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You have knocked yourself out to sell your home. And now, you’ve worked through the process and have an agreement. What happens once you accept the buyer’s offer?
- You or your agent will open escrow with a title company or attorney. They will examine and insure the property title and deal with the property records
- The buyer or mortgage company will order an appraisal (and complete the mortgage approval if needed)
- The buyer will probably order a home inspection, and take a final walk-through before closing
Your purchase agreement should set out a timetable for these events. be careful about hitting your deadlines to keep your sale on track.
Offer + acceptance = just the beginning
Accept the buyer’s offer and it’s perfectly okay to celebrate. As a home seller you’ve passed a major hurdle and closing lies ahead.
When a purchase offer is accepted, there’s an instant and important transformation in the selling process. There has been offer and acceptance, a meeting of the minds. You’re on your way to the promised land of quiet closings plus the joy of big settlement checks.
But you’re not there yet. Looming ahead is a series of potential landmines which need to be navigated. Keep track of all deadlines. It’s important because by not notifying the buyer that he or she missed a deadline and is “out of contract,” you may accidentally waive your own rights.
After you accept the buyer’s offer
If you look at the contract which now exists between buyer and seller, the odds are that it’s not a done deal. It’s a “contingent” arrangement, a fancy term which means there will be a transaction — but only if various items are resolved before closing.
So what needs to be done?
Contingent contracts can differ in all kinds of ways, there’s no such thing as a “standard” agreement. The arrangement between buyer and seller is potentially unique, but most likely contains at least some of these common understandings.
After you accept the buyer’s offer and close the deal, you must be out of the property and the home must be “broom clean.” Sale agreements normally set closing on or before a given date. You must respect this deadline.
If sellers delay closing, they may also cause a buyer to lose an interest-rate lock-in. A delayed settlement can also mean that you will not have the funds required to purchase a replacement property. The bottom line: Be ready and able to move when required.
Very few sellers accept offers that don’t include earnest money deposits. So once you accept the buyer’s offer, you, your broker or title company should get this deposit. It’s evidence of the buyer’s commitment to go through with the transaction, and may also serve as compensation to you if the buyer backs out.
And even that may not prove that the buyer can close — believe it or not, sellers need to ask if the check bounced.
The deposit is typically held in the broker’s escrow (trust) account. In a dispute, brokers will generally turn the money over to a court if they cannot get a release and cancellation from both parties.
If the transaction is going to be financed, there’s typically a requirement for the purchaser to apply for financing within a given number of days, say five or ten.
There will usually be a deadline by which the buyer must secure mortgage loan approval, and prove it with a mortgage credit approval or pre-approval letter.
If there is not mortgage involved, the buyer should have to furnish “proof of funds to close” by a certain date.
There may also be deadlines for appraisals to be ordered, received and approved. Check your agreement carefully, note all deadlines, and follow up with your buyer (or have your agent do it) to make sure everything is on track.
A “fixture” is generally defined as something attached to and intended to remain with the property after the sale. If not attached, it’s just personal property, aka “personalty.”
For example, a built-in microwave is generally regarded as a “fixture,” while a microwave that just sits on a kitchen counter is personal property.
What needs to be done: Work with your broker at the time of listing to identify what is a fixture and what’s not. If you really want that clothes washer and dryer, define them as “personalty,” something that leaves with you.
Also, be careful not to walk off with things that the buyer expects to be there. Example: if you listed the children’s swing set as a fixture, it must remain with the property. Don’t disassemble it and take it with you.
Do not cancel your policy as of the date of settlement. Settlement may be delayed. Work with your insurance broker to make sure that coverage continues for several days past the actual closing. Just in case closing is delayed and you have a claim.
If the property somehow floods because a pipe bursts, with insurance, much of the expense will be paid by the insurance company. Without insurance, you are responsible for the entire cost.
If one party or the other does not follow through according to the contract, there can be big problems. The seller might try to keep the deposit and even sue the buyer. The buyer might try to sue the seller. Both may seek “specific performance,” that is, having a court order a buyer to buy or a seller to sell.
For example, one real-life seller in Nevada discovered that the property appraised for a much higher price than she accepted from the buyer. You can’t do that once you accept the buyer’s offer. She tried to back out, and the buyer had to get a lawyer to intervene.
If disputes arise, immediately contact a local attorney who specializes in real estate.
As a condition of the sale, a seller may agree to make repairs or replace equipment. To avoid conflicts, the agreement should be as specific as possible regarding your obligation. For instance, what brand and model dishwasher will be acceptable?
One way to avoid problems with appliances that die soon after the sale, or repairs that don’t hold up, is to throw in a home warranty with the purchase. That’s an insurance policy that covers replacement or repair of many systems in the home.
As a condition of the sale, the title must be good, insurable, and marketable. meaning that the seller has the right to sell the home in the first place, and that there are no others who have a claim on the property.
To establish what the owner is selling, the closing agent will conduct a title search. The agent investigates the chain of title (property transactions, liens, and things like easements that allow others access), and looks for defects like unpaid liens or uncanceled mortgages.
Because a title search may miss defects, and because some potential defects are not in the property records (think of a sale by someone too young), mortgage lenders require title insurance. Many cash buyers do as well. If the title is “clouded,” it can’t be insured. The seller must take action (this is called “quieting” the title) to clear it for the sale.
Buyers have a right to walk through the property prior to closing. They generally want enough time for a careful inspection. The electricity and water utilities must be working for them to inspect the place.
The idea of a walk-through is to assure that the buyer is getting the property in substantially the same condition as it was in when the contract was ratified. If, while moving out, you dropped your piano through the stairs, you’d be responsible for the repairs.
When you accept the buyer’s offer, you start a potentially long process. The culmination includes signing and recording of all official documents, the transfer of funds, and providing the keys to the home’s next owner. Your old home has become the buyer’s new home.