Buying a home is a process that involves multiple steps after the buyer and seller have entered into a contract. This is why a property will be pending even after an offer has been accepted. During this pending phase, a third party intermediary, known as an escrow company, is responsible for holding the funds for the purchase of the property in an account.
In addition to the escrow company, several other entities are involved to ensure a successful exchange of the property between the buyer and seller. For a standard sale, this contract pending status can last between 30 and 45 days.
Buyer Investigation and Loan Application
Once the seller has accepted an offer, the buyer is allotted a certain number of days to investigate the property. This includes performing a home inspection, investigating square footage, environmental hazards, checking building permits, and neighborhood conditions.
If the buyer is obtaining a loan to purchase the house, the lender will begin processing the loan application. The lender will request an appraisal of the property to determine its market value to ensure the price of the home is equal to the loan amount.
Escrow and Title Services
The escrow company will coordinate with the lender and a title company. The lender will want to make sure the title to the property is free and clear. The title company will provide a preliminary report detailing known issues that may create problems when transferring title to the new owner. The seller may need to have these issues resolved before the sale can be completed. The lender will require the buyer to obtain title insurance to protect against claims that may arise on the property.
Counter Offers
The buyer may want to renegotiate terms of the offer upon further inspection of the property. She may want to ask the seller for a credit to fix the repairs discovered during the investigation or counter offer for a price reduction to compensate for the cost of the repair. If an agreement cannot be met, the contract may be canceled if the buyer is still within the time allotted to complete her investigations.
Funding for the Purchase of the Home
Once the loan application is approved, the house has been appraised, a preliminary title report has been produced and the buyer investigations have been completed, the lender will disburse the funds to the escrow account. A buyer that submits an all cash offer does not have to wait on a loan approval or home appraisal. Submitting an all cash offer can shorten the time to close the sale.
Close of Escrow
The escrow company ensures that all the necessary documents have been signed, and money for insurance premiums, earnest money deposit and other closing costs have been collected. The title is recorded at the county registrar where the property is located. When a title is recorded, the buyer is officially recognized as the new owner. The money for the purchase of the home is released to the seller. The home is considered sold, and the contract is no longer in a pending status.
