You Just Signed a Real Estate Contract. Now What?
After months of open house tours, private appointments with your agent and looking at listings online, you’ve found the home of your dreams. You’ve written an offer and maybe even gone through a few rounds of counter offers with the seller. You and the seller have come to terms at last and you now have a signed contract.
At this point, everyone is ecstatic. But most, especially first-time home buyers, are also a bit anxious. What was once just a dream of actually owning this particular property is now about to become a reality, and it can be scary. The next few steps you’re about to take require no small amount of time and money. So if you have any serious doubts whatsoever, now is the time to verbalize them. It will save everyone — especially you — a lot of time, money and stress.
If you’re ready to proceed, here’s what you can expect after signing the real estate contract.
Your escrow or earnest money deposit check will be cashed
Depending on the market, this money can vary from $1,000 to 3 percent of the purchase price. These funds, which ensure that you have “skin in the game” with the seller, are held in a third-party account.
Most likely, you have contingencies such as document review, property inspection and an appraisal or loan approval to get through. The money you’ve set aside for escrow or earnest money is generally non-refundable, though contingencies can give you a way out in some situations. For more information, read “3 Ways to Protect Your Escrow Deposit.”
You’ll need to dive into disclosure and other documents
The next step is to start reviewing the seller’s disclosures as well as city reports and property specific reports, such as the preliminary title.
Your first few days of escrow are meant for you to start to familiarize yourself with the property, its history, the sellers’ experience living there and how the city or county sees your property. During this time, you’ll learn about things like the zoning district you’re in, whether or not there are past permits pulled on the property, if there are any easements, if there has been any crime in the neighborhood or if there are any factors related to the home that would be a negative factor. A formal review of this documentation is serious business. It should be read with your real estate agent or real estate attorney. They should be able to guide you through what to look for and what the red flags are. For more on this topic, see “5 Things You Should Know About Real Estate Disclosures.”
It’s time to start working with a mortgage broker or banker
Prior to writing the offer, you probably went through some sort of loan pre-approval or pre-qualification process. Now that the contract is signed, it’s the time to start talking to your mortgage broker or banker about the current interest rates and types of loans.
You’ll want to “lock” in a rate, at this point. A bank will generally let you lock in a rate for a certain period of time, generally between 30 and 90 days, depending on the length of your escrow. Be sure to lock in your rate at the most optimum time, if possible.
This is also the time when the bank orders a property appraisal. It could take up to a week for the appraiser to set an appointment and another week for the appraisal to be submitted to the bank. You’ll likely be in touch with your mortgage professional regularly in those first few days of signing a contract.
Next up: the property inspection
The property inspection (or inspections) is likely the last important milestone after you’ve signed a contract and before you close.
A first-time buyer should be present at the inspection with their agent in tow, armed with a list of questions about the home. After having read the seller’s disclosures, you may have questions about the home, such as the roof work they recently completed or the furnace’s life expectancy.
The general property inspector’s job is to check out the property from top to bottom. They should point out the major systems, where they’re located, and how they work. The inspector is not there to demonstrate all that is wrong with the property. While the inspector will identify issues that are either glaring or are long-time maintenance concerns, the purpose of the inspection is to familiarize yourself with the home, its systems and components. Once the deal is done, you’ll need to know where everything is and have a short- and long-term plan for maintenance.
You’re almost at the finish line
Many people assume the home search ends with the signatures on the contract. While the search may be over, the purchase process is really just beginning. Use the time between contract signing and closing to do as much due diligence as possible. If you have any questions, now is the time to ask them of your real estate agent, loan officer, attorney or property inspector.
Also, be aware that this period can be extremely stressful for many people. A home purchase is a lot to go through on top of your daily work, family and home life responsibilities. Take time out to care for yourself — and prepare for your new life in a new home.