You’ve Found the House, You’re Under Contract, What’s Next?
You’ve been searching for your next home and now, you’ve finally found the one. You’re under contract, and it’s time to make it yours. There are a lot of moving parts and as buyers, you have to be efficient and prepared. We’ve outlined the contract process so you know what to expect:
As the Buyer you get to select a title company, and your agent will provide some recommendations. Your agent will schedule the account with the title company, which includes putting them in touch with you, the seller’s agent, and your lender. The title company will conduct a title search to determine if there is any debt / liens / judgments on the property that needs to be paid by the seller prior to transferring the property to you.
The title company will order a location drawing or a survey to confirm the property boundaries. The title company will also provide information on title insurance, both standard and enhanced policies. These services are part of your estimated closing-costs.
A deed will be prepared for your new home and it will be titled as you specify; for example, sole owner, or with your spouse or family member named as co-owners.
Communication with Your Lender
Your agent will submit a copy of the ratified contract to your lender.
Call your lender – You have a small window of time to complete your loan application. Get in touch with your lender and find out what else they may need from you. You’ll likely have a laundry list of items to complete. Don’t delay as sometimes these documents can take time to pull together.
Maintain your credit – Don’t apply for any credit cards, additional loans, or make a major purchase. Your credit report will be scrutinized during this time and adding debt or a loan to your existing situation could disqualify you from acquiring financing.
Your agent will schedule inspections with the professionals you choose, recommendations will be provided. The general home inspection (also known as the Structural and Mechanical inspection) will take place first and is the most comprehensive. A detailed report will be issued by the inspector for your review.
Optional secondary inspections such as termite, radon, lead, chimney, or sewer can be done at the same time, or in the days that follow and are typically done by specialists.
The cost of each inspection is paid directly by you as the buyer to the inspector. Some inspectors take advance credit card payment online and others request a check at the time of service.
At the conclusion of the inspections contingency period, as buyer you will either confirm your intent to proceed with the purchase (if it’s an as-is sale) or your agent will submit a copy of the inspection report along with a request for repairs.
The seller will have up to 5 days to respond, allowing them time to get estimates or a second opinion from a licensed contractor (if needed). It’s advisable to anticipate that the seller will agree to some but not all of your requested repairs. In preparing their response, the seller’s agent will likely encourage the seller to focus on potential safety issues impacting the property.
Your lender will order an appraisal. Lenders want to ensure that the property is worth what you’ve agreed to pay. An appraisal is an unbiased and independent professional estimate of your property’s market value by an unvested third party.
The buyer pays for the appraisal as part of the lending process. The borrower pays the fee in advance, as the appraiser gets paid for his services regardless of whether the loan goes through. Be prepared to pay this cost in advance. Prices can vary from $400 and up depending on the type of the property and the area.
The appraisal report is issued to the lender, and a copy will be sent to you. The seller does not receive a copy of the report unless the valuation was below the contract sales price. If the value is at contract price or higher, then the loan can proceed.
After the home inspection(s) and appraisal are complete, its time to start planning your moving day, alert any landlords if applicable, and start packing. As it’s not uncommon for settlements to get shifted, it’s advisable to be flexible on your moving date. If possible, avoid having your settlement and your moving day occur at the same time.
Insurance, Utilities, and Home Services
Your lender will require that you purchase a homeowners insurance policy. You should not leave this to the last minute as you may find it beneficial to obtain a few quotes. The insurance company may ask you questions about the age and condition of the property, and typically this data is available in your home inspection report.
Call Comcast (or whichever internet provider you use) in advance. They book up and can take a couple weeks to schedule at the new house.
Contact Baltimore, Gas, and Electric a day or two before closing and tell them your settlement date and set up your new account.
If you are using an alarm company and the house has existing equipment, call the company to schedule them to set up your new account.
The water bill will be transferred by the title company. That said, it takes the city some time to figure that out. If you receive a water bill in the old owners name after you move in, return it with payment and the new names written in.
Some people like to have the locks changed when they move, if so schedule the locksmith to visit the property with you after settlement.
Just prior to settlement, your agent will schedule a walkthrough. If repairs were done, a copy of the receipts should be delivered to your agent prior to walkthrough. Properties are supposed to transfer “broom clean” and this includes attics + garages + storage sheds. Buyers have the right to request that all items (apart from fixtures) be removed.
The “clear-to-close” signal from the lender to the title company will confirm the bank is ready to complete your purchase. TILA-RESPA guidelines stipulate that lenders need to deliver the buyers final closing disclosure a minimum of three days prior to settlement. This is done once the lender’s underwriting department approves the file. If there are going to be delays, typically this is the culprit. Your agent will closely monitor the lender’s progress, and keep you updated.
The final CD (or closing disclosure) will confirm the amount of funds you need to bring to settlement. These funds will include your scheduled down payment. Your earnest money deposit will be shown as a credit towards your down payment. Any grants, incentives, repair credits, or seller contributions towards your closing costs will be shown as credits against the funds due.
If you are planning on wiring funds, please send the money to the title company at least 24 hours prior to settlement. Wire instructions will be issued from the title company (typically by request) and for security purposes we recommend that you call the title company and confirm their account details prior to sending funds.
If you are paying via check, please plan to have your bank issue a certified check made payable to the title company. A personal check will not be acceptable, as the funds need to be immediately available to conduct settlement.
Bring a photo ID to settlement. At settlement your closing officer or settlement attorney will be reviewing all of your title, tax, and loan documents. There is a lot to read and sign, please allow two hours to complete settlement.
Settlement is a chance to finally meet the sellers face-to-face and share details about your new home.
But that’s not required. Whatever makes you feel comfortable is the best course of action.
Last step – treat yourself! Buying a house is literally a “big deal” and there is a lot of work involved. We think having plans to relax and celebrate are definitely in order.