There are several steps involved in the sale of a home, so we will break down each step here. Our goal is to help sellers understand the sales process before accepting an offer by explaining how these concepts work in practice. As you read this it's important to keep in mind that most sales happen as described, but each sale is unique.
This includes the price, the transaction dates/deadlines, the amount of the deposit, etc. Upon execution by both parties, it becomes "legally binding"
By far the most common method of submitting an offer is for the buyer's agent to send an email directly to the listing agent. The seller has the option of accepting or rejecting the offer or making a counter-offer. A seller's offer is emailed directly from the seller's listing agent to the buyer's agent after both parties have reached an agreement on the terms. Contracts become legally binding once they are signed by both buyers and sellers. If there are contingencies such as a home inspection included in the offer, the seller is more legally obligated than the buyer is.
Deposits are sometimes referred to as "earnest money" and are held in escrow most commonly by the listing brokerage but could also be held by the seller's attorney. The total sum of the buyers deposit is usually divided into two parts. An offer is accompanied by one and a Purchase and Sale Agreement by the other.
In general, buyer's agents mail deposits to the listing brokerage once the Offer and the Purchase & Sale agreement has been signed. All parties must first agree and sign a mutually agreed release before funds can be returned to the buyer or given to the seller.
Pre-Approval is a conditional approval provided in advance of mortgage application. In addition to their offer, buyers who plan on getting a mortgage should provide their pre-approval documentation.
It is common for buyers to assume that once they get a pre-approval for their loan, everything will be fine, but the "pre" in the pre-approval is crucial to understand. A buyer cannot apply for full approval until they find a home. It is more likely that a buyer with a pre-approval from a reputable mortgage broker and company will be able to obtain a mortgage, provided they do not have extreme life changes, such as losing their jobs or making large purchases that affect their credit.
It is simply a period of time during which buyers have to inspect the home and conduct their own due diligence before they purchase the home. In the Offer to Purchase, inspection deadlines and types of inspections are outlined.
Ultimately, after their inspections of the property, buyers have the option of proceeding with the sale, renegotiating the terms of the transaction, or backing out of the sale. The buyer's deposit is refunded if both parties cannot come to an agreement. Inspection contingencies are sometimes used by buyers to renegotiate their offers terms. If this happens, we will advise you on the most appropriate course of action based on the specific situation.
The Purchase and Sale Agreement is a comprehensive and legally binding contract between the buyer and the seller. To complete the sale, each party must perform certain tasks prior to and up until the closing. The agreement contains clauses that are designed to protect both the buyer and the seller.
Upon signing, you have successfully crossed one of the biggest hurdles for the sale to take place. The Purchase and Sale Agreement may be breached in certain circumstances, for example, when one or both parties fail to fulfill their obligations under the Purchase and Sale Agreement. Our team will provide you with advice according to the situation if this occurs.
Appraisals are conducted by licensed appraisers hired by the buyer's mortgage company to determine the home's value. This is done so that the lender will be sure that the home's value is sufficient to justify a mortgage in the buyer's proposed amount.
Appraisals are not another inspection, and buyers have no control over how much the appraisal will be. In most cases, an appraisal value will reflect what a buyer is willing to pay. In some cases, appraisals come in lower than expected; such instances are more likely to occur in areas with fewer comparable sales. Depending on the circumstances, if the appraisal comes back too low, we can advise you accordingly.
The Mortgage Contingency Date date is in the offer and purchase and sale agreement. This date specifies when the buyers must receive their mortgage commitment from their lender.
When buyers notify the seller earlier than the contingency date that they may need additional time or that they will not be able to obtain a mortgage, the buyer may request an extension of the date or the sale can be terminated and the deposit returned. It is often the case, however, that the seller keeps the deposit if the buyer is denied a mortgage after this date. If this situation occurs, please note that the Escrow policy with regards to the deposit will apply.
This is the date on which the deed is executed and transferred to the buyers, and buyers officially take ownership. Sellers may think they can remain in the home up to or after this date, or that the seller can easily change this date after signing a contract. Both are misconceptions. It is often stipulated in the purchase and sale that the house is to be 100% cleaned out by this date.
As stated in the Purchase and Sales Agreement, this is a firm date that cannot be changed easily in the future. There are times when a closing can be delayed because of items like mortgage or title delays.