Lets dig into what happens once you have a solid offer accepted. First, congratulations! I hope that we were helpful in marketing your home and advising you along the way and if not, the congratulations still stands! Now, after you have taken a moment to celebrate let’s get our game faces on because the real is fun is about to begin.
I highly recommend creating a transaction deadline checklist for all important dates within the contract. There are significant implications for both the seller and buyer to comply with these contractual deadlines agreed by both parties. In fact, if you are selling by owner, getting a lawyer to review the contract is a great idea.
Escrow
Once the contract has been fully executed, or signed by all parties, then initial deposit for escrow is due. If otherwise agreed, this is due three days from the effective date or executed date. Important to note is that days are counted in calendar days and not business days unless otherwise specified within the contract. Sellers, as the buying party deposits the escrow monies, you are entitled to receive proof of that payment from the title company or attorney holding escrow.
If your effective date is December 1 and first escrow is due three days after, then your initial escrow is due December 4th by 5 pm.
There is a second escrow deposit due later. Usually the due date for the second escrow coincides with the inspection period deadline. There are couple reasons for this. First, a buyer can pull out of the contract during the inspection period for any reason. Once the inspection period ends, the likelihood that the deal closes increases.
Property Inspection
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. This is a critical period in the sales process. It is important that any issues with the home that is known by seller is disclosed upfront to avoid and surprises during this period.
Property Appraisal
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. If property doesn’t appraise at the agreed upon price, then, renegotiation may occur but if no compromise can be reached, the contract can be nullified and escrow monies returned to buyer if there is an appraisal contingency.
Financing
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. As a seller, make sure you accept offer only from qualified buyers to avoid this issue from occurring.
Title
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.
Final walk-through
The buyers are allowed to do a final walk-through of your new home up to 48 hours before closing.
This allows them to make sure any items that should be there, as per your contract, remain. It also lets them to check the condition of the home to make sure no extra damages have occurred. If anything is different from what was agreed upon, the closing may be postponed to give the seller time to fix the problem.
Closing
This is the day when ownership of the home is transferred. You will need to bring ID. Check with your attorney or the title agency about the details of your closing.
If you change your mind
If you are a seller and you have changed your mind about selling your house to a particular buyer — or selling at all — you may have an out, depending on how the contract was negotiated. Some real estate contracts are written with a kick-out clause or escape clause that allows you to accept a better offer if one comes in during a specified time period. If you don’t have a kick-out clause and you have signed a contract with a buyer, you run the danger of being sued by the buyers if you decline to sell your home.
If a buyer wants out of a real estate contract and don’t have any contingencies available, they can breach the contract. However, once they do so, they may lose their deposit along with the money they spent on an appraisal, a home inspection and a title survey. The seller could also decide to sue you for breach of contract.