Once you accept a purchase offer on your home, there are still several steps to complete before you can finalize—or “close”—the transaction. While the process differs in each state, here are the basics of what you can expect during the period between signing and closing:
What happens after I sign a purchase agreement?
Once you have accepted a purchase offer, you will enter “escrow,” an arrangement that protects both buyers and sellers during real estate transactions. Escrow means that a third party controls payments between you and the buyer in a separate account and will only release the funds once both you and the buyer meet the terms of your agreement. An agent who is a REALTOR® can help you navigate this process.
What goes into an escrow account?
Typically, a buyer puts money into the account to show they intend to close on the home, called “earnest money.” This may be a percentage of the purchase price or a set amount. The seller’s property documents will also be held in escrow by a designated person, such as an attorney or escrow agent. Once you close on the home, your money will typically be applied towards your payoff and other closing costs.
What do I need to do before I can close?
During escrow your REALTOR® will ask you to complete many disclosures related to the property. These disclosures will ask things such as repairs, alterations completed or other known issues with the property and even the neighborhood. It is important to disclose all you are aware of no matter how minor you feel it may be. Issues can arise from sellers failing to disclosure know facts. During this time you will also want to make sure the house is accessible for the things like the appraisal and inspections. Making sure that all the timelines are followed will help create a smooth process.
What is an appraisal?
A home appraisal is a professional opinion of a home’s value by a licensed or certified residential appraiser that helps the lender ensure the purchase price is in line with the property value. Your purchase agreement might have a “contingency” on an appraisal—a condition that the market value and purchase price must align in order for the transaction to continue. A mismatch between a home’s appraised value and the purchase price could impact how much the lender allows the buyer to borrow for their mortgage. Some lenders also have appraisers verify certain things like chipped paint or hand rails to ensure the home is safe. If the buyer is not using a mortgage and is paying for a home “in cash”—money currently available—you still may make the offer contingent on an appraisal or do one independently, but it is not required.
What are inspection?
While not required, some buyers include a home inspection as a contingency in their purchase agreement. These inspection are to notify the buyer of issue you may not have noticed and disclosed. An inspector will look throughout the interior and exterior of the home, checking for items such as for wood destroying pests, or testing for radon, lead paint and asbestos.
How long will all this take?
These steps may take several weeks or more depending on your situation. Each part of the process operates on its own independent timeline, so the length of the process is influenced by many factors, such as when home inspections are scheduled and how long it takes for the buyers mortgage application to be approved.
What happens at close?
You can expect to sign documents shortly before the scheduled close date and receive your money shortly after the close date. The amount of which depends on many things like loan payoff, seller credits, taxes and other escrow fees.
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NOTE: Consumer guides do not constitute any change in NAR policy. Real estate professionals must ensure they market properties consistent with relevant MLS rules and educate sellers on the choices available.
Practices may vary based on state and local law. Consult your real estate professional and/or an attorney for details about state law where you are purchasing a home. Please visit National Association of REALTORS® for more information and resources.