Under Contract: Now What?
Congratulations, you are on your way to owning your very own home!
During this period of purchasing your home, you are going to need an escrow or closing company to act as an independent third party so that you know when and who to give your money to get the deed. The escrow or closing company will hold your deposit and coordinate much of the activity that goes on during the escrow period. This deposit check may also be held by an attorney or in the broker's trust account. Make sure that there are sufficient funds in your account to cover this check.
The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, minus standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase agreement, it would be wise to speak with your agent to determine if it is your best interest to include a liquidated damages clause.
The escrow period is typically 30 days. During this time, each item specified in the contract must be completed. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
- Inspection Contingency: The inspection should be completed as soon as possible after the purchase agreement is signed. Each contract will have a specified number of days to complete the inspection & and negotiations resulting from the inspection report.
- Financing Contingency: Once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you may choose to cancel the purchase contract. Keep in mind that this may impact your earnest money deposit.
- Marketable Title: With an attorney or title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership. Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.
- Homeowner's Insurance: This will probably be required before you can close the sale. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
- Final Walk-Through Inspection: At this time, you should make sure that the property is exactly as the contract says it should be.
During this time, be sure to contact local utility companies to schedule to have service turned on when you close escrow.
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!