Once buyers and sellers have agreed to price and all terms and changes have been signed off, the contract is considered “ratified”. Now we’re entering a new stage of the roadmap.
A copy of the contract is sent to all parties, including the mortgage company and the title company. There are a myriad of details (from small to large, but ALL important) that happen in this stage.
There are often contingencies that have to be met by certain deadlines. One such contingency is the home inspection. The purchaser will have an inspector come to your home and conduct his inspection-usually 2-3 hours. Then we will receive a copy of the home inspection and an addendum removing the contingency if the owner agrees to perform certain repairs. This frequently opens up another round of negotiations.
The home inspection is often a sensitive time. Sellers know what price they got for their house and now they feel the buyer is trying to get into their pocket for more. On the other hand the buyer thought they were buying a perfect house and are finding out that there are repairs needed that will cost them real cash. This is one more reason to have a professional represent you to get past any challenges that come up.
The termite inspection is another detail that mortgage companies require unless the property is a condo above the height termites are active. The property has to be free and clear of wood destroying insects. Generally this is easy, but over the years, we’ve seen everything from minor damage to major work needing to be done.
One of the most important contingencies is the appraisal. The bank will order and send out the appraiser. His job is to come up with a valuation for the property. The bank will only lend money based on the appraised price of the property, so if the appraisal comes in low, one of four things happen. Either the seller brings the price down to the appraised value, or the buyer brings cash to the table to make up the shortfall between the appraised price and the contract price, or the seller and buyer meet in the middle, or the contract falls apart. Recently appraisers have been very conservative in their valuations, and we’ve seen appraisers traveling from distances where we know they aren’t as knowledgeable about the area as they should be. We have a lot of experience in this part of a real estate transaction and can be very helpful in meeting the appraiser and giving them up-to-date market data, and knowing which comps and upgrades he will accept as showing value he can use to increase the appraised price.
While these are three big parts of the process, there are many other details that our closing department is busy with behind the scenes. We watch over the title company to make sure the owner’s lender has been contacted for the payoff, that the title exam has been done and come in clean, and that all pro-rations of taxes, homeowner association fees, and closing costs have been done accurately. We review the TRID settlement statement prior to settlement to verify the numbers.
We also coordinate with the lender throughout. Usually the date to receive final loan approval is part of the contract and we need to be vigilant to make sure they comply. Any closing costs or credits agreed to by the parties must be sent to the lender for approval. Sometimes there are conditions that are required to be met once the loan comes back from underwriting.
During the whole process we also communicate with everyone about times for inspections, walk-thrus and settlements, methods for access, status of repairs and payments to contractors, and making sure our clients are aware of “what’s next”. It’s a busy time, but doing this almost 300 times a year gives us the experience and systems in place to handle everything smoothly and accurately for you.