Your Contract is Signed - What is Next?
The time between signing a contract and closing a sale is a busy one for buyers, their real estate agents and the title company. Your agreement of sale is signed and the home selected is officially under contract. Now it’s time to satisfy all the terms of your contract. The seller has relatively little to do at this point. The buyer and the agent, on the other hand, will be very busy for the next four to eight weeks as they work toward closing.
1. Title Company
? The title company will investigate the home’s chain of ownership to determine whether or not another party has any claim to the property, judgements, or liens. If another party does have a “cloud” on the deed, the title company will work to clear the deed. However, the only guarantee of a clear title is title insurance. If the buyer is borrowing money to finance the purchase, their lender will require that they order title insurance on its behalf.
The title company will conduct the closing. The title agent will work with the buyer’s and seller’s real estate agents plus the mortgage consultant to collect the information they need to prepare closing documents.
It may seem like nothing is happening because there is a lack of communication when your paperwork goes to the title company but be assured there is plenty happening. The title company has to first “open” title which means they are starting your title search.
Your REALTOR® is busy providing information to them but for the most part, it is now in the hands of the title company. You will want to get to know your escrow agent there because they will need information from you for this process. If you have a mortgage, they will need your payoff information. Don’t wait until the last minute to provide this as some lenders sell your mortgage to other banks and it could be confusing when trying to get a payoff from the wrong bank.
If your property is deeded to a trust, estate, LLC, or corporation, the title company will need a copy of those documents. If you are divorced or a spouse is deceased, the title company will need that information also. And, even if your deed is in one name, in Texas, both husband and wife must sign at closing.
When it comes to confidential information such as social security numbers, mortgages, etc., the REALTOR® doesn't want to relay that sensitive information to the title company for security reasons.
2. Mortgage Applications
? If the buyer is not paying cash, they must apply for financing & be approved within the period of time specified in the sales contract. The earlier the application is made, the better. That way, if the lender requires additional documentation later in the underwriting process, the buyer is more likely to have time to submit it well in advance of closing. This time can vary greatly depending on the lender so getting all necessary paperwork in as soon as possible is a must.
It is an excellent idea to have this application in place and a letter of pre-qualification written BEFORE a buyer begins their search for just the right property. It can actually help your negotiations when purchasing.
Picking a lender is more important than you might imagine. Every link in the chain of this transaction has to be strong. The buyer, seller, REALTOR®, escrow agent at the title company, the lender, and the insurance agent need to be knowledgeable. Consult your REALTOR® about the best choices. They are very familiar with the ones that will make it a smooth closing and those that will not.
? If the buyer elects to have the home inspected, the inspections will be ordered very shortly after the contract is signed. The inspector will examine the structure of the building and determine whether or not the home’s systems — electrical, plumbing and heating/cooling — are functioning properly. He’ll also look for signs of poor drainage. Water and air quality tests also may be done, and the inspector may look for signs of termites, too.
If the inspections show that repairs need to be made, the agents will help the buyer and seller negotiate a solution. The buyer may agree to accept the home “as is” or the seller may agree to do some or all of the repairs. Occasionally, they have been known to reduce the sales price so that the buyer can make the repairs later, after closing.
4. Homeowner’s Insurance
? If the buyer is financing the home purchase, his lender will require that he purchase insurance, for the sake of protecting its investment. Although the buyer isn’t responsible for insuring the home until closing, it’s prudent to start shopping for a policy early, as many sales contracts are contingent on the home being insurable. If the condition of the home makes it uninsurable, it’s better to know sooner rather than later. In Texas, a lender will require that you provide flood, windstorm, and homeowner’s policies. They can vary greatly depending on the area you have chosen and the insurance company.
? If the buyer chooses to purchase a condo, there are certificates and addendums that are specific to the sale. A local REALTOR® that has experience in this area is important. There is also a condo declaration that will be provided to the buyer. It will lay out the rules and regulations for that particular building.
The Resale Certificate for that Homeowner’s Association is an important source of information about that association. It will give you the budget, an insurance summary, disclosure of any pending assessments or lawsuits, and information about who to contact in that building for HOA information. We do advise our buyers to contact the President of the board or the building manager to ask questions about the property. All of these documents are unique and will probably require some explanation from your REALTOR®.
? The transfer of ownership from the seller to the buyer occurs at closing. The closing is scheduled as soon as all the terms of the agreement and all the conditions of financing have been met. After signing at closing and recording of the deed, the buyer cannot take possession until this transaction is funded. That means that the title company has paid the seller and recorded the deed. Sometimes, the lenders take an additional one to three days to fund so be sure to check and not assume you can move in that day.
These are the basic steps from a signed contract to closing. There are many variables, emotions, personalities, legalities and new laws each year to complicate this process. Be sure to choose a local knowledgeable and professional Realtor to guide you. If you are buying a condo, it is especially important to select a Realtor who has experience in condo sales.
As always, we are here to help and hope you select one of our knowledgeable team to represent you in this important purchase.