What to do after you are in contract?
There are a few major milestones for a Buyer once you are under contract:
1. You put your initial deposit into the escrow account
2. You get to know what you just said you wanted to buy
3. Lender satisfies themselves about making a loan
4. You release your contingencies
5. You signoff on the dotted line
6. You take possession
There are things to know about each of these milestones. Your agent should supply you with a calendar timeline within 3 days of going into contract. I have attached a copy of our calendar timeline for reference (link to the sample calendar). Your agent will shepherd the timelines of the contract but it doesn’t hurt to know what is going on.
Initial Deposit: Within 3 days you must deposit your Initial Deposit (also known as Earnest Money Deposit or Good Faith Deposit) into the escrow account. The accepted and most common method is through wire transfer. You have the option of delivering a check to the Escrow Company yourself if you prefer. Wire fraud is a major concern in real estate. Do not accept wiring instructions through the internet. Contact the title company directly and verify the routing numbers for sending your wire. Your agent will help you with this.
Getting to Know the Property: Within 5 days you should, if you haven’t already, receive a disclosure package with all inspections, disclosures, preliminary title report, easements and other information about the property. If the property wasn’t pre-inspected, your agent will help you order inspections. Read and review this information thoroughly with your agent. If you aren’t comfortable with anything, ask questions. FYI, as a general practice, we recommend you get your own inspections, even if they have been supplied by the seller. At the very least, request the inspectors come back out to the home and go through the inspections with you - especially if you don’t understand or are uncomfortable with something. All of the inspections combined are usually under two thousand dollars. When you are spending a minimum of $500,000 to purchase a home in our area that is a small price to insure you have the best information available on the home. It is wise to contact your insurance agent during this stage to get quotes on Home Owners Insurance. Insurance is required by your lender and you will need a quote before the signoff.
Lender satisfies themselves: If you are taking out a loan to purchase the property the lender will require an appraisal of the property to insure the value is there. The lender will order the appraisal and you are generally not present during the appraisal.
You release your contingencies: Contracts can be contingent on many things. The most common contingencies are:
1. Buyers ability to secure a loan - Known as Loan Contingency
2. The home appraising for the purchase price – Known as Appraisal Contingency
3. The Buyer’s physical inspection of the property and any other inspections other than a physical inspection – Known as Buyer’s Physical Inspection and All Buyer Investigations other than physical inspection
4. The Buyer reviewing disclosures made by the Seller or companies they have hired to disclose – Known as Reports/Disclosures
5. Reviewing the Preliminary Title Report – Known as Title: Preliminary Report
6. If the property has a Home Owners Association you would review the documents explaining the HOA – Known as Condominium/Planned Development (HOA or OA) Disclosures
What happens if you have a problem with one of the contingencies? Your agent will guide you through that process. Sometimes homes do not appraise for the price a buyer offered. Sometimes you find issues upon inspection: Termites, broken seals in windows, roof repairs needed etc. If you find the home has issues you wish the seller to remedy, such as termites, you can make a request that they repair or correct those items before releasing contingencies. Once you release contingencies you have no leverage to ask for repairs or changes.
Signoff: This happens once your lender has sent the loan documents over to the Escrow/Title Company. You, your agent and your Escrow Officer sit down and sign the final paperwork. Prior to signoff it is customary to do your Final Walk Through of the home to make sure it is in the same condition as when you made your offer on the home. You will need proof of who you are – passport or driver’s license, to signoff. After the signoff is a good time to call to set up the transfer of all utilities into your name.
Take Possession: In Northern California taking possession is rather bland. Your lender has funded the loan, you have wired your money into the escrow account and the night before it is due to close, the Escrow Company declares All Funds are in and releases the deed to be recorded with the County early the next morning. The close of escrow day, your agent receives a call from the Escrow Company saying the deed has gone from Seller’s name to Buyer’s name -also Known as Recorded and it is yours. Your agent picks up the key and delivers it to you. A quiet end to a very BIG process.
Definition courtesy of Vocabulary.com Contingent. The adjective contingent can be used to describe when something can occur only when something else does first. Making money is contingent on finding a good-paying job. When something is contingent it means that the possibility of an event or situation depends on another happening or being true first.