You’ve successfully negotiated the terms and accepted an offer, now what ?
Well, in short, everything that has been contractually agreed upon between buyer and seller now begins playing out. First, the home is put in a “Continue to Show” (CTS) status alerting agents that while the home can still be shown, there is an accepted offer. The 1% check that accompanied the Binder (accepted offer) is placed in the buyer’s agent’s escrow account until the point where contracts are signed.
Now we need to fulfill the contingencies, negotiated up-front between buyer and seller, include the following points:
Depending on the systems in your house, the buyer customarily has 7 business days to complete all inspections which can include:
* Building/Engineering Inspection – conducted by a licensed property inspector — from the roof to the foundation-and everything in between. This usually also includes a termite and pest inspection. Other inspections performed can also include a lead test and water test. The test can run 3-4 hours depending on the size of the home.
* Radon Test – radon is a gas that occurs underground and when a house is built it can be “trapped” in the structure. The buyer will most likely do a test which consists of putting a monitoring system in the lowest living level of the house and letting it run for 48-72 hours. The test is then read and in CT, a radon level found under 4.0 picocuries is considered ok.
* Septic Inspection – if your house has a septic system the buyer will hire a licensed septic inspector to check the integrity of the tank (no cracks), and the capacity left on the leaching system.
An inspection that turns up items of concern to the buyers in the home can be grounds for further negotiation or worst case, nullifying the purchase agreement.
In lower Fairfield County, CT we use attorneys to draw contracts. Your REALTOR will forward the negotiated accepted offer to the real estate attorney of your choosing and they will draw a contract and send it to the buyer’s attorney. Both attorneys will then discuss any terms that need to be discussed, add in any inspection items or credits that arise and the buyer’s attorney will have their client come in and sign the contract-usually within 10 business days of the accepted offer. The contract will then be returned with the remainder of the deposit money (up to an additional 9%) that will be held in your attorney’s escrow account. The buyer’s agent will also send the good faith 1% deposit they are holding to your attorney. You will go in, review the contract and make sure everything is as it should be, and then sign.
The buyer must secure mortgage approval and the clock starts ticking as soon as the offer is accepted. The buyer needs to continue the application process they have already started. The signed contract is usually necessary for the appraisal to be ordered, but everything else can get moving right away. The loan will have to be “packaged” when completed and then passed on to the underwriting department for review and approval. This process takes approximately 6-8 weeks.
If a loan is to be considered for approval, the lending institution usually wants to see that the property is valued at the sale price or higher. They will hire an independent licensed appraiser to do an in-depth assessment of your home – square footage, acreage, condition and upgrades. They will then research sales up to 6 months old that they find as comparable, making adjustments as necessary. They will file their report with the buyer’s lender. This is a major part of the mortgage approval process and why it is so important to price your property reasonably. If the appraisal comes in lower than the sale price, one of three things can happen: 1. a renegotiation can take place. 2. the buyer has to come up with more cash or 3. the deal falls apart.
The property must have a clear title for a clean exchange of ownership. Your attorney will handle hiring a firm to do a title search. Things that can effect title are outstanding liens on the property or a mechanics lien from a disgruntled past worker. Municipal searches are also being done to make sure all permits have been properly closed out, some of which can date back prior to your ownership. Unfortunately, you are still responsible for putting all permits to rest.
If these contingencies (or any others listed in the purchase contract) are not met, the deal can be nullified and the good faith money returned to the buyer.
Tie Up Loose Ends:
During the escrow period, the buyer should be busy tying up loose ends that might stall or prevent the transfer of property. Homeowner’s insurance, required by the lending institution, must be purchased, local and state regulations pertaining to property transfer must be met.
Time to pack!