The Sales Process

The process of buying a home can be daunting and a little scary. With information on your side, the process will seem easier.

Below is a step-by-step guide on what to expect when purchasing a home; along with contract terms.

Once we find a house, we write a contract that lists out all of the terms we are offering to the Seller.  This contract is something I write and is sent to you electronically for signature. The terms we decide on are:

1. The sales price of the home
2. Earnest money deposit – This is like a security deposit and indicates to the Seller how serious you are about the home. This deposit is held by the title company and is deducted from the total amount of funds needed for closing. The amount of the deposit is dependent upon how many offers there are on the home. The higher the deposit the stronger the offer.
3. Home inspection – The home inspection is when we hire a third-party individual to go over the property and determine all that is wrong with the property. For the contract we determine how many days we will complete the inspection in or if we are going to waive it.
4. Financing contingency deadline – This deadline is for when the lender needs to provide conditional loan approval. Typically, this deadline is 21 days from when Buyer and Seller agree to the contract terms.
5. Appraisal contingency deadline – This deadline is for when the appraisal needs to be back. Typically, it is 21 days.
6. Closing date – The date as to which all of the loan papers are signed and you get the keys to the property.

Once we have decided on these terms, I will put the contract together and I send it to the listing agent.  When the offer is presented, the Seller can accept the terms of what we offered or counter them.  If they counter then we decide if we like their terms or want to counter again. This goes on until we have an agreement between both parties as to the terms of the contract. Once this is done and the contract has been delivered to all parties, we call it Contract Ratification.  The ratification date is the date that all of our contingency deadlines begin.

The contract is now ratified and needs to be submitted to the title company. The title company will then open a file and it will be time to wire your earnest money deposit to them.  The earnest money can be refunded during certain contingency periods which I will go into as I explain each of them.

After the contract is ratified, we will schedule the home inspection (if we have agreed to have one). Typically, I say that our home inspections have to be completed within 5 days of contract ratification.  This is a time for a third-party company to come in and tell us everything about the house. During this time, we can negotiate any repairs that we feel need to be remedied by the Seller.  I usually recommend the repair items to be major items that will cause harm. Such as major plumbing, electrical, and foundation issues.  If the Seller does not agree to make repairs and we decide that you do not want to purchase without repairs then we get out of the contract and you get your earnest money deposit back.

There is also a home inspection for informational purposes only. This means that you have a home inspection but waive the right to repairs and waive the right to get out of the contract should something be wrong.

The last home inspection choice we have is inspection with the right to void. This is when we have a home inspection but no repairs are asked for and you have the right to cancel and get your earnest money deposit back with no penalties.

Each of these inspection choices is what we decide on and negotiate as part of the contract process.

The next contingency is the financing contingency. This is when the bank offers a loan commitment letter stating that they will finance you. If you cannot get financing during this contingency period then you can get out of the contract and get your earnest money deposit back.

The appraisal contingency is next. This is when the appraisal has to be back to the lender showing that we are appraised at least at the contract price and if there are any lender-required repairs. If the appraisal comes in less than the contract price, we have to renegotiate the contract and determine how the gap will be bridged from the contract to appraised value. This can be done in a couple of ways.  One, the Seller comes down to the contract price. Two, the difference is split. The seller comes down half and the Buyer brings half of the difference to closing. Three, we get out of the contract and you get your earnest money back.

If there are any lender-required repairs by the appraiser then it would first be on the Seller to agree to repair and if they said no; then it would be our decision if you wanted to make the repairs.

The last contingency is a review of the HOA/Condo resale package.  This package is delivered to a buyer within the first 2 weeks of contract ratification. The package includes all of the rules of the association, the budget, and if there are any special assessments. Once this package is received, we have three days to review it.  In those three days if you see anything that you do not like then we could get out of the contract and get your earnest money back.

After all of the contingencies have been waived you can no longer get out of the contract without losing your earnest money deposit. If you are leaning toward voiding the contract we would have a discussion on what is worrying you about the deal and how I can make you feel more comfortable.  I will also go over the repercussions of voiding the contract.

Once all the above steps are completed, it will be getting close to the time we close. There are some final steps with the loan that will occur before you sign the loan documents on the day of closing.

1. Conditional loan approval – underwriting has reviewed the loan and needs some final documentation to get full loan approval. This sometimes can include updated bank statements, updated paystubs, etc.. These are usually minor items.
2. Full loan approval – Underwriting has given the go-ahead to approve the loan.
3. A closing disclosure goes out three days prior to closing. This disclosure lists out all of the costs associated with the loan and the final amount of money needed to close. At this time the wire transfer will be made to the title company for the funds to close the amount.
4. The loan gets clear to close and the loan documents can be sent to Title.
5. Closing day. All of the loan paperwork is signed which takes about 45 minutes. At the end of the signing, you will get the keys to the house and you can move in.

Congratulations on your new home purchase!