Wednesday, March 4, 2015 / by Vanessa Saunders
So your offer to purchase a home has been accepted. Congratulations! You have, in real estate parlance, come to a "meeting of the minds." So what happens next? It can be a long and winding road, depending on circumstances, lawyers, banks and the property gods. Here is what happens in New York, in a nutshell.
The first thing that happens is a call for an inspection by the buyers. An independent inspector will visit the property and perform a rigorous search for any problems which may concern the buyer. This includes the structure of the property and any damage that may be present including rotting framework, insect damage, erosion or anything else which might compromise the integrity of the structure. He goes on to examine all systems, including heating and air conditioning, electrical, plumbing, septic, and anything else which may present a problem. Also on the list is a check for mold, damaged windows, chimneys, steps, basement problems etc. In all, he should spend a solid two hours or more.
If the inspection turns up any significant problems or things the buyers want to address, this is the time to bring them to the seller's attention. The buyers can ask the seller to remediate the problems (fix them) or re-negotiate the selling price to make up for the problems found in the inspection. It should be noted thatNew York state requires some problems to be remediated automatically, such as high radon gas levels, mold and asbestos. If the inspection shows no problems, the process moves on to the next step: Contracts!
The seller's attorney will now draw up contracts stating the conditions of the sale, including the agreed-upon price, any concessions, special exclusions ("We want to keep our chandelier.") or other conditions of the purchase. The attorney will then deliver the contract to the buyers attorney. The buyers then sign it and return it to the seller's attorney with the buyer's escrow check. When the sellers sign off, the contracts are considered "fully executed," and the property is taken off the market and flagged on the MLS as "Under Contract."
At this point, a lender gets involved. If you have an all cash offer and don't need a lender, you get to go to the head of the line in the Real Estate Express Lane. Closing will be a short 30 to 60 days away as attorneys draw up the reams of paperwork that must be signed at the closing table.
If you need to finance all or part of the purchase, you will already have a lender. Your escrow funds are released to the seller's attorney, and your lender sends an appraiser to see if the house is worth the money you want to borrow for it. This is known as a market value appraisal. If the property "appraises" and the lender agrees you're getting a fair deal, you can go on to the next step. But keep in mind that in a market where downward price fluctuations can happen in the course of the few months between appraisal and closing, the lender may ask for a "re-appraisal," to see if the market value of the home is still high enough to back up the amount of the mortgage. I've seen many cases where, a few days before a closing, a second appraisal shows the home has depreciated enough for the lender to reject the mortgage.
But let's say your purchase doesn't appraise. What then? You have several choices, none of them particularly attractive. You can offer to put more money down to balance the value of the property. You can go to the seller and see if he would like to lower his price. (Fat chance, right?) Your Realtor can help you, by presenting comparitive values of other homes to the seller and other relevant information. If you can't come to a solution, it's back to square one in the house hunt process.
Closing Dead Ahead!
If your house appraises, HOORAY! You can expect to close in 30 to 60 days. There is no way to get a fixed closing date until you are notified by the lender, as the process is now in the hands of the lawyers. It is normal to have a "target date" set for closing, with the closing expected to happen a few days either before or after. It seems like such a loose date would cause problems scheduling movers. But don't despair. Mover's are used to this moving target, and wait for the "Clear to Close" phone call from the buyer's lender.
This is where our closing check-list kicks in. Your agent uses it to make sure all the ducks are aligned for lift-off and no detail has been neglected. Details like disclosures are critical, such as having any existing well tested, as required by the State of New York. At this point, the devil is in the details. The checklist makes it easy to cover them.
The last thing to happen before closing is a walk-through by the buyers and their agent a day or so before. The purpose of this exercise is to allow the buyers a chance to see (a.) if all the terms of the contract have been met - repairs made, appliance in place as agreed to, no damage by the seller's movers etc. It also allows buyers to be sure the property is left in a "broom-clean" state. If not, they buyers can demand a cleaning allowance at closing.