Closing the Deal: After You Have Found A Buyer
By Sadiya Anjum
If you have found a buyer for your home, congratulations! Once you have both negotiated and agreed on the price as well as terms regarding the property, it is time to take the next step in selling your home– the closing process. The following steps are generally what are included in any closing process except in certain situations like when owner financing is involved, buyer takes early possession of property or in any other special circumstances.
Both parties agree on terms that should be included in the sales contract. This is a legally binding contract which requires the buyer to purchase the home. It generally includes the price, description of the property, closing date, possession date and other contingency clauses. These clauses usually protect the buyer in case the appraisal, inspection or financing is not cleared. The seller may also include a clause regarding the term period he will wait for until the buyer obtains financing, after which he may choose to withdraw from the deal if the finances are not obtained.
The seller (or agent) should now open escrow. It can be done simply by taking the sales contract to an escrow agent. The escrow agent should be decided upon by both parties. Opening escrow will help put the wheels in motion regarding title search. The property will be checked for any liens which may pose problems.
Although the seller has no real part to play here, he should keep track of the buyer’s progress from time to time. The buyer will now basically shop for loans and settle on one. The lender will conduct certain checks before approving and processing the loan. But ideally the buyer should have showed the seller a pre-approval letter when he made the offer. With a pre-approval, it is easier to obtain a loan. Placing a time frame in the contract will save the buyer from waiting for an indefinite period, at the end of which the buyer may claim that he could not obtain financing.
The buyer has the right to get the home inspected before the deal is closed and he has to bear the costs of the inspection. A professional inspector will examine the structure, heating, cooling and electrical systems, appliances, etc. His report will indicate any defects in the property. If defects are found, then repairs can be made according to the terms of the sales contract. The seller may either make the repairs or renegotiate the price with the buyer.
Termite and Pest Inspection
A professional (not home inspector) has to be hired to check the home for any termite or pest infestation. If there are any problems, the seller will have to take the responsibility of getting the problem fixed. Apart from pest inspection, the state laws may require a check regarding certain items such as radon gas.
While inspections are being dealt with, the lender will require an appraisal of the property. This is to ensure that he does not lend more than the fair market value of the home. The price that the buyer and seller agreed in the sales contract has to match up to the appraised value. If the appraisal comes in low, then both parties may have to renegotiate or they may risk losing the lender.
Assuming that all the above steps were dealt with successfully, it is time to close the deal. Before closing day, the buyer may conduct a last check on the property to make sure that all is in order. He will check that all repairs needed after the inspection have been completed satisfactorily (applicable only if seller has decided to make any repairs). He will also look at the general condition of the home and if contents to be sold (if any) are all intact.
The last day of escrow is the closing day. After everything is in order, the escrow agent will inform the parties involved about the date, time and place to meet. Both parties will produce the necessary documentation: seller – any warranties or other documents, buyer – home owner’s insurance and any other documents. An attorney may be hired by one single party or one that can see over the whole transaction. After reading all the documents you can sign on the dotted line. The title as a deed will be handed over to the buyer. The buyer will hand over the money to the escrow agent who will settle it with you. Closing costs are generally covered by the buyer unless the seller has agreed to pay for it. The deal is closed and you give the keys to the buyer unless the possession date is a few days after closing.
The whole process if goes smoothly should take about 4 weeks. This is just a brief outline of the whole process; there may be special circumstances and clauses coming into action every step of the way. If there are any hitches and disagreements regarding the inspection, appraisal or financing, the deal may fail. So remember to include all the necessary contingency clauses in the sales contract. Handle the closing process judiciously and you will see closing day soon.
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