Venturing into the realm of property selling as a homeowner can be an exhilarating endeavor, fraught with uncertainties and endless inquiries. After all, it’s not merely a financial transaction; it’s the gateway to your future life phase. However, breathe easy, because you’ve chosen to navigate this journey with Beycome 😉
First, let’s clarify what ‘under contract’ denotes. A house enters ‘under contract’ status when both parties – the buyer and the seller – mutually agree on the price and conditions, followed by the signing of a purchase agreement. Once this step is completed, the property is labeled as a ‘pending sale’. However, there remain several crucial steps to be executed before the deal can be officially sealed, marking the transition of your home ownership.
Before the sale is finalized, all contingencies in the contract must be met. In the world of real estate, the term ‘contingencies’ refers to specific conditions outlined in the contract that must be satisfied before a property sale can be finalized. Often, these contingencies involve factors that could influence the buyer’s decision to complete the purchase. Let’s take a closer look at the four most common contingencies you might encounter after the buyer deposits earnest money into escrow:
Financing Contingency:
The financing contingency is a common clause you’ll see when the buyer is planning to secure a mortgage to purchase your property. Although they’ve likely already shared their mortgage approval letter and have been pre-approved by the lender, the actual financing isn’t officially guaranteed yet. This contingency essentially states that the deal hinges on the buyer securing the necessary financing.
The Role of Appraisal Contingency:
This contingency exists primarily to protect the interests of the lender. An appraiser assesses your property to confirm that its market value is in line with the loan amount the buyer is requesting. If the property appraises for less than the agreed-upon price, this can pave the way for negotiations, or in some cases, even lead to the buyer backing out of the deal.
Inspection Contingency:
Almost all buyers opt for a thorough home inspection before finalizing the purchase. The inspection contingency allows the buyer the leeway to negotiate repairs, or, in cases where the inspection unveils significant issues, to walk away from the deal entirely.
Home Sale Contingency:
Often, buyers are juggling the sale of their own property while purchasing yours. A home sale contingency provides assurance that the buyer’s commitment to buy your house is contingent upon the successful sale of their own property.
While the financing, appraisal, and inspection contingencies are fairly standard inclusions in most real estate contracts, the home sale contingency isn’t as typical but certainly isn’t uncommon. As you navigate the closing process, understanding these contingencies will help ensure a smooth and successful transaction.
What Actions Remain Before the Transaction Can Be Finalized?
Home Inspection and Repairs:
Typically, the first thing that happens after a home goes under contract is the buyer schedules a home inspection. This usually takes place within 7-10 days of signing the contract. The purpose of the inspection is to identify any potential issues or defects that may need to be addressed.
If significant problems are discovered, the buyer may ask for repairs to be made, a reduction in price, or even, in some cases, decide to back out of the contract. This negotiation process can sometimes be stressful, but remember, it’s all part of ensuring a fair transaction for both parties.
Appraisal:
After the inspection process, an appraisal is conducted by a neutral third party (usually hired by the buyer’s lender) to determine the fair market value of your home. The appraisal protects the lender by ensuring that the loan amount is not more than what the property is worth.
If the home appraises at or above the agreed-upon sale price, the process will proceed smoothly. However, if the appraisal is lower than the sale price, the buyer may need to come up with the difference, negotiate a lower price, or walk away from the sale if an agreement can’t be reached.
Final Mortgage Approval:
Assuming the buyer is borrowing money to purchase your home, they will be working diligently behind the scenes to obtain final mortgage approval. This involves providing their lender with all necessary documentation to confirm their ability to repay the loan. Any hiccups in this stage can delay the closing process or potentially nullify the contract.
Title Search and Insurance:
A title company will conduct a thorough search to ensure that the property is free from any legal issues, liens, or claims that might affect the sale. They will also arrange for title insurance, which protects the buyer (and their lender) from any potential future disputes regarding property ownership. beycome Title is offering his services for $199 flat fee. See more
Final Walkthrough:
Usually conducted a few days before closing, the final walkthrough is the buyer’s chance to ensure that the property is in the agreed-upon condition and that any requested repairs have been made.
Utility Arrangements
Several days before the closing of your home, it’s important to arrange for the discontinuation of all your utilities. Services such as gas, electricity, cable, water, telephone, and Internet should all be scheduled to be shut off immediately when you vacate the property.
Closing:
The last stage of the process is the closing, where all parties meet to finalize the transaction. During this meeting, all documents are signed, and funds are transferred. As a seller, this is where you’ll hand over the keys and say goodbye to your old home. It;’s also the time that you contact beycome, and provide them with your executed closing statement or ALTA, to finalize the sale an update the title in the MLS system.
In summary, while going ‘under contract’ is a crucial step towards selling your home, it’s essential to understand that this doesn’t mean the sale is complete. Patience, open communication, and preparedness for negotiations will go a long way in ensuring a smooth journey from ‘under contract’ to ‘sold’.