Even the most seasoned buyers and sellers can feel lost during a real estate transaction. That’s why we’ve broken the process down into this simple explanation that covers the basics. Think of it as your map to the closing table. Understanding all of the steps involved can help you expect the unexpected and make it an easy and straightforward experience.
Before looking at properties it is best to be approved by a reputable lender to determine your budget. After reviewing your loan application and finances, your lender will help you set budget parameters and provide you with a preapproval letter. The Austin market is very strong; submitting a preapproval letter with an offer is comforting to sellers and suggests that the financing will progress smoothly.
Choose an Agent You Connect With
Roots is committed to making sure our clients are heard and that each client receives the highest quality of service. It is important to choose an experienced agent that you feel understands your needs.
The home search has the most variable timeline in the process. You may fall madly in love with the first house you see, or it may take a little while to find just the right fit. Your Roots agent will shorten this time as much as possible by only showing you properties that genuinely fit your wants and needs.
Once you’ve found a home you like, you and your agent will discuss the terms of the agreement in detail. Your agent will then write the offer and review it with you before submitting it to the sellers. The seller will usually counter and negotiations can go back as forth and many times as necessary for both parties to come to an agreement. If an agreement cannot be reached, the offer is void with no financial repercussions to the buyer.
Once both parties have agreed to the terms of the offer, by initialing and signing it, the contract is now considered “executed”. The buyer’s agent then delivers the earnest money (generally one percent of the sales price) and contract to the title company where it is held in an escrow account and the closing process begins. The option money must be delivered to the sellers within 48 hours of executed contract for the option period to be valid.
Note to Buyers: you should contact your loan officer immediately after the acceptance of your offer to ensure your loan officer has all the information needed to secure financing for an on-time closing. The need to send duplicate documents to more than one person is common so it is easiest to keep copies of anything you are asked to send out.
Once the contract is receipted, the title company will send the executed contract to the buyers, sellers, and the agents involved. From this point on, the title company will serve as a liaison between the involved parties— collecting information, ordering the survey, maintaining the escrow account, etc. The title company also ensures that the title to a property has no claims against it and can be freely transferred to the buyer.
The Option Period
The option period is a time for buyers to do their due diligence, have the property inspected and negotiate any potential repairs. During this time, buyers reserve the unrestricted right to cancel the contract. Typically option periods are between 7 and 14 days. The fee can range from $100-500 depending on the asking price and current market conditions. In most cases the option fee is credited to the buyer at closing. If for any reason the buyer chooses to terminate the contract within the option period, the option fee is forfeited, however, the earnest money will be refunded.
Buyers should schedule the inspection with the inspector of their choice upon acceptance. The inspector examines many facets of the home including, but not limited to, the plumbing, electrical, and main structural systems of the home. Inspections typically take two to four hours to complete depending on the square footage of the property. The buyer and his agent will receive a report within 24 hours. The cost of an inspection can vary but is usually between $250-500; it is paid for by the buyer. In Texas, we also highly recommend a Wood Destroying Insect (WDI) inspection which is an additional $75-100.
Assessing the Inspection
The buyer and his agent review the inspection and determine what, if any, items need repair. Inspection reports may seem intimidating at first, but a good agent will help you determine what is significant and what is merely cosmetic. Please note that repairs are negotiable and need to be agreed upon by both buyer and seller. Additional documentation will be signed and executed if any agreements are made.
After the option period, the lender required appraisal will be ordered on your behalf. The buyer is responsible for the cost of the appraisal – between $300-500 – which should be included in the lender’s good-faith estimate.
During this time buyers will be in frequent contact with the lender. Providing all of the required documents as quickly as possible will keep the process moving forward smoothly. Files may flow back and forth several times – requiring additional information or detail – before the loan is considered to meet underwriting approval.
Clearing the Title
While the loan is being processed, the title company is searching for any existing liens on the property, such as unpaid property taxes.
Home Warranty Selection
At this time, the Title Company will order a home warranty with the company of your choice. For your convenience, Roots has links to a number of reputable home warranty companies. A home warranty is a service contract that covers the repair and/or replacement costs of home appliances, major systems such as heating and cooling, and possibly other components of a home that fail due to normal wear and tear. Coverage can vary across home warranty companies and does not cover all home repairs.
Clear to Close
When the underwriter is satisfied with the buyer’s information, the lender issues a “clear to close”, sends the documents to the title company, and a closing is scheduled.
Final Walk-through: Within 24 hours of closing your Roots agent will schedule a final walk-through of the property to ensure that any negotiated repairs have been made and the home is in satisfactory condition.
Once the title company receives the necessary documentation from the lender, they will set appointments with the seller and buyer to sign documents. These generally happen on the same day, but not always at the same time. The seller’s appointment often takes 30 minutes or less. The buyer’s appointment takes about one hour. After everything is signed, the lender must still approve funding before the buyer gets the keys. This usually occurs the same day. The title company will send all the documents to the lender for final approval. Once the lender has issued final approval the transaction is considered “funded.” Keys are then released to the buyer and proceeds are disbursed to the seller.
Breathe easy and smile as you start a new chapter in your life!