Buying a house takes time, energy, and focus to get through the process without making a mistake or simply losing your mind altogether. Getting your loan pre-approval completed, finding the right house, structuring a competitive offer, and executing a sales contract can be exhausting.
Once you have a signed sales contract in hand, it may feel as though your work is done; unfortunately, this is not the case. An accepted offer is only the beginning of the process; there's a lot more work to do to get your transaction closed. The most common question buyers ask after their offer has been accepted is: “What happens next?”.
This article will help you stay on track and make sure that you are properly prepared to close your transaction without any unnecessary drama. If one of these steps gets overlooked, it can delay your closing; or possibly sabotage your entire home purchase.
A good REALTOR® is your best resource to help avoid issues that might jeopardize your home purchase. They will walk you through each step and make sure that nothing is missed.
Earnest money is your proof as a buyer that you “earnestly” want to purchase their home. This cash deposit involved at the beginning of the transaction protects the seller's interests as they take their house off of the market.
Some REALTORS® will collect earnest money from you before they submit your offer. Others will coordinate the earnest money drop off after an offer is accepted. Whatever your scenario is, make sure that your earnest money is delivered on time and in the proper payment form. This information is typically agreed upon and documented in your sales contract.
Once you have an executed sales contract in hand, the clock starts on your inspection period. Make sure you know how long your inspection period is, and that you complete your inspections in a timely manner. There are multiple types of inspectors that you may need to schedule. A standard home inspector is the most common; but radon, pest, septic, sewer lines, structural, HVAC, meth, and mold inspections may also be relevant to your buying situation. Discuss your options with your REALTOR®. Make sure that you have resolved any inspection issues within the time agreed upon in your sales contract.
As soon as you have an executed sales contract on a home, you or your Realtor will need to communicate with your mortgage lender to make sure that they get a copy of said contract. As soon as they receive it, they will start the mortgage process for your transaction.
To begin this process, your lender will begin asking for a myriad of paperwork. Be prepared to provide plenty of documentation throughout the transaction. Make sure that you get the requested documentation to them ASAP to limit any problems with their timeline. Gathering and organizing all of these documents can quickly become overwhelming if you are not prepared; not providing them to your lender on time can really slow their process down.
Some lenders are not as thorough with regards to checking in with you to keep you updated on their progress. If this is the case, make sure that you are checking in with them to verify that they are on track. Your REALTOR® should help you with this as well. If a lender does not complete the loan process in a timely manner, it can cause you to be in breach of your sales contract by not closing on time. A breach of contract will give the seller the opportunity to terminate the transaction, and to keep your earnest money.
If you stall on any requested lender docs, you can be sure that the finger will be pointed at you if they are not ready in time. Make sure that you are not put in this situation by promptly providing any documentation to your mortgage lender as soon as they request it.
This step is handled by the Title Company or law office facilitating the transaction. They will issue a Title Commitment that reviews the title history of the property (chain of title) and discloses any liens against the property that need to be resolved before closing.
Be sure to review your title commitment and ask an attorney for advice if you see anything within it that looks concerning. Most title commitments are straightforward and require no additional work on your part. Just be sure to review it thoroughly before moving on to the next step.
Once you have cleared the Inspection process, let your lender know. They will then order a home appraisal to verify that the value of the home you're purchasing is worth the loan amount that you are asking for. In Colorado, appraisers have 10 business days to complete the appraisal, starting from the day it was ordered. For this reason, it is important to make sure that your lender orders your appraisal as soon as possible. It’s likely that you will be paying for the appraisal, so it’s best to wait until after you and the seller have reached a satisfactory agreement regarding your inspection objections, if any.
HOME INSURANCE & WARRANTIES
Your lender will require you to have a Home Owner’s Insurance Policy on the property that you are purchasing before closing. You should shop around and choose the homeowner's insurance provider and policy that works best for you. Once you have the policy in place, let your lender, REALTOR®, and/or title company know.
Home warranties are also popular within real estate transactions. Some sellers will provide an allowance for you to purchase a home warranty. If you're purchasing a home warranty, you’ll want to shop around and find the home warranty company that best suits your needs. Once you have found the right home warranty provider, be sure that the title company knows who you plan to use as soon as possible.
TURN ON UTILITIES
Now that you're past all of the major steps required to purchase your home, you will want to get your utilities turned on, or transferred into your name. In Colorado, the sellers often provide all of the relevant utility contact info in the Seller’s Disclosure.
In the Summer months when the local real estate market is busy, you may want to do this at least a week before closing to make sure that they can process your request before closing.
SCHEDULE YOUR CLOSING
Your sales contract will have an agreed upon closing date. Make sure that you and/or your REALTOR® have contacted the title company in advance to make sure they have a time slot open that is convenient for your schedule. Title companies are often booked up during the busy Summer months, so be sure to do this at least a week or two ahead of time.
Most buyers and sellers will attend the closing together; so your REALTOR® may need to coordinate this with the listing agent as well. This is usually an easy step - just make sure that it doesn’t get pushed off until the last minute so that the title company can accommodate your request.
It is wise to do a Final Walkthrough before the closing. The purpose of a Final Walkthrough is to verify that any repairs have been completed, that all of the seller’s personal belongings have been moved out, and/or to make sure that the home is ready to move in and in the condition that you expected it to be in.
This is not a time to renegotiate repair items on the sales contract. It’s simply a safeguard to make sure that no major issues arise that could cause the closing to terminate; which would likely be followed by legal proceedings to mitigate the issues. Minor annoyances like finding a few burned out light bulbs during your final walk-through shouldn't be cause for you to delay your closing.
CLOSE THE TRANSACTION
One the day of closing, you will need to have your driver’s license (or other approved photo ID) and certified funds (cashier’s check or wire transfer) for any monetary amount required from you at closing. You will meet at the title company to sign all of the required documentation.
A typical closing usually takes less than an hour. As the buyer, if you're getting a loan, you will be signing the lion's share of the paperwork, so get that John Hancock ready! Once the documentation has been signed and your lender has funded the transaction, you will be given the keys and the house is yours! Hurray!
Each of the 10 steps listed above has the potential to sabotage your home purchase. Make sure that you stay on top of your transaction to identify any potential issues before they arise.
If you have a good mortgage lender and/or REALTOR®, they will catch these issues immediately. They will keep you in the loop through each step of the transaction and protect your interests. A good REALTOR® is your best resource to make sure that every step above is met in a timely manner with no added drama.
Unfortunately, it is possible that your REALTOR® and/or mortgage lender may disappear once you have a signed contract. If you aren't confident in your REALTOR's® ability to keep track of the transaction, take charge and communicate directly with your lender and title company to make sure that everything is moving along as planned.
Buying a home takes time and energy, but it’s extremely rewarding. After you sign the papers at closing and get your keys, all of your hard work will have paid off and you will feel a wave of excitement as you move on to enjoy your new home and your next phase of life!