The house hunt seems to be reaching its end. But after dozens of showings and maybe even a few offers that were outbid or not accepted, a homeowner has finally accepted your offer!
But now what? Has the process ended, and is it time to plan the move?
While an offer acceptance is a positive step toward homeownership, certain hurdles must be cleared before completing the process. Some of the steps depend upon the offer’s details, such as contingencies and inspections. Others might relate to finalizing a mortgage, homeowners insurance, title search, and other tasks that must be resolved before the transaction is officially completed.
In most cases, the prospective buyer must also submit the appropriate earnest money or good faith deposit to demonstrate their commitment. This money gets credited back to the buyer at the time of closing.
Buyers should always work with an experienced and highly regarded real estate agent who will help navigate the journey and smooth the way to a crisis-free closing.
Due Diligence Phase: Contingencies and Inspections
The most critical period of the home purchasing process, the due diligence period, is defined in the initial offer, during which specific actions must occur. The duration of this period may be one week up to one month to complete particular tasks needed to move forward.
Some of these steps may be contingencies, such as:
Professional Home Inspection
The buyer engages a professional, certified home inspector to evaluate the home in detail, point out deficiencies, and submit a report. The buyer’s Realtor will usually recommend a proven expert to complete this inspection.
When the inspector finds problems, the buyer may request that the seller repair these before the closing or appropriately reduce the selling price. The Realtor will help negotiate these changes according to the buyer’s wishes.
Unless the buyer has made a cash offer, some proposals may be contingent on their ability to secure sufficient mortgage financing. Buyers are generally expected to obtain mortgage preapproval even before starting a serious search with their Realtor. However, a lender must finally certify its commitment for the amount, length of the loan, percentage rate, and any other terms.
To secure financing, buyers must verify their ability to repay the loan. Underwriters will review proof of income, credit rating, recent tax returns, and current assets and debts before loan approval.
With financed purchases, the lender will send an official appraiser to the property to estimate the property’s value. This appraisal, paid for by the buyer, assures the lender that the property’s value will be sufficient to recover the principal in case of default.
Final Steps to Closing
A critical behind-the-scenes activity involves the title search or investigation into the property history. This crucial step determines if there are any critical legal issues or restraints that could interfere with the sale. The title insurance company or the closing attorney typically conducts this step.
Securing Property Insurance
With lender-financed transactions, proof of insurance is required before closing. Therefore, the buyer should explore all options and understand every aspect of homeowners insurance, including inclusions and exclusions, deductibles, and any other applicable elements.
Setting the Closing Date
Once all contingencies are cleared or resolved, the buyer’s Realtor will arrange a time and location agreeable to all parties for the final closing with the title company or attorney handling the transaction.
The seller may choose to cancel utilities as of the closing date. Or, the buyer can contact utility companies at least two weeks before the closing to set the date of transferring the utilities into their name. To ensure continuity, communication between the buyer and seller will help ensure the transition is seamless.
Within 48 hours of the scheduled closing, the buyers will have an opportunity to inspect the property to ensure its satisfactory condition. At this time, any agreed-upon repairs should be completed.
After signing numerous documents at the scheduled time and place for the closing, the buyer becomes the proud owner of a new home!
Buying a home does not have to be an overwhelming process. Working with a proven and professional real estate agent will help everything go more smoothly.