Brief Details About Real Estate Closing Transaction Process

Brief Details About Real Estate Closing Transaction Process

In this article, we're going to be going over a real estate transaction process from start to finish. Just to clarify we are only going to be addressing the real estate transaction process from the point of a purchase contract being written and submitted. Before writing a purchase agreement we always need to have the buyer and seller read and sign an agency relationship agreement. This establishes the agency and who is responsible for what during the course of the real estate transaction

It's also a good idea to explain to a buyer or a seller that there will most likely be two sets of negotiations, one to negotiate pricing terms and the other to negotiate repairs. The negotiation regarding repairs can be and often is more difficult than any other part of the real estate transaction. It's also a great idea to explain to a buyer or a seller that there are contingencies, within the purchase contract that allow for the buyer to exit, from the contract within certain time frames.

Brief Details About Real Estate Closing Transaction Process
Real Estate Closing Transaction Process


What Inside The Purchase Agreement?

The purchase agreement will be contingent on inspections review of disclosures, home loan approval, appraisal, and a few other things. These contingencies are ways for a buyer to exit the contract should something not go as anticipated. As a buyer's agent, you want to get together with your buyer and agree to what price and terms you want to include into the contract and then sign the agreement and submit it to the listing real estate agent. If you're representing the seller, you want to go over all offers with the seller. And then contact the associated lenders to go over each buyer qualifications. After that, you'll want to relay to your seller which buyers are the strongest? Why they're the strongest?

The listing real estate agent will have the seller accept the offer as it is or write a counteroffer until the offer is fully agreed upon by both buyer and seller. Once both the buyer and the seller have signed and initialed the purchase agreement. We will then have a fully executed contract.

After Acceptance Of Contract

It's typically the responsibility of the listing agent to forward the fully executed contract to escrow and also back to the buyer's agent. The date in which the final signature has been put on to the contract agreeing to all of the terms is our acceptance date. This will be day one in our timeline to close and also the date which will determine when contingencies will be removed. It's also typically the listing agent’s responsibility to open escrow and have escrow order the preliminary title report from the chosen title company. It's the buyer's agent’s responsibility for the fully executed contract to the buyer’s lender to make sure that the lender has the escrow and title information. The lender will need this information before they can start the loan process.

Within the first three days after acceptance. It’s the buyer's agents responsibility to make sure that the buyer gets their earnest money into escrow. We are now on day three of our timeline. Within the first seven days, it’s the listing agent's responsibility to get the sellers disclosures over to the buyer's agent for the buyer to review them. Also during these first few days, the listing agent should order a termite inspection on the property if it's been requested by the buyer. 

If you were the buyer's agent you'll want to get the physical inspection ordered as soon as possible so that you can comply with your contingency timeline. It's a good idea to meet the inspector out at the property to see firsthand the findings of the inspector. Whether you're representing the buyer or the seller, if you're the buyer's agent this may be a good time to complete your agent visual inspection as well.

Brief Details About Real Estate Closing Transaction Process
The Purchase Agreement

Between day 7 and 14 there's a lot that goes on. If you're the buyer's agent you'll be reviewing the seller’s disclosures escrow instructions and title report. Make sure these are delivered to the buyer, that they can review them as well. You will want to address any issues that may arise or things that the buyer may need clarity on. The buyer's agent will also be going over the termite report and inspection report with the buyer. 

The buyer's agent will then write up a request for repair addressing any repairs and credits that the buyer may request from the seller in accordance with inspection reports. The listing agent will work with the seller to negotiate the buyer's request for repairs this is round 2 of the negotiations that we spoke about earlier. This can often be the toughest part of the transaction. The buyer and seller will hopefully come to a mutual agreement regarding the request for repairs.

If you're representing a buyer you want to make sure that you wait until after the request for repairs has been negotiated for the lender to order the appraisal. This can save the buyer a significant amount of money if the deal were to be canceled due to buyer and seller not being able to agree on repairs. Once the inspections are complete and repairs negotiating the listing agent should have the buyer's agent remove all contingencies accept the loan and appraisal. This would typically be day 17 in our contract. If you're representing the seller and you have some concern of whether or not that property will appraise you should probably meet the appraiser out of the property to discuss comparable sales and improvements made to the property. This can help the appraiser understand how the price was established.

Once the appraisal is complete and coming up value the lender will submit it to their Underwriting Department. Within a day or two, we should have full loan approval. At this point, the listing agent should have the buyer's agent remove all contingencies. This would typically be day 21 in our contract. If you're a listing agent on a property that has a septic system you want to make sure to wait until all contingencies have been removed before ordering septic pumping and inspection. 

We do this to protect the seller if there are still contingencies in which the buyer can cancel the seller could be forced to pay for pumping all over again with a new buyer. If too many times gone by between buyer cancellation and obtaining a new buyer. This would typically be done between days 21 and 25. If you're representing the buyer it's now time to have the buyer transfer all utilities into their name. We do this because we don't want the seller to stop services and the buyer has to pay extra fees to start up new services.

It's much better to just have the buyer transfer the services from an existing account rather than start new services. The letter will typically have the buyer sign their home loan documents between days 25 and 27. The buyer's agent will want to complete their final walkthrough with the buyer a few days prior to closing. Typically, between days 26 and 28 of a 30-day timeline, the lender will fund the buyer’s loan sending the funds to the title company for closing between days 26 and 28. 

Keep in mind that our real estate transaction is still not officially closed yet. Official closing occurs when the title company records all the documents down at the county recorder’s office. Our real estate transaction is now officially closed. If you're representing the buyer it's time to meet the buyer at the property in exchange the keys. Let me be very clear here, never ever give keys to a buyer before recording has occurred. I've heard many horror stories about real estate agents that didn't follow this rule.

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