Real estate transactions are much more complicated than buying and selling consumer goods. Typically, after contract acceptance, it may take weeks or months to finalize the transaction. During that time, the buyer, the seller and third parties work together to inspect the property, establish its title, obtain financing to close the sale.
In most states, once the contract is signed and an earnest money check is written, the check is deposited with a third party such as an attorney or a title and escrow company. That third party sets up a file and begins researching the ownership history, or chain of title, of the property by looking through public records. The title research continues while the property is under contract. A title search confirms that the seller has the legal right to sell the property, and that the title is free of liens.
Inspections and Renegotiations
Soon after the contract is signed, the buyer usually inspects the property to ensure that it meets his expectations. Most buyers look at the property's overall physical condition -- at a minimum. If the property is in good condition, continues with the transaction. If not, the buyer may attempt to renegotiate the price or obtain repairs from the seller.
Although buyers frequently have a mortgage pre-authorization letter in hand before putting the house under contract, the financing process begins in earnest after both parties agree on price and terms. The lender hires an appraiser to inspect and report on the property's value, while the lender's underwriting team decides processes the buyer's application for final loan approval. If everything works out, the transaction can move into the final steps.
Usually, the buyer has the right to re-inspect the property right before closing. While many contracts don't allow a full re-inspection, he's allowed to ensure that nothing else has gone wrong at the property since he last visited it. Called a final walk-through, the inspection also confirms that the seller finished any repairs that he agreed to under contract.
Before the property is set to close, the buyer usually needs to have his money in place. Frequently, the buyer must arrange to have his loan funds and down payment in the escrow account either the morning before an afternoon closing or the afternoon before a morning closing. This is important, because the seller won't release a deed without payment from the buyer. If the seller needs to pay money at closing, such as a mortgage or other lien, he may need to transfer money into the escrow account before the closing appointment.
At the closing, the buyer and seller sign the documents necessary to transfer ownership of the property, pay off the seller's mortgage and establish the buyer's mortgage. Money also changes hands to prorate property taxes and utility bills. Final inspection reports like termite letters are delivered to comply with lender requirements, and any outstanding homeowner's association dues or assessments are paid. Finally, the buyer receives a set of keys to the property.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.