunity to correct certain items if necessary.
Keep in mind that Lender owned properties (Bank Owned REO's aka Foreclosures) and Short Sales (homes that are sold for less than what is owed to the Lender), very rarely will agree to fix items for a buyer – buyers almost always have to purchase those properties in “AS IS” condition and there is an AS IS Addendum that the parties sign in those circumstances.
BUYER INSPECTION NOTICE
Once the inspections (and hopefully the appraisal) are complete, the Buyer, with guidance from the Real Estate Professional, will determine whether to:
a) Move forward with the purchase "As Is" or
b) Move forward if the Seller will make some repairs or
c) Cancel the contract so that you (the Buyer) can get your earnest money refunded.
If you as the Buyer choose to: b) move forward if the Seller will make some repairs and the repairs are spelled out on the inspection notice, the Seller then has 3 options:
a) Fix or replace the items asked to keep the Buyer in contract,
b) Fix some of the items and then let the Buyer decide whether he/she would like to fix the remaining items or cancel the contract or
c) Fix none of the items and pray that the Buyer has enough money to fix the items AND loves the home enough to buy it "As Is" without cancelling the contract.
Once the Inspection Notice has been negotiated, all parties (Buyer, Seller, Realtor(s), Title Company & Lender) working together move toward the close of escrow date.
The Lender will give you a “Good Faith Estimate" (GFE) of your closing costs. Usually, although negotiable, the Seller pays for the owners title policy and 1/2 of the escrow fee & recording fees. Seller also pays property taxes prorated to date of close of escrow. Seller usually pays commissions, back HOA fees, any back assessments or taxes, mechanics liens, IRS liens etc.
You, the Buyer, customarily (but negotiable) pay for your loan costs (i.e., origination fees, discount fees, lender's title insurance -- required by Lender), 1/2 the escrow fee, appraisal fees, inspection fees, pre-paid interest, property taxes, mortgage insurance, HOA fees or HOA transfer fees, 1/2 of the recording fees, and endorsement(s) which is a fancy way of saying - miscellaneous (which usually include courier service fee, mobile notary fee, flood certificate etc).
In a few circumstances, there may be a septic certification, condo certification, water well inspection and certification, road easement transfer, back taxes, HOA fines, IRS or Mechanic liens that the Buyer would be responsible for; however, the Title Company and your Realtor will walk you thru all these issues and decisions.
HOMEOWNERS INSURANCE & UTILITIES
You will need to speak with a Homeowners Insurance Company and determine what your costs will be for Homeowners Insurance. Your Lender &/or Real Estate Agent can recommend some great insurance agents/companies if necessary.
You will also need to arrange to have all the utilities turned on & other services transferred (Electricity, Water, Sewer, Gas, Trash, Cable TV, Internet, Phone, Alarm, Postal Service, Lawn Service, Pool Service etc).
If you have a favorite Home Warranty Company great; if not, let your Realtor recommend one for you. He/she has personal representatives that will usually provide great care and service to you because of the relationship the Realtor has developed with the representative &/or company. Your Realtor can sign you up and submit all the paperwork to the Title Company for you so that your Home Warranty is implemented & paid for simultaneous to your closing escrow.
Here is a link for you to review all the new Old Repulic Home Warranty Plans available as of 4/15/16: https://www.orhp.com/newPlans/
SETTLEMENT OR CLOSE OF ESCROW
Your Lender will also send the Good Faith Estimate (GFE) to the Title Company and they will work up the exact numbers pro-rated to the “Close Of Escrow” (COE) date.
Loan fees, which may or may not include discount points and origination fees, are no longer negotiable with your lender based on new regulations introduced 1/10/14.
Senior Escrow Officer/Branch Manager
Driggs Title Agency
7975 N. Hayden Road
Scottsdale, AZ 85258
The Title Company will put all the numbers on a “Settlement Statement” with Buyer’s costs on one side and Seller’s costs & receipts on the other side. You will get a draft copy to review with your Agent but it probably won't be until your loan docs have been approved by Underwriting and delivered to the Title Company.
There will be a lot of documents for you to sign – from the Lender, from the Real Estate Broker and from the Title Company. All of these professionals will correspond with each other and make sure everyone is completing the tasks on time to close escrow.
Once Underwriting has "approved your loan" the Loan Officer will send the Lender’s loan documents to the Title Company to prepare the closing documents. These "docs" would include a “Deed of Trust” giving you clear title to the property and a “Title Insurance Policy” which guarantees clear title.
DOWN PAYMENT, LOAN AND CLOSING COSTS
You will deliver or wire to the Title Company the remainder of your down payment and closing costs (The Title Company will provide the exact amount on the settlement statement); and the Lender will wire transfer the funds for the loan to the Title Company as well. After the Buyer, Seller and Real Estate Agents have signed all necessary paperwork, the Title Company will notarize some of the most important documents and then will return all the documents to the Lender for final review and funding. It is important to note that just because you signed the documents, close of escrow has not happened yet. Sometimes it may take 1-2 days to get the signed documents okayed by the Lender and the Deed of Trust "Recorded" by the County. Under normal circumstances, once the Deed of Trust has been publically recorded, then closing is complete.
After recording, and closing is complete, your Realtor can then hand you the keys to your new home and the Title Company will disburse the funds to the appropriate parties. We highly recommend that you immediately change all the door locks or have them re-keyed, re-key your mailbox and re-program your alarm, keyless entry and garage door openers.
I hope that this explanation helps you to understand the process so you can anticipate the steps involved.
Congratulations – Enjoy YOUR New Home & Lifestyle!
The Shanna Day Dream Home Team
Your Real Estate Agent(s)
Keller Williams Realty East Valley (AZ)
Keller Williams Realty Salt Lake City (UT)
Shanna is licensed in both UTAH & ARIZONA and has teams in both states).
So now you are in contract, what’s next?