Accepting an Offer and Closing
What happens during closing?
One the buyer and seller have agreed to a deal, it’s time to start working towards completing the transaction and closing. The closing time-frame is usually between 45-60 days. During this time the inspection, appraisal and final touches to financing take place . Then the paperwork at the end to close the deal.
- Stay Organized
- Know About Earnest Money
- Start Clearing Contingencies
- 1) The Inspection
- 2) The Appraisal
- 3) Preliminary Title
- 4) Water & Septic Tests (if required)
- 5) Finalize Financing
- Final Walk-Through
- Signing Closing Documents
The closing process involves a lot of steps. Staying organized helps ensure the process proceeds smoothly. Your agent will play an integral part on helping keep everything on track.
Know About Earnest Money
You will have negotiated earnest money as part of the offer you agreed to. This is a form of “Good Faith Deposit” from the buyers and is deposited into a trust account. If the transaction is completed, the money is applied towards the purchase. If the buyer backs out for any reason not covered by a contingency, the buyers will likely forfeit the earnest money to the sellers. The earnest money is an important consideration when clearing contigencies.
Make sure your agent clearly describes the situations in which earnest money can be released.
Start Clearing Contingencies
Your transaction will likely include contingencies that must be met before the deal can close. The most common contingencies are the inspection, appraisal, title, and financing. In Ketchikan, contingencies can also include providing a passing water test and septic test performed by licensed labs or engineers. (This applies to properties with a cistern and or septic system.) Your agent will work closely with you and the buyer’s agent to clear contingencies timely and correctly to get to signing day.
1. The Home Inspection
The buyer will hire a home inspector, unless they waived the inspection contingency. Typically, buyers have up to 21 days (depending on the terms of the contract) to perform the inspection. Sellers are asked to give access to all areas of the home for the inspection. The home inspector will help give the buyers an idea of the condition of the home and identify any major issues. The inspection will typically take a few hours, and at the end the buyers will be provided with a report. If any issues are discovered during the inspection, the buyer can then negotiate repairs or also choose to back out of the deal.
This clears the inspection contingency.
2. The Home Appraisal
If the buyer is using bank financing to purchase the home, the bank will order a home appraisal from an independent third-party licensed appraiser. The appraisal is paid for by the buyer. If the home appraisal does not meet or exceed the purchase price, the lender will not approve the loan and the buyer will have to decide what to do. Options include paying additional cash down to cover the difference, renegotiating the purchase price with the seller to satisfy all parties, or backing out of the deal.
This clears the appraisal contingency.
3. Preliminary Title Report
The buyer will order a preliminary title report. The purpose is to ensure the home’s title is clear of any liens or encumbrances, and uncover any easements that may not have been previously known.
This clears the title contingency.
4. Water and Septic Tests
If required as part of the transaction, the right time to order water and septic tests is usually after the appraisal is completed. This only applies to homes not hooked up to public services.
This clears the water and septic test addendum (if required).
5. Finalizing the Financing
The last big hurdle is typically the bank finalizing the financing. Once the loan has received final approval through underwriting, the bank will issue the Closing Disclosure. There is then a 3 day waiting period before buyers can sign closing documents.
If the buyers have a financing contingency and fail to obtain the loan, they can back out of the transaction. If the fault is on the buyer (e.g. the buyer fails to submit financial documents requested by the lender) they may have to forfeit the earnest money. If it is not the fault of the buyer, they can keep the earnest money.
This clears the financing contingency.
6. Final Walk-Through
Prior to closing, the buyers will typically request a final walk through of the home. This is to confirm that the condition of the home is the same as when the offer was accepted, all required repairs are complete, and everything that was included in the sale (washer and dryer, fridge, etc.) are still in the home.
7. Signing Closing Documents
One day prior (or a few days at most) to the scheduled closing date, both parties will sign closing documents. Your agent or lender will help coordinate and schedule your closing appointment with the escrow agency.
The next-day, the escrow agency will submit the recording documents to the state recorders office. Once recorded with the state, ownership transfers and the transaction is complete.