Selling a residential property is like climbing Mount Everest – getting a signed contract is a great accomplishment, but that's only half the journey. The typical home sale today involves more than 20 steps after the initial contract is accepted to complete the transaction.
Much of what needs to be done before the closing is the responsibility of appraisers, loan processors, attorneys, and inspectors — the REALTOR®'s role is to coordinate those responsibilities, helping to ensure that others do their jobs promptly and correctly and that the closing isn't
Many steps between contract ratification and closing involve the cooperation of both buyer and seller, and attentive REALTORS® on both sides of the transaction will troubleshoot and keep everyone on track.
|1. Select an escrow|
One of the parties selects an escrow
agent. The escrow agent will collect the necessary documentation from
each side and will conduct the closing.
|1. Deposit earnest|
Earnest money funds are deposited
according to instructions, which include who will hold the deposit,
whether interest is to be accrued, and conditions of release. These
funds are applied to the down payment at closing.
|2. Assemble condo or|
home owners association (HOA) documents.
Sellers who live in condos or in a
neighborhood subject to an HOA must provide financial statements and
recent reports to the buyer for review.
|2. Make the final loan|
If interest rates are falling and more
home owners are refinancing, additional time may be needed to obtain a
mortgage commitment. If the property is being financed with a VA, FHA,
or other government-backed loan, it will be necessary to obtain copies
of correctly filed building permits for all remodeling or additions done
since the original construction. Decisions about locking in interest
rates can be made at any time after a contract is ratified.
|3. Order a preliminary|
A title search examines all public records
to determine any defects in the chain of title; in other words, to
confirm that the seller actually owns the property and has the right to
|3. Order the home|
Lenders require an appraisal before
committing to a loan. Appraisers compare the features and condition of a
home to similar properties to arrive at a dollar figure for its value.
|4. Request a|
satisfaction letter from present lender.
Total amount due on any existing mortgages
must be provided in advance of settlement.
|4. Arrange the property|
A survey determines the boundaries of the
property, its location, and the size and shape of any buildings on the
lot. The survey also identifies any existing easements or encroachments.
|5. Coordinate home|
appraisal and inspections.
Arrangements for access to the property
must be made for the lender's appraisal and any inspections as specified
in the contract.
|5. Order inspections.|
Inspections may include those for home
condition, radon, lead, earthquake, and termite infestations.
Inspections should be ordered as soon as the contract is ratified so
there is time to remedy any problems or renegotiate terms. REALTORS®
have established relationships with inspectors and contractors to help
ensure that their transactions get priority in busy times.
|6. Arrange final|
utility readings and payments.
When bills are prepaid, payments will be
prorated at settlement between buyer and seller.
|6. Verify employment|
and financial information.
Lenders will require buyers to verify
employment and financials before committing to the loan to ensure that
there have not been significant changes since the process began.
|7. Obtain home warranty|
policy (if applicable).
If a seller has offered a home warranty
policy, he or she must obtain this policy before closing.
|7. Purchase homeowners'|
and hazard insurance.
Homeowners' and hazard insurance is
required by lenders; in some areas, flood insurance is also required.
|8. Complete repairs.|
If the sellers have agreed to make repairs
as a result of a home inspection, these must be completed. If repairs
require a building permit, sellers must apply for one as soon as
possible, because this could delay closing.
|8. Obtain title|
Title insurance can help ensure that title
defects will not make a property unsaleable in the future because of:
|9. Have an attorney|
prepare the deed.
The deed is the document by which the
owner transfers title to the property.
|9. Secure a loan|
Lender notifies escrow agent of commitment
and confirms settlement date.
|10. Arrange for payment|
of transfer taxes.
Most states require a tax on transfer of
property. This expense is most often the responsibility of the seller.
Cities and local municipalities may also charge transfer taxes.
|10. Transfer utility|
Utilities should be transferred into the
buyers' names as of the date of settlement.
|11. Complete the final|
Buyers walk through the property with their REALTOR® shortly before closing to ensure that the property is being delivered in the condition agreed to in the contract.
When things go wrong, closing can easily fall behind. Here's how much time to expect on particular delays:
- Buyer submits incorrect information to lender.
- Source of downpayment changes.
- Escrow fails to notify parties about missing documents.
- Principals leave town without signing all necessary papers.
- Unknown defects are discovered in the property.
- Last-minute liens discovered.
- Cloud on title.
- Move-out date changes.
- Lender decides at the last minute it doesn't approve of the borrower or the property.
- Lender raises interest rates.
- Lender requires last minute reappraisal or repairs.
- Appraisal too low.
REALTORS® have extensive experience in handling problems that may arise during the time between contract and closing; they can anticipate difficulties and address them in time to ensure a smooth settlement for all involved.
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