The Closing Process

When signing a contract to sell your old home or purchase a new one, you should be aware of several contingencies contained in a typical real estate contract. The inability to satisfy a contingency allows one of the parties to cancel the agreement, return deposits and go their separate ways.

Home Inspection Contingency

The first contingency requires the buyer to obtain a home inspection by a certain date.  Most contracts provide between 7-14 days from the full execution of the contract to complete the inspections. A buyer should inspect everything, including the structure, well, septic, radon, and any other environmental concerns. 

When the inspection report is issued, the buyer may request the seller perform certain repairs or give credits for certain work that may need to be completed. The seller may have up to three (3) days to respond and negotiate these issues with the buyer. If the parties agree on repairs, that agreement should be made in writing and provided to both the buyer’s and seller’s attorney. If the parties are unable to reach an agreement, either may terminate the contract, provided they are still within the contingency period.

Mortgage Contingency

The second contingency requires the buyer to provide proof that they qualify for their mortgage; this is called the mortgage contingency date.  It is the Buyer’s responsibility to diligently pursue the mortgage under the terms set forth in the contract. This includes making formal loan application and having the lender investigate the buyer’s credit as well as ordering a property appraisal. This contingency is approximately four (4) weeks from the contract date. 

If the buyer is declined for the mortgage and notifies the seller on or before the contingency date, then the buyer’s deposit will be returned. If the buyer misses that date and is declined after the expiration of the contingency then the buyer may lose their deposit to the seller.

Statutory Contingency

In the event the property is in a Common Interest Community (Condominium or Planned Unit Development), the buyer is given a statutory contingency for the review and approval of the resale package.  The seller will be required to order and pay for a resale package, which generally includes a resale certificate, common charge statement, bylaws, rules and regulations, budget and waiver of any right of first refusal. 

Once received by the seller, it is delivered to the buyer. The buyer has five (5) business days from the receipt of the documents to terminate the contract if they do not like the information disclosed. A buyer may cancel for any reason. It is important for the buyer to review the Bylaws and Rules and Regulations as they will govern conduct within the community. The buyer should to also provide a copy of the resale certificate to the closing attorney. This document provides crucial information about clearing the title if there is a “right of first refusal”, monthly common charges, special assessments and the budget of the community.

When all contingency dates in the contract have passed, the next step is to prepare for the closing.  The buyer must clear any pre-closing conditions with their lender. These conditions will be listed in the mortgage commitment. The buyer must obtain homeowner’s insurance along with a one year paid receipt at least one week prior to closing and provide a copy to Closing Management, LLC. 

Once your loan is “Clear to Close” (i.e. all pre-closing conditions are satisfied) we will be able to schedule your closing date and order you loan package from the lender. Final closing numbers will be completed as soon as we receive closing instructions from the lender and confirm adjustments with the seller’s attorney. In order to make your transaction go smoothly, we are always happy to review your “Good Faith Estimate” in advance so you know approximately how much money you will need. Remember, the “Good Faith Estimate” only contains the lender charges. There will be other fees, costs and adjustments between the parties that are not stated on the “Good Faith Estimate”.

Closing Day

Finally, when the day of closing arrives, you should schedule a walk through of the property with your real estate agent to insure that the property has been left in “broom clean” condition and that any seller required repairs have been completed.  You are required to bring with you to the closing a bank or certified check for the amount of money you need. Alternatively, you can have the funds sent by wire transfer directly to our settlement account. It is your responsibility to make sure the funds are received by Closing Management, LLC by the date and time of your closing. In addition, all of the parties will be required to provide proof of identification, so make sure that you bring your driver’s license or some other form of identification. 

By taking the time to review your contract in advance and consulting with one of our professional staff here at Closing Management, LLC, we hope to make your closing a smooth and pleasant experience. Call us today for a free consultation.