This month I want to pass along a simple outline of the primary steps required to successfully complete any residential real estate transaction.
There are literally dozens of additional tasks and requirements necessary to complete a transaction. For the most part though, all required tasks are related to one or more of the following 4 steps outlined.
STEP 1: SALE PENDING/AGREEING TO TERMS
BUYER AND SELLER EXECUTE AN AGREEMENT OF SALE
Both parties should “know their numbers” before executing a sales agreement.
SELLERS…What are your net proceeds after selling costs and mortgage payoff?
BUYERS…What is your “cash to close” requirements and your total estimated monthly mortgage payment upon taking ownership?
STEP 2: HOME INSPECTION CONTINGENCY
Click here and scroll to page 4 – Section 11 of the PAR Pennsylvania Association of REALTORS) Standard Agreement of Sale, as it pertains to the contract terms of the Home Inspection Contingency.
Typically these inspections are the option and responsibility of the Buyer and are to be completed by a certain date. Usually within 10-15 days of Step 1.
The Buyer can walk away from the transaction if they are not satisfied with the property condition as stated in the written home inspection report.
STEP 3: MORTGAGE CONTINGENCY
Click Here and scroll to page 3 – Section 8 of the PAR (Pennsylvania Association of REALTORS) Standard Agreement of Sale as it pertains to the contract terms of the Mortgage Contingency.
IN THEORY…the Buyer needs to qualify for the loan amount and the property needs to appraise at or above the contract sales price.
IN REALITY…the bank/lender can deny the loan for any reason and at any time prior to closing.
Typically the Buyer is required to apply for their mortgage within 7 days of Step 1. In most cases the lender will then need 30-60 days to process the Buyers application for a mortgage and provide a mortgage commitment or approval.
STEP 4: CLOSING/SETTLEMENT
The closing/settlement date is stated and agreed to by both parties in Step 1.
IN THEORY…This will be the closing date.
IN REALITY…Until the property closing/settlement actually occurs there are no guarantees. Under current market conditions and as an unofficial estimate, I would say less than 50% of the transaction closings occur on the original agreed upon closing date.
Qualified, well informed and well represented Sellers and Buyers can navigate this 4 step process with minimal stress and annoyance. All others will find the real estate transaction overwhelming.