After your offer is accepted
Once the seller accepts an offer, the buyer and seller are under contract. This means that the two parties are in a legally binding agreement. The next step for the buyer is to pay earnest money.
Earnest money is a portion or percentage of the sales price that is held by a third party in escrow until closing. Earnest money is given to show the full faith of the buyer, that he is “in earnest” in his desire to purchase the property. Thus the seller is obligated to take the house off the market and not accept any other offers. The third party who holds the earnest money varies by state. In some states, it is the title company or settlement company. In other states, the real estate broker holds it.
If the offer is rejected or rescinded because of contingencies listed in the offer, the earnest money is returned. For example, if the property’s inspection shows multiple problems that would take a great deal of money to repair, and the offer was contingent on an inspection, the buyer can withdraw the offer and receive the earnest money back. However, if the buyer backs out for any reason other than those stipulated in the offer, then he forfeits the earnest money to the seller.
Once the sale of the home has concluded, the earnest money is counted towards the purchase price.
You’ve found a home you love and made an offer. The seller has accepted the offer and you have given the title company or broker a check for earnest money. The next step in the process is closing time — which is to say, a lot of “hurry up and wait” time.
This is the time in which a home inspection takes place. If the inspection shows significant problems, then further negotiations may take place. The buyer may either ask the seller to pay for the repairs or to lower the sales price.
During this time, the financial issues will be finalized. The mortgage company will appraise the property, if needed. If the appraisal is lower than the selling price, further negotiations will be required. The buyer will also need to finalize approval for the mortgage and be prepared to pay the closing costs and down payment.
Start packing — it’s time to move to your new home!
The day has finally come: the day you get the keys to your new home.
In some parts of the country, this day is called closing. In others, it is settlement. Either way it is the day ownership is transferred from the previous owner to you, the buyer. This day is normally at least 30 days to several weeks since the offer was accepted.
Several things happen during this process. If the buyer is paying a down payment, he brings a check to the title company covering that, as well as one covering closing costs. If any of the selling price is being covered by a mortgage, then mortgage paperwork will need to be signed and finalized. The seller brings the deed, keys, and any other needed items to the title company to be transferred to the buyer. The seller’s mortgage is paid off with the proceeds, and the real estate agents also receive their percentage payment at this time. If there is any money left after the mortgage pay-off and realtor fees, this money is given to the seller. The title company then registers the transfer of deed. All these parties are not required to be at the title company at the same time.
In states where ownership transfer is handled by a settlement company, the same process takes place. However all the parties — buyer, seller and agents — appear at the settlement company’s office at the same time so that all steps are done at once.