I just ratified a contract… NOW What?
This blog post is a detailed explanation on the process of Contract to Closing in DC Metro area. If you just ratified a contract – congratulations! Enjoy the high of this moment, because once we do a home inspection – your dreamy idea of your new home might just take a bit of a hit 🙂
Two important things you should know:
1. Time is of the essence – which means if we have a deadline for home inspection and we missed it – you just gave up your right to ask for repairs. Pay attention to all dates!
2. As a buyer you have a couple of ways to cancel the contract and get your money back:
a) Home inspection contingency. In order to cancel the contract you will need a home inspection report, but it can be as clean as a whistle – like not a thing wrong with the property. If you don’t have a home inspection report you can’t cancel the contract.
b) Condominium or Home Owners Association’s (HOA) Document Review. If your home is a part of a condo or an HOA – you will have 3 days to review those documents and cancel the contract- even if you are perfectly OK with all the rules.
Let’s get back to the ratified contract. What is going to happen next?
1. Schedule your inspections right away! Good home inspectors book up very quickly – so it’s important to get the times reserved. I recommend Troy Hendrickson with A-Pro for regular home inspections and radon. His numbers are (703)737-3888 for scheduling, his mobile (703)501-1269, email: firstname.lastname@example.org, Web: www.loudounhomeinspection.com. Schedule this inspection at a time that is convenient for you and I will do my best to re-arrange my schedule. You should participate in this home inspection, check the house again, ask questions. Troy will prepare a detailed report with photos. You are welcome to use any inspector of your choice. If you need to schedule a lead based paint inspection – I recommend: Jack Gellar www.gellerenvironmental.com
Once home inspection is completed we will collect and send to seller a list of repairs that we would like the sellers to complete before settlement. We will also have an option to ask for credit if you prefer to take care of things yourself.
2. Pick your lender and make an official loan application as soon as you can. The contract allows you 7 days to make this application, but if you take too much time and can’t make the settlement date – you will be in default and will risk loosing your Earnest Money Deposit. My #1 recommended lender is Marc Aymard with Guaranteed Rate. Phone (703)728-1759, Marc.Aymard@rate.com, Once you make your final decision – please let me know so I can send a contract to the lender of your choice. Be prepared to provide all kinds of financial information – loan processing has gotten a lot stricter in the last few years and they ask you for the oddest things! Please deliver all required documents in a timely manner as lenders have time sensitive requirements by law.
Your lender will order an appraisal and issue a loan commitment letter once your file is processed. We should expect the seller’s agent to ask for appraisal and financing contingency removal once we are passed the deadlines for those contingencies. Unlike home inspection contingency – these deadlines do not expire and continue until removed. The seller does have a right to give us a 3 day notice to remove these contingencies and we don’t – the contract becomes void.
If the appraisal comes in at a lower value that the sales price – we will negotiate with the seller to lower the price. If it comes in at sales price or higher – we will remove appraisal contingency.
3. If I don’t have your Earnest Money Check – please deliver it (in person or mail) to the Escrow Agent that we have chosen in the contract within 2 days. Make sure the check can be cashed and if it bounces, our contract becomes voidable! My preferred Escrow Agent and Settlement Company is Universal Title at 2107 Wilson Blvd Ste 520, Arlington, VA 22201.
4. Please call your home owner’s insurance company and get a quote within 7 days of ratification (condos will need a quote for an HO6 policy). Some homes have had too many quotes and have become uninsurable – so please call and make sure there is nothing strange happening with the property.
5. I will send a copy of the contract to the Title Company of your choice – usually we’ve chosen it in the contract. They will send you a welcome letter, explain their process, provide helpful information regarding your closing. A title company will also order a title search and a property survey if you’d like or need one. They also prepare closing documents such a Closing Disclosure to show your closing fees, taxes, information on your loan, etc. Please check your calendar and let me know if you have preferred time for the settlement on that day. Settlements usually take an hour, but they happen during the regular working hours – so potentially you will have to take time off work.
6. If termite inspection is needed – I usually order it with PestNow within 30 days of closing. Buyers usually do not participate in this inspection, but you are welcome to come. The cost of the inspection is $35 and it is paid at settlement – it goes right on your Closing Disclosure – so no separate check is needed. Should there be any termites or damage found – sellers are responsible to correct the issue before the settlement.
7. If you are purchasing a property that is a part of the Condominium or a Home Owners Association – you will receive condo/HOA documents electronically or via mail. Once those documents are received – we will check if everything is included and then sign a receipt. Once we have a complete package – you will have 3 days to review the documents, ask questions and cancel the contract if you find something of concern.
8. If home warranty is not included you have an option purchase this insurance to cover any unforeseen expenses poi might incur once you take possession of the home. The cost for 1 year ranges from $400-$500 with $100 deductible. If you are interested – just let me know and I can provide you with more information.
9. Utilities – you will call utility companies (Gas, Electric, Water, Cable) a few business days before settlement to transfer them to your name as of the day of closing. Don’t wait till the settlement date – as you might have to re-connect the service and that will cost you extra. We will send you a list of utility providers 2 weeks before closing.
10. Final walkthrough – we will be doing a final walkthrough of the property before closing. During the walkthrough we will check if everything is in about the same condition as the date of the contract, we will also check the repairs that sellers completed. Sellers do send us receipts from various service companies as proofs of repairs before settlement. The house should be vacant for this walkthrough – to make sure there are no surprises behind furniture.
11. Finally – the end is near! On the settlement day we will sign all the loan and purchase documents and you will receive keys!!! You will need to bring your State issued ID, and money – a Certified check or wire money ahead of time. Your lender will let you know the final amount a couple of days before closing. You should also bring your checkbook – just in case some last minute changes. Usually, buyers, sellers, their agents and closing attorney attend closing. Sometimes “split” settlement happen and buyers and sellers sign at different times.
12. Power of Attorney and Alternate Presentation. It is preferable that you are present at settlement, but should you be unable to attend – you will need to appoint someone to attend in your place. This has to be arranged in advance with your lender and Title Co.
This process is a bit like an airplane ride – some turbulence is possible, but hopefully at the end there is a smooth landing!