From Making an Offer to Closing

Buying a Home

From Contract to Closing’ve finally found the house of your dreams! What happens next, and who’s responsible for what? This is an overview of what you can expect to happen between making an offer and when you can move in.

Making an Offer: You and your agent will work together to outline an offer. The owner may accept, reject, or make a counteroffer and there may be several rounds of negotiations for selling price as well as other terms and conditions. In SC real estate transactions, only one document, AGREEMENT/CONTRACT: TO BUY AND SELL REAL ESTATE, is used and amended throughout the real estate transaction. This contract is considered an ‘offer’ until all parties agree to the terms and contingencies and sign off on them. At this point, the document is referred to as a ‘ratified contract’ and after it is signed, it is legally binding.

Terms and Contingencies: Some of the terms that you will negotiate include the selling price, which items will convey, the closing date, earnest money, transaction costs, the repair procedure or due diligence addendum, and home warranty coverage. Real estate transactions are different from other business deals in that the buyer’s obligation is ‘conditional’ or ‘contingent upon’ clearly defined outcomes. Typical contingencies include the buyer obtaining adequate financing, the property being valued appropriately by the appraisal, and a clear CL 100 Wood Infestation report. You or your lender may stipulate additional contingencies. The time allowed for clearing each contingency is included in the contract.

Earnest Money: The buyer is expected to submit a negotiable amount of earnest money when the offer is made. This money does not get deposited until the contract has been ratified; at this time it will be deposited in an escrow account.

Contract Ratification: A ratified sales contract means both the buyer and the seller have signed off on the final offer. It also acts as a starting point for satisfying the contingencies stated in the contract.

Loan Application: The ratified sales contract specifies the amount of your down payment, the price you will pay for the house, the type of mortgage financing you will seek, your proposed closing and occupancy dates, and other contingencies. You will give all this information to your loan officer when you apply for a loan. Your lender will update you along the way and ask for more information as needed.

Due Diligence Period: “Due diligence” is the period of time you have to remove contingencies after the contract has been ratified. During this time, the buyer has the right and obligation to inspect the property. In the contract, both parties agreed to either follow an outlined repair procedure or sign a due diligence addendum, which grants the buyer the right to terminate the contract due to any information uncovered during inspections of the property or investigation of the property documentation.

Inspection: The house inspection is ordered and paid for by the buyer; your agent can recommend a licensed home inspector. The inspector determines if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and you should attend. This is an opportunity to examine the property’s mechanics and structure, ask questions, and learn far more about the property than is possible with an informal walk-through.

Repair Negotiation: Sometimes repairs are negotiable. In that case, you (with your agent’s help) or the seller will get estimates from contractors and try to negotiate a credit, a repair, or a price deduction. There is no guarantee that the seller will be willing to negotiate repairs.

CL 100: The seller (or you) will obtain a wood infestation report indicating no evidence of wood destroying organisms.Addendum: After the due diligence period is over, your agent will prepare an addendum to be signed by both parties stating that inspection contingencies, etc. are removed or otherwise negotiated.

Appraisal: After we have deleted the inspection contingency, your lender will order an appraisal from an independent party to give an estimated value of the property.

Insurance: At this point, you will need to get quotes for property insurance. Your agent will check with the seller for a copy of the land survey and a flood elevation certificate.

Buyer’s Financing: During this time, you will continue to work with your lender to confirm financing.

Attorney: You will need to hire a real estate attorney to prepare legal documents and to make sure that your interests are protected. Your attorney will order title work and a survey (if you want one). As we get closer to closing, your attorney will send you a copy of the HUD Statement, which is a form outlining all of your costs and the ‘bottom-line’ amount of money you will need to have at closing. You should review this document to be sure all the fees are what you had been told and that you agree with them.

Closing Date: Your lender will notify your attorney when the finance package is ready and a closing date/ time will be set.

Final Walk-through: Reinspect the property once again before closing--usually a day or so before. Is everything the way you expect it to be? Have all the agreed-upon repairs been completed? This is important so that you don’t arrive at your new home and find unexpected surprises. The house should be left in broom-clean condition.

Closing: Your agent--and sometimes your lender--will accompany you to the closing; the seller and his agent will be there as well. Your lawyer will go over each form that you are asked to sign--and there will be a lot of them. You should bring a certified check for the amount of the closing costs, and be sure to bring a personal check in case there is a small charge on the HUD Statement on the day of closing.