After all those long months of trying to find the right home, you finally have a ratified contract. So, what comes next?
This post takes a look at the steps after a ratified contract.
Outside of closing, ratifying a contract is probably the most exhilarating part of buying a home. The seller agreed to your offer and you suddenly can picture yourself owning the home. You soon realize that there are a couple hurdles you have to jump before that home becomes yours.
First things first, it’s time to write your first check towards the purchase of the home, which is the earnest money deposit. Per the sales contract, your real estate agent has to deposit your earnest money deposit with the assigned escrow agent within a specific time period
Next is the home inspection. For your own interest, your awesome realtor added a home inspection contingency to protect you from unforeseen issues that you might not have noticed when you visited the home. Obviously, before you purchase this home, you’ll want to know if the home needs any type of repairs. Your purchase of the home is contingent on the property being in a condition you are comfortable with. You have the option to walk out of the transaction if you are not comfortable with the results of the inspection. It is important to note that a home inspection contingency typically has an expiration date. Most sellers will agree to a 7-10 days home inspection contingency period. It is advisable to schedule your home inspection right away. You want to give yourself enough time to book a solid home inspector that can inspect the home around your schedule. You should attend the home inspection. This is going to be your home, so you’ll want to ask questions and get acquainted with the home.
Once the home inspection is completed and items have identified that require repairs, your realtor will send a repair list that the seller will need to fix before closing/settlement. Get ready for a little negotiation here as the seller might reject some items on your repair list, but the ball is in your court. You can choose to walk if you are not comfortable with the seller’s response.
If you come to an agreement on the home inspection repair list, you will then proceed to the next step of the process, which is your loan application (if you are financing). It is important to note that the sales contract stipulates that you apply for financing within 7 days of contract ratification. Applying any longer can result in you missing the agreed settlement date and potentially losing your earnest money deposit. The loan application process might be the exhausting part of the whole process. Your lender is going to want to collect all kinds of information and documents from you. Be prepared to provide your paystubs, W2s, bank statements, 401K statements, etc. Don’t be surprised if your lender/loan officer calls you at 11 pm asking for more items. It will be an ongoing process until you get the clear to close for the lender. Do your best to provide all the requested items in a timely manner.
Your lender will also order an appraisal once your file is processed. Once again, your fantastic realtor made sure you have the right contingencies in place – this time it is a financing and appraisal contingency. This allows you to get out of the contract or renegotiate the sales price if the appraisal comes back lower than the contracted sales price. The appraisal contingency will be removed if it comes in at the sales price or higher.
Okay, so now you’re done with the appraisal and the lender is moving forward with processing your loan. It is time to march towards closing. By this time, your realtor has sent a copy of the ratified contract to the title company of your choice. The title company is responsible for doing a title search on the property. A title search is usually done by the title company, who researches the vested owner, the liens or other judgments on the property, the loans on the property and the property taxes dues. The last thing you want is to be stuck with a home encumbered by liens. They will also prepare closing documents that includes a closing disclosure that shows your title insurance, taxes, HOA fees, etc.
Your real estate agent more than likely requested a termite inspection in the sales contract. Some lenders require a termite inspection, so it’s important to get this done before closing.
It is advisable to get a home warranty before you take possession of the home. A home warranty will protect you from the costs of repairing major appliances and other systems. No home is perfect, so there is a high possibility that you will run into issues with appliances or systems within the first few years of owning the home.
Expect to receive condo/HOA documents from the seller. It is extremely important that you read through these documents. You want to make sure that you are fine with bylaws, rules, etc. of the condo association or home owners association (HOA). If you aren’t, you are within your rights to cancel the contract.
It is always great to have all utilities transferred to your name by the day of your closing. You run the risk of paying re-connection fees if you wait until after closing to transfer the utilities to your name. The seller more than likely will cancel his/her services the day after closing.
Before you go sign on the dotted lines, you will want to do a final walk-through of the home. This is your chance to ensure the home is in the same condition as it was on the day you first visited the home. If you requested repairs done, you want to make sure all repairs were completed. Also, you want to make sure that the seller has completely moved out of the home. The home needs to be completely vacant unless you have a moving arrangement with the seller.
By now you should have gotten notice that your loan documents are ready and you have gotten the clear to close. Your lender would have notified you of the amount to bring to closing. This is usually your down payment as well as closing fees.
It’s time to sign the dotted lines and get your keys!! It’s an exhausting process, but it is rewarding once you’ve signed and taken ownership of the home.