Offers, closing and moving
The Basics of Making an Offer on a House
Similar to marriage, purchasing a home begins with a proposal and involves both love and a legal transaction. Making an offer when you’re prepared to purchase a home is crucial because verbal agreements are not legally binding in real estate deals.
Residential Purchase Agreements are among the basic forms that realtors typically maintain up to date with evolving legal requirements.
A real estate agent will make sure that sellers adhere to the disclosure requirements that are mandated by many states and will also respond to any queries you may have about the sale.
Keep in mind that your purchase offer or contract must abide by all applicable federal, state, and local laws if you are not working with a Realtor. Because state laws differ, your location might need to include particular clauses.
Making an offer should include the price as well as all other terms and conditions of the purchase in addition to meeting legal obligations. If the sellers, for instance, agreed to contribute $2,000 toward your closing costs, make sure to include that in your written proposal and the final contract; otherwise, you won’t be able to claim it afterwards.
Your real estate agent, the seller’s agent, or frequently both will present the offer to the seller after it has been created and signed.
Sales agreements are frequently drafted by the parties’ attorneys in a few jurisdictions.
What to include when making an offer
If accepted in its current form, your purchase offer will constitute a legally enforceable sales contract, sometimes referred to as a purchase agreement, earnest money agreement, or deposit receipt. Therefore, it’s crucial that the offer include every component required to act as a guide for the ultimate sale. The following should be included in these purchase offers:
- Address and sometimes a legal description of the property
- Sale price
- Terms—for example, this is an all-cash transaction, or the deal is subject to you obtaining a mortgage for a given amount.
- Seller’s promise to provide clear title (ownership)
- Target date for closing (the actual sale)
- Amount of earnest money deposit accompanying the offer—whether it’s a check, cash or a promissory note—and how the earnest money will be returned to you if the offer is rejected (or kept as damages if you back out of the deal for no good reason)
- Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections and the like
- Type of deed that will be granted
- Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
- A provision the buyer may make a last-minute walk-through inspection of the property just before the closing
- A time limit (preferably short) after which the offer will expire
- Contingencies (these are extremely important matter and discussed in detail below)
If you state in your proposal, “This offer is contingent upon (or subject to) a certain occurrence,” that event must occur before you will proceed with the acquisition. Two typical conditions found in a buying offer are as follows:
- Financing. You, the buyer, must be able to get specific financing from a lending institution. If you can’t secure the loan, you will not be bound by the contract.
- Home inspection. The property must get a satisfactory report by a home inspector “within 10 days after acceptance of the offer” (for example). The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure all inspection conditions are detailed in the written contract.
Negotiating the price
Is the asking price accurate? A REALTOR® can estimate the home’s value for you using a Comparative Market Analysis (CMA), or you can look up nearby listings on realtor.com® to see how much comparable properties have recently sold for. If the house needs repairs, you might also demand a lower price or repair contingencies based on the results of the inspection.
If the following circumstances apply to your scenario, you are in a strong bargaining position and appear particularly welcome to a seller:
- You are an all-cash buyer;
- You have been pre-approved for a mortgage;
- You don’t have a house that must be sold before you can afford to buy.
In some situations, you might be able to bargain for reductions from the advertised price. On the other hand, if the ideal home becomes available in a hot seller’s market, you might wish to make the whole list price (or even more) in order to outbid other early offers.
Finding out why the house is being sold and whether the seller is under any pressure is very beneficial. Keep the following things in mind:
- Every month a vacant house remains unsold represents considerable expense for the seller.
- If the sellers are divorcing, they may just want out quickly.
- Estate sales often yield a bargain in return for a prompt deal.
The deposit you include with your housing offer is called earnest money. It makes sense that a seller would be wary of a written offer that wasn’t backed by a cash deposit to demonstrate good faith. The deposit is often held by a REALTOR® or an attorney. It counts toward your down payment and varies from community to community.
Buyers: The seller’s response to your offer
If the seller unconditionally accepts your written offer as-is after receiving it, you will have a legally enforceable contract. Once you receive notification that your offer has been accepted, it is legally binding. That’s it if the offer is turned down. You are not bound by the agreement if the vendor later changes their mind.
You might get a formal counteroffer with the seller’s desired adjustments if the seller accepts your offer with the exception of the sale price, the suggested closing date, or the basement pool table you want to stay with the property.
You have the option of accepting it, rejecting it, or even making your own counteroffer, such as “We accept the counteroffer with the increased price, but we still insist on having the pool table.”
The opposing party is free to accept, reject, or counter each time one of the parties modifies the conditions. Only when one party eventually signs an unequivocal acceptance of the other side’s proposition does the agreement become legally binding.
Buyers: Withdrawing an offer
The majority of the time, the response is affirmative up to the point at which it is accepted—and in some circumstances, even if you haven’t yet been informed of acceptance.
If you decide to withdraw your offer, make sure to do so only after speaking with a real estate attorney. You don’t want to lose your earnest money deposit or face legal action for any harm you may have caused the seller by acting on their behalf.
Sellers: Calculating net proceeds
When an offer is made, the seller has three options: accept it exactly as it is, reject it (which is rarely an effective response), or make a counteroffer with the revisions they desire.
Sellers calculate how much money they will receive at the end of the deal while considering a buying offer. When given two offers at once, for instance, they might find that they would be better off taking the one with the lower sale price if the other required them to pay points to the buyer’s credit institution.
Once a seller has a particular offer, figuring out net revenues is easy. They deduct the following from the intended purchase price:
- Payoff amount on present mortgage
- Any other liens (equity loan, judgments)
- Broker’s commission
- Legal costs of selling (attorney, escrow agent)
- Transfer taxes
- Unpaid property taxes and water bills
- If required by the contract: cost of survey, termite inspection, buyer’s closing costs, repairs, etc.
The mortgage lender for the seller may keep an escrow account into which they deposit funds to cover the cost of homeowner’s insurance and real estate taxes. In that situation, keep in mind that the proceeds from the sale will be increased by the refund of any money that was in that account at the time.
Remember that unless sellers accept a purchase offer from a potential buyer in its entirety and without conditions, the buyer will be allowed to reject the offer. The seller runs the danger of losing the option to sell if the suggested buyer changes the counteroffer.
Local custom is frequently used to determine who pays for what products. However, sellers and buyers are free to reach any agreement they choose regarding who will pay for the following:
- Termite inspection
- Buyer’s closing costs
- Points to the buyer’s lender
- Buyer’s broker
- Repairs required by the lender
- Home protection policy
Although some of these fees may not be the sellers’ obligation, many buyers, especially first-time buyers, lack the necessary funds. The greatest method to sell a house might be to assist the buyer.
Make sure a real estate agent and/or an attorney review the terms in the offer and counteroffers, whether you’re buying or selling a home.
As soon as both parties accept the written offer, you have a legal contract.
It doesn’t have to take forever to close on a house. Here’s How to Make Things Go Faster
Your offer to buy the home of your dreams was accepted after you established your credit and saved for a down payment.
The exciting aspect now is the closing procedure. Although closing on a home might not take as long as organizing your finances or choosing the ideal place to live, it can still be stressful. A smooth closing requires a lot of moving components to line up, and because of the epidemic, the logistics have changed.
Thankfully, the pandemic’s early stages have passed and lenders have improved their processes for handling remote closings. Many states have implemented regulations to enable digital notarization. Although the requirements for qualifying for a mortgage, including your credit score, have increased, the general confusion has decreased. With regard to the first few weeks of the shutdown, Esther Phillips, senior vice president of Chicago-based Key Mortgage Services, says, “We went through a very turbulent three to four weeks when there were guideline changes every day.” However, she pointed out that things have now cooled down because lenders have more information about some of the modifications.
The good news is that closing shouldn’t take any longer than usual if you work closely with your lender or mortgage broker to obtain a preapproval loan and have all your financial documentation in place.
How Long Does It Take to Close on a Home?
The closing procedure starts when a seller accepts a buyer’s offer, and it is completed on closing day when ownership of the property is transferred. If the buyer obtains a mortgage on the property, the procedure typically takes 30 to 60 days to complete. The closing procedure might be shortened to one or two weeks if the buyer is paying cash (no loan is required).
Expect to finish the following tasks from offer acceptance through closing:
Set a closing date: The buyer normally selects a closing date after you and they have agreed on a price and any necessary conditions. It will often be at least 30 days beforehand.
Open an escrow account. Your lender will set up an escrow account for you to retain any earnest money that is paid up front by the buyer. This money can be used for taxes, closing costs, down payments, and insurance.
Title search: A title search is a review of public records conducted by the buyer’s lawyer or a title business to ensure that the property is free of any “defects,” such as rival ownership claims, tax liens, or other judgements. To proceed with the deal, the title to the property must be free and clear of all liens and claims.
The buyer and lender both take a step in the mortgage application, underwriting, and loan approval process. The buyer produces financial records, including pay stubs, bank statements, and evidence of assets. Your official credit report will be checked, and the bank will decide whether you qualify for a loan. The lengthiest process might be this one. Preapproval for a mortgage speeds up the process.
Your lender will call for an appraisal to establish the property’s value and pinpoint what repairs are required.
Home inspections are usually optional but are nevertheless wise to do. It will help you get a better picture of the house’s condition and spot any potential problems before closing. Before the house is put on the market, the seller could conduct an inspection.
Final walk-through: Usually conducted in conjunction with a real estate agent, the final walk-through is your opportunity to confirm that everything is exactly as you had anticipated. Virtual home tours have grown in popularity among purchasers as a result of social distance rules, and Phillips has seen instances when the final walk-through was the buyer’s first visit to the new house.
Closing Appointment: The action. Here, all the paperwork is signed and the money is transferred.
Depending on where the property is located, there may be different criteria, deadlines, and roles for each step of the closing process. The specifics of closure vary by jurisdiction, says Melinda Opperman, president of the nonprofit, HUD-approved independent counseling service Credit.org. Our headquarters are located in California, an escrow state, claims Opperman. “Closings in real estate transactions must be handled by a neutral third party under escrow states.” There are other states that mandate that an attorney handle loan closings. The closing procedure is often handled by these attorneys’ internal employees.
What Happens on Closing Day?
The time has finally arrived for you to pick up the keys to your new house. You should speak with your lender or real estate agent ahead to receive a checklist with everything you need for closing because there may be local variances. Typically, you’ll need to bring documentation like:
- Valid identification
- Proof of homeowners insurance
- Funds for the down payment and closing costs
For the amount you owe, you will often need to present a certified check or cashier’s check, although you may also be able to wire the funds in advance (you must do so for a virtual closing). So that you can confirm the information at closing, you might also wish to bring the purchase agreement and the mortgage’s Closing Disclosure form.
The last few tasks should be completed in no more than a few hours on closing day. Many closings currently take place remotely or include some digital components.
If your state doesn’t have rules governing virtual notaries, a virtual closing may require a notary to visit your home to sign paperwork. Another choice is to give a real estate attorney power of attorney so they can handle the paperwork. Regardless of how the pandemic has affected closing procedures in your state, your real estate agent and lender ought to have all the wrinkles smoothed out.
What to Expect to Pay on Your Closing Date
Closing costs, which range from 2% to 6% of the purchase price, include anything from lender fees and homeowners insurance to property taxes. A Closing Disclosure form must be given to you by your lender at least three days before the closing. Similar to a Loan Estimate, the Closing Disclosure form gives you your actual closing costs rather than simply an estimate of them.
The amount you’ll have to pay depends on a variety of variables. Some closing costs may be reduced, while others are beyond of your direct control. You can avoid paying exorbitant lender costs by looking around for the finest lender. However, your future home’s location will have a significant impact on things like property taxes, homeowners association dues, and even homeowners insurance.
How to Avoid Delays and Close Faster
The loan and the property are the two main moving parts of a real estate transaction. One of those two components will almost certainly be involved if there are delays.
Lack of timely delivery of the appropriate papers to your loan officer or mortgage broker could cause financing delays. Additionally, it’s crucial to prevent significant alterations to your credit report during the closing process. In the months before making a home purchase, Phillips recommends clients not to open any new credit lines, steer clear of major purchases, and refrain from increasing the balances on their existing lines of credit (i.e., don’t max out your credit cards). Your lender will keep an eye on these behaviors and evaluate your credit report as a result.
If you can’t prevent them, you should also talk to your lender about any significant financial transactions. Lenders will want you to substantiate irrational deposits and big withdrawals. You’ll need a paper trail, according to Phillips, even if you’re merely moving money from a retirement account or the sale of stocks. This is done in part because the lender wants to make sure your financial situation hasn’t changed. Your capacity to pay your mortgage could be affected if you take on more debt.
You should also inform your lender of any large financial transactions if you can’t avoid them. Lenders will require documentation to support illogical deposits and big withdrawals. Even if you’re only shifting money from a retirement account or the sale of stocks, Phillips says you’ll need a paper trail. The lender wants to make sure that your financial condition hasn’t changed, which is why they’re doing this in part. If you take on extra debt, it can have an impact on your ability to pay off your mortgage.
Being clear about what is and isn’t included with the home can help both the buyer and the seller. She has encountered situations with clients when appliances, outbuildings, or light fixtures went missing without warning during the final walkthrough. This kind of closing-related hiccup is easily avoidable.
5 Pro Tips for Movers From Realtors Who Have Helped Countless Families Make Their Next Move
The majority of Americans have some experience packing up and relocating because they move an average of almost 12 times throughout their lifetimes. Now consider how many moving-related techniques a Realtor® picks up from observing customers relocate each week: Regarding a seamless move from one home to another, we’re talking expert status.
For Full Control Over Your Timeline and Moving Budget, Go DIY
Many sellers see relocation as an opportunity to profit from their equity. Going the DIY approach by packing, loading, and driving to the new location is a smart alternative because it allows them to keep as much of those revenues in their pockets as feasible.
Penske offers a dependable and well-maintained truck, so if they are able to relocate their possessions without hiring professional movers.
Prep for the Move Before Listing the Home
It’s a good idea to start the sorting and decluttering process as soon as the thought of relocating even occurs to someone. Most of us always have things to sell, give away, or throw away, even if our plans alter. She then instructs clients to pack up anything they won’t need for the following three months just before listing a home.
We all prefer a little uniqueness in our homes, but not too much. Emphasizing a home’s square footage by doing this is a smart idea, according to this. The majority of consumers are searching for a new home to obtain additional space.
Incorporate Breaks in Your Moving Timeline
Take breaks when you can because moving might feel like a bit of a marathon affair. Fortunately, one benefit of relocating yourself is that you can set your own schedule. We advise renting a moving truck for a few days and loading as much as you can. It’s likely that the first few boxes contain items you don’t need and the last few have necessities.
Get Creative with Finding Moving Help
Try to relocate on a weekday as many leases begin on September 1, which falls on a Saturday this year. If you can, try to move the move-in date forward (or back, if you can) with your new landlord so that it falls on a weekday.
You can get a better deal on a moving company or rental truck by avoiding the weekends and the end of the month.
Verify the credentials of your movers.
Cost-cutting may be a priority, but if you’re unsure about their reliability, don’t hire movers for the lowest price.
A website for people on the move that offers consumer protection warns that those looking for the cheapest movers [may] be duped by unrealistically low estimations. They hire the mover, but after the company has the customer’s possessions, the movers won’t release the package until the client makes a larger payment. Thousands of dollars more is what I mean by “more.”
Avoid clicking on ambiguous, fluffy adverts. Despite how impatient you might be, resist the urge to choose the initial option. Be careful: To find out if a company is legitimate, check with the Department of Transportation, look into its physical location, business history, membership in associations and community organizations, and, last but not least, look into its internet reputation and overall digital footprint.