What happens after a buyer and seller agree on a price for a home?
UPDATED: February 20, 2013
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Buying and selling a home are complex undertakings and in most cases, an overwhelming experience. A potential buyer of your home who wants to make an offer to purchase the home will ask is or her real estate agent (or an attorney) to prepare a written offer to the seller, outlining several specifics, such as the purchase price, time to close escrow, contingencies for inspections or loan approval, place of escrow, amount of the
If the price for the purchase and sale of the real property has been agreed to as well as the contingencies, etc., that are in the written contract, signed and dated by the seller and the buyer, the situation is then known as the “parties being in contract”.
What happens next?
At this point, typically the real estate agent representing the buyer sets up an escrow with an escrow company to handle all the paperwork. The selling agent sends any
Depending on the specifics in the purchase agreement, both the selling agent and the buyer may also contact third party experts (i.e., pest inspectors, home inspectors, surveyors, licensed contractors, roofers, and even engineers) to take an in-depth, unbiased look at the overall structural condition of the home prior to purchase. These experts submit reports to the buyer. If there are property defects or repair issues/requests, the buyer typically will ask the seller to make the repairs at his cost or, alternatively, credit the costs in the purchase price. In this situation, an “addendum” to the purchase agreement is then signed by the seller and the buyer.
At the same time, the residential seller is required to give the home buyer “transfer disclosure statement” (TDS). The statement discloses any details on the present condition of the home, defects and major repairs, putting the buyer on notice of any material facts that might affect the desirability or the purchase price. Likewise, statutory disclosures such as the need for smoke detectors, carbon monoxide detectors, water heater straps and the like are also presented to all sides by the listing agent. The TDS can be complicated and confusing, so the seller will want to make sure to understand every word in it. A reputable real estate agent/attorney can guide you through the process.
In California, the selling agent typically orders a natural hazard report (NHD) for the neighborhood where the property is located. This report advises the buyer of various natural hazards in the neighborhood, including earthquake faults, flood zones, high fire zones, landslide areas and the like.
Throughout the time period when the parties are “in contract” until close of escrow (signing of documents to transfer title of the property), the real estate agents are exchanging documents and disclosures for their clients to review, read, understand, sign and date concerning the property to be purchased. The buyer and seller receive estimated closing costs and distributions amounts that each will pay and receive from the sale from the escrow company. The buyer, if he or she is financing the property, will also receive from the lender proposed loan documents and disclosures as well as an appraisal of the property.
Once the parties are satisfied that all known problems with the property have been uncovered and the costs for any repairs been addressed, the financing secured by the buyer, all written contingency requirements are then waived by the buyer and the parties sign paperwork at escrow to close the sale. The paperwork typically signed by the buyer at escrow’s close will be loan documents, a promissory note and a mortgage (trust deed) to be recorded on the property. The buyer also signs the final escrow instructions and receives paperwork for such. The seller signs the deed transferring legal title to the property to the buyer and the final escrow instructions.
The buyer and seller also receive the final closing statement showing what each will pay into or receive from the transaction from the escrow company and all monies that escrow paid out to in the transaction. Such payments would the real estate commissions, lien payments, and third party expert bills.
Rescinding the financing
The buyer has a statutory three-day period to rescind the loan assuming any loan is needed in the purchase under federal law. Once the three-day period passes and the loan is not rescinded by the buyer, escrow records the deed transferring title to the property from seller to the buyer and a recorded copy is then given to all sides. At this point, the real estate sale has closed.