From Contract to Closing

1. LOAN APPLICATION: Immediately after they negotiate the contract the buyers should apply for any financing necessary to complete the purchase. Their agent's advice can help them select a reputable lender whose products and service best meet their needs.

Notification of loan application is passed to the listing agent who keeps the seller informed as the process progresses. During this process the buyers must furnish to the lender information regarding their assets, income, debts and credit history.

2. HOME INSPECTION AND REPAIR RESOLUTION: The rise in the importance placed on home inspections is probably the most significant change that has occurred in the home selling process in recent years. Typically the process involves a top-to-bottom inspection of the property, performed by an inspector who is chosen and paid by the buyers. After the buyers review the report, they have the right to ask that some or all of the defects discovered be repaired.

The seller may not be obligated to make these repairs; however, if they cannot reach an agreement within the prescribed time period, the contract dies. Both the buyers and sellers move back to square one. The buyer must look for another house and the sellers must look for other buyers.

This process can easily amount to a complete renegotiation of the contract. The role of the listing and selling sales people is critically important to successfully negotiate this often difficult process.

3. APPRAISAL: As a part of the loan approval process the lender will require that the property be appraised to ensure that the value of the property is adequate to justify the loan. Although the buyer and seller have already agreed on a price, the appraiser's evaluation must support that price. If the appraisal is not adequate, the contract must be renegotiated or the loan will be disapproved. If this occurs, both buyers and sellers return to square one.

4. LOAN APPROVAL: When the appraisal has been satisfactorily completed and the lender has verified the buyer's income, credit, etc., the loan can then be approved. Both listing and selling agents will work to ensure that all necessary steps are taken to get to this point. A closing attorney is then selected.

5. CLOSING ATTORNEY: When the loan is approved, an attorney specializing in real estate must be selected to prepare for and conduct the closing. The buyer usually makes the selection unless the seller is paying the closing costs (which include the attorney's fee). Among other things, the attorney will check the title to the property, prepare necessary paperwork and handle the receipt and distribution of all monies in the transaction. The attorney will represent the lender in the transaction, not the buyer or seller. The attorney must be approved by the lender. Buyers and/or sellers may hire attorneys to represent them. While this is rarely done, it might be advisable in special circumstances.

6. TERMITE INSPECTION: Most contracts require the sellers to furnish a termite clearance letter to the buyers. A licensed pest control operator must certify that the property is free from infestation by termites or other wood destroying organisms. This inspection requires specialized skills and is separate from the home inspection. If the inspector finds active infestation, the property must be treated to alleviate the problem. In addition, any structural damage caused by current or previous infestation must be repaired. The cost of this inspection and any required treatment or repair is usually the responsibility of the seller.

7. HOMEOWNER'S INSURANCE: Prior to closing, the buyers must arrange for a home owner's insurance policy covering the property. The selling agent will help the buyer make sure that the coverage is adequate to satisfy the requirements of the lender. These arrangements must be made prior to closing and the policy must be present at the closing.

8. REINSPECTION OF REPAIRS: Prior to closing, any repairs agreed upon as a part of the home inspection and termite inspection must be completed. Sellers should be careful to hire reputable repairmen and keep good records of completion and payments involved. Buyers will normally have the property reinspected to ensure satisfactory completion.

9. UTILITIES TRANSFER: Prior to closing both buyers and sellers should arrange to have the utilities transferred from one to the other. To accomplish this a date (usually the possession date) will be agreed upon for the transfer. The seller notifies the utility companies to cancel their service on that day. The buyers make application with the various utilities and ask that their service be established on that same day. It is important that these dates coincide to avoid a lapse in service.

10. THE CLOSING: After the loan is approved the closing attorney will prepare the necessary documents to finalize the sale. A time will be scheduled for the buyers, sellers, and their respective agents to meet to "close" the transaction. At this meeting all of the paperwork will be reviewed and signed. The buyer will make payment to the closing attorney in certified funds, and the closing attorney will make payment to the seller and others receiving monies.

Careful planning and coordination are essential to ensure a smooth, successful closing process. During this critical period, your sales associate will prove to be very valuable.