Step 5: Signing the Sales Contract & Closing the Sale
Now that you and the buyer(s) have agreed upon a price for the home and signed the purchase agreement, there’s a few steps to go before you’ve officially sold your home. To ensure that closing the sale goes smoothly, it’s important that you understand your responsibilities as a seller. Of course, an ALR agent will discuss this information with you thoroughly, we’ve included some helpful information below for your benefit.
It’s the buyer’s responsibility to submit the agreed upon earnest money deposit, to secure financing, and to pay for any home inspections. In the meantime, it’s the seller’s responsibility to...
Provide buyer with necessary disclosures.
By law, sellers are required to provide buyers with the following disclosures:
- Material Defects Disclosure - the seller is required to inform the buyer of any and all known facts that materially affect the value of the property and that are not readily observable or known to the buyer
- Radon Gas Disclosure - explains what radon gas is and the possible health hazards associated with it
- Lead-Based Paint Disclosure - must be given to buyers of residential units built before 1978; sellers must disclose the presence of any known lead-based paint; buyers must be given an EPA pamphlet
- Energy Efficiency Disclosure - an informational brochure about energy efficiency that informs buyers of the right to have an energy efficiency rating performed on the property
- Homeowners Association Disclosure - a summary regarding the association, the existence of restrictive covenants, and any assessments/fees that the association imposes
- Property Tax Disclosure - cautions buyers not rely on the amount of the seller’s property taxes an indication of future property taxes the buyer will have to pay
- Community Development District Disclosure - a caution to buyers on the sales contract that taxes and additional fees (not including other county and local taxes) may be imposed on the property
Hire the title company indicated in the purchase agreement.
Holding “title” means that you are the rightful, legal owner of your property. Title companies usually handle all things “title” related in a real estate deal including the title search, issuing title insurance and accepting escrow deposits. The title company plays an important role in making sure that the title is clear for a deed transfer to the new buyer.
On the purchase agreement, you should have indicated how much you require from buyer as an earnest money deposit, or a “good faith” deposit. This is money that the buyer gives to the buyer’s agent, broker, attorney or title company to show the seller that the buyer has a stake in making sure this deal goes smoothly. At the end of closing, this money will be given to the seller as part of the down payment. If the buyer backs out of the contract because of the home appraisal or during the home inspection period, this money is returned to the buyer.
The title company will also perform a title search, which is a review of public records to determine if there are any existing liens or open permits that exist for the property. If any existing liens or open permits exists, you are responsible for resolving them prior to closing.
Schedule the home appraisal appointment.
If the buyer is taking out a mortgage to purchase your home, the lender will order a home appraisal to determine whether the property’s value is worth the loan amount. If the home is worth significantly more or less than the loan amount, this may pose an issue and halt the sale for a number of reasons.
- If the home appraises for more than the loan amount, the buyer will have to come up with the rest of the money out of pocket.
- If the home appraises for less than the loan amount, the buyer will still have to come up with the rest of the money, or the seller will have to lower the purchase price.
If this occurs and you and the buyer are unable to come to an agreement as to what should take place so that the buyer can still purchase the home, it is likely that the sale will fall through and you’ll have to put your home back on the market.
Cooperate with the home inspection.
During the home inspection period, the buyers have the right to perform any home inspection they deem necessary. You can usually ask your agent to provide you with a home inspection checklist so you will know which items an inspector will want to see.
The inspector will perform a thorough evaluation of the home’s structural and functional conditions including (but not limited to) the foundation, roof, electrical, heating, and plumbing. The buyer may also request that a termite inspection be done on the home, which can only legally be done by an inspector that works for a licensed pest control company.
During the home inspection period, the buyer has the right to terminate the contract for any reason so it’s in your best interest to cooperate fully with the home inspector(s). If anything pertinent is uncovered during the inspection, further negotiation regarding repairs may be necessary between you and the buyer(s).
Make any upgrades or repairs and get ready to move.
Once the appraisal is complete, the loan is approved, and the required inspections have been performed, it’s important to make any repairs or improvements that have been agreed upon by you and the buyer(s).
Now it's time to get ready to move. By now, you should have been considering where you are going to be moving to, if you didn’t know prior to deciding to sell your home. Typically, you'll have about a month from the time you signed the purchase contract to move from your home.
However, you can negotiate the closing date with the buyer so you can have more time. The day of closing is when the buyer takes possession of your home so you’ll want to plan accordingly.
Final Walk-Through & Closing
Once all is said and done, the final step before closing on the house is the final walk-through which is when the buyer is given the opportunity to make sure the home is in the same condition as when the sale agreement was signed. This usually happens the day of closing or a few days before.
Before the buyers sign all the closing documents and make the final payment at the title company or in the presence of a representative from the title company, the buyer(s) will go back to your home to make sure that everything is the same as it was when they last saw it. If there’s anything missing or damaged or not fixed that was supposed to be repaired, the process may come to a halt.
If everything is fine, then you can rest assured that you’ve just sold your home, the buyer will soon be making payment and signing all the necessary documents, and you can expect to have your funds from the sale wired to your bank account within a few hours.