What Happens Once You Are Under Contract

What Happens After the Offer is Submitted to the Seller:

Negotiations:  When the sellers receive your offer, they have 3 choices.  They can reject your offer without responding.  They can change one or more items on your offer and submit the offer back to you (a counteroffer).  They can accept your offer as is.  If the sellers reject your offer, you may submit a new or revised offer and start the process over.  If the seller counteroffers, you also have 3 choices: reject, counter or accept.  This process continues until all parties agree and have signed or until the final counteroffer is rejected.

Receipting the Contract:  When the offer is accepted by all parties, you must sign the contract and initial every page and every change.  The sellers must initial any changes as well.  Once all changes have been accepted and all pages signed, the contract becomes officially “executed” and will bear that date of commencement.  The execution date starts the clock ticking on the option period.  I will keep you updated during the option period and let you know when the contract becomes binding on the you  Once, the contract has been executed, it is “receipted” at the title company, which means the escrow money is deposited.  The title company will open title, if they haven’t done so already and will begin work on the title commitment.

The Buyer’s Inspection:  During the option period, you will most likely hire a licensed inspector to check the condition of the home compared to the current building codes.  You do not have to attend the inspection, but I do recommend meeting with the inspector at the house as soon as he is done.  That way, the inspector can go over any items of concern with you in person right away , and you can ask questions.  The inspection usually lasts 2-4 hours, and although you need to call the inspector yourself, please coordinate the inspection time with my schedule as well.

Requesting Repairs:  After the inspection is done, it is possible that you will want to request that the seller complete certain repairs that might have been indicated on the inspection report.  You might make the contract contingent upon completion of those repairs, or you may offer to cancel the remainder of the option period if the seller will agree to make the repairs.  I will advise you on which repair requests are reasonable and might be accepted by the seller without jeopardizing the contract.  You have two other alternatives:  Negotiate a lower sales price or cancel the contract based on the inspector’s findings.

After the Option Expires:  You are one step closer to purchasing your new home.  It will still need to appraise at or above the sales price in order for the sale to go through, if you are obtaining financing.  The survey must be free of encroachments (fences are usually okay).  Your financing must go through.  During this time period, your responsibility is to make sure you have turned in and signed all paperwork for your lender.  Also, do not make any changes to your financial situation; e.g. no big purchases, don’t open any new lines of credit, don’t quit or change jobs.

Appraisal and Survey:  An appraisal is done to make sure the property is really worth the price you are paying.  The appraiser uses comparable sales to determine value.  The survey is a drawing of your lot and the structures on it.  It shows any easements or building set back lines.  Both will be ordered after your option period expires and you are certain you are moving forward with the purchase.  The cost to you will be roughly $400-600 a piece.  Typically, both are paid at closing as a part of your closing costs, but the lender may require the appraisal fee in advance.  The lender orders the appraisal, and the title company orders the survey.  I will let you know if any problems arise with these documents.

Utilities:  At the closing date approaches, you will want to order all utilities transferred to your name.  These services usually include electric, gas, water, wastewater, solid waste, cable and phone.  If you don’t know who to contact, ask me.  Schedule service to begin the date of expected funding.

Title Commitment:  One to two weeks after the contract is receipted, the title company will mail or email you a title commitment.  You and I will need to look carefully at Schedule C.  Sometimes, the title company will include a cover letter with the title commitment that spells out in plain English what needs to be cleared before closing.  More often, though, Schedule C will list these items.  Both buyer and seller issues will be listed.  I will check into both and may call you to help me answer any questions that appear on the buyer’s side.  Examples of possible problems are mechanics liens on the seller’s property, past due seller home owner’s fees, credit or legal issues involving someone who has your same name, divorce or marital status issues, etc.  Everything listed under Schedule C must be resolved prior to closing!  That’s why it’s in your best interest for me to continually check on these issues until all of them are clear.

HUD1 Settlement Statement:  Technically, you should see this BEFORE the day of closing.  Unfortunately, lenders rarely get their closing instructions to the title company in time for them to prepare the HUD much before closing time.  I will put as much pressure on folks as I can to get this in advance, but if you find yourself at the closing table seeing the HUD for the first time, that’s okay.  BUT, we need to look it over very carefully before signing.  Don’t be afraid to ask questions about this very important document.  The HUD contains all of the charges to you associated with buying your home as well as the credits you will receive from the seller.  The net number is the amount for the cashier’s check  you will bring to closing.  You will want every penny of this statement to be accurate.  Some charges to look out for:  prorated property taxes, prorated home owner dues, home owner association transfer fees, lender fees, option and earnest money credits, etc.  All of these fees should be charged either to the seller or to you, the buyer, according to the terms of the contract and according to the good faith estimate provided by your lender.  The most common errors on settlement statements involve mistakenly charging you for seller’s fees or overcharging of lender fees.  Another common error is omission of the home warranty fee charge to the seller.  It’s my job to check over the HUD carefully for mistakes, but it is in your best interest to check it just as carefully!  I am not perfect, and I can miss things, too!

Closing and Funding:  Bring to closing—your cashier’s check (your lender will give you the amount) and your driver’s license (needed for the notary).  Remember that you may not get the keys to the house immediately.  Expect closing to last about one hour.  Be flexible about the closing time.  Do not schedule anything else on the date of closing in case the times change or paperwork is delayed.  Try to schedule the closing before 2 pm so that funding will occur the same day.  Afternoon closings rarely fund the same day.  Depending on your lender, your loan may not fund until the next day or even a couple of days later.  Be flexible with your moving plans just in case.  Remember, you are most likely using someone else’s money to buy this house (meaning—a loan).  Lenders are very picky about giving out their money, and they call the shots when it comes to when your loan actually funds.  Funding means the sellers get their proceeds, the loan is in place, and you are able to obtain possession of the house according to the terms of the contract.  If there is no leaseback for the sellers, then you should be able to get the house keys and move in.  With a seller’s leaseback, the sellers become your tenants for up to 30 days after closing.  It’s up to you to stay in contact with the sellers after closing.  You become their landlord for the term of the leaseback.

Contact me or call 512-266-2606 if you have questions about this process.  Contracts, offer procedures and lending rules are constantly changing.  This page is just to give you a general idea about the process.