So, You Signed the Contract…What’s Next in the Transaction? George Campolo Weighs In
by Mashum Mollah Real Estate 06 March 2019
It’s an exciting moment when your offer to purchase a home is accepted by the seller(s). Though your purchase is far from a done deal, the vast majority of all transactions proceed smoothly from that point right through to the closing table when you will get the keys. However, it’s a good idea to know about the steps in between having your offer accepted and the closing. There are many possible glitches, and if you know what they are you will be prepared or even better avoid them entirely.
George Campolo has years of experience assisting clients in real estate sales and purchases. A full-time Associate Real Estate Broker with RE/MAX Distinguished Homes and Properties, his business is looking out for his clients’ interests in an industry with numerous traps and pitfalls for consumers. Below, Mr. Campolo offers his approach.
The Home Inspection
In New York, the Home Inspection is the next step after getting an “Accepted Offer.” In the other 49 states you sign a contract and put down “earnest money” first. Even though you’ve walked through the house ten times before making your offer and you think you’ve taken a good look at the home and its condition, keep in mind that you’re not a home inspector, and you can be surprised by the number of things an experienced one might find.
Sure, many are minor deferred maintenance things, torn window screens, scratches, scars, cracks, and other small things are common. In some areas with slab foundations, there can also be notes in the report about ground sloping toward the home. This allows moisture to enter in some cases, especially wicking into stucco if present. There can be more significant issues that could cause you to reconsider your purchase, but it’s more likely to be a case of many smaller things that you weren’t expecting.
This is a point for more negotiation if you want some items repaired before closing, or a monetary credit at closing so you can make the repairs yourself. The goal of the typical seller is to spend as little as possible once they’ve agreed to a deal, and they may not be as careful about the quality of repairs, so you may be best off with a credit at closing.
An important thing to remember is that you may have been a sharp negotiator and pushed the seller close to their bottom line for what they want to take away from the closing table. If this is the case, don’t expect a lot of give in repair negotiations; they just may say no, especially in a “Seller’s” market where there are ten other people who want the property enough to take it “As-Is”.
So the inspection issues if any have been resolved, now it’s time for the attorneys to get going on the contract. The seller’s attorney will send your attorney a draft contract for his review, and your attorney may or may not request insertions and/or deletions to protect you as best can be.
Once your attorney is satisfied that the contract language is in its proper form. He or she will call you in to sign your side and give your down payment. The amount you put down at contract signing may or may not be the full amount you will be putting down out of your pocket. If you are putting 20% total down, you may only give 10% at contract signing.
After you have signed, the seller will sign, and ONLY NOW can you rest easy that the house will be yours, barring any unforeseen events.
Your Mortgage Approval
Yes, you got a pre-approval, so there’s not much chance of a problem getting that purchase funded at closing…or is there? It’s important to understand that your loan isn’t REALLY fully approved until a week or two from the closing, and you shouldn’t do ANYTHING that impacts your credit from the time you get your preapproval until AFTER you have closed and are holding the keys. Lenders make a final credit (and Employment) check close to closing, and you don’t want that new car payment or the loan you co-signed for cousin Fred to kill your home purchase. Unfortunately, I have seen it happen. Don’t change jobs in between either. Lenders like continuity of employment, and you could blow your loan by changing jobs. Speak to your loan consultant as to all the do’s and don’ts.
Once your lender has a fully executed contract signed by both parties, they will step on the gas to get your loan cleared. They will order an appraisal and get any remaining documents form you that they need. Assuming the property appraises for an amount equal to or greater than the agreed-to sales price, there is no problem. HOWEVER, if the appraisal comes in less than the sales price, either party can get out of the contract (generally) so this difference must be negotiated. ASK your ATTORNEY about this possibility before you sign the contract.
Commitment Letter and final loan approval
Once your lender has the appraisal back and all the documents they need from you, you should get your “Commitment Letter”, then soon after they will send your file for “final underwriting” review. They may ask for some additional documents in that process.
After that, assuming all goes well, you will be “Cleared-to-Close”. The attorneys will schedule the closing, and you will sign your name(s) about 50 times and get the keys.