The current real estate market is very competitive in Northern Virginia. Multiple offers and waived contingencies are the norm for updated homes in popular locations.
Having your offer accepted is only half the battle however. After your offer is finally accepted, there are a multitude of dates. steps and contingencies to keep track of to get top closing and to receive the keys to your new home.
Every transaction is different and the list below may or may not represent the steps in your purchase. However, it does cover most of the typical contingencies on purchases made with the NVAR contract.
- Contract Ratification Date
The contract ratification date is an important date as it is the date all timelines run from. It will typically be the date the last person that is a party to the transaction signs the initial offer paperwork (making an offer into a contract.) The ratification, or written acceptance of your offer, creates a valid enforceable contract that creates the steps to bring the transaction to closing/settlement.
- Deposit the earnest money deposit (usually within 2-5 days from ratification)
Make sure you have money in your bank account for the Earnest Money Deposit (EMD.) As the contract is ratified, you will have to deposit the earnest money deposit amount into an escrow account of either Soldsense or the closing company within typically a few days. The MED amount will vary depending on your offer and is negotiated upfront. 1-3% of the purchase price is common. You will typically receive the EMD amount as a credit at closing.If the transaction falls through (and you are not in default of the contract) the deposit will be returned to you as soon as a release of contract is signed by all parties. If you defaulted in the transaction, your EMD will be at risk and could go to the seller.
- Apply with lender of your choice (usually within 7 days of ratification)
Select a lender and apply with that lender within 7 days after the date of ratification. The lender will need a copy of the ratified contract – you would have received a copy after everyone completed signing.Ask the lender about insurance requirements – all lenders require you to get insurance for a home you have a mortgage on (even for condominiums.)The lender should provide you with a Good Faith Estimates (GFE.) If you are comparing lenders, get one for each on the same day with “0 points” and compare to see which one gives you the best overall deal. Keep in mind – it is not always about the interest rate but also fees and your confidence that they can make it happen. Local lenders are usually best but online national lenders like Quicken are sometimes good options.You have 7 days from the ratification date to apply with the lender you choose. If you change lender after that and the loan falls through you could be in default. Also, do not apply for any credit or buy a new car until after the transaction has closed as this may affect your loan (and may even disqualify you from a mortgage in some cases.)
- Check Availability of Insurance (within 7 days of ratification)
Lenders require homeowner insurance on your home (and you should have one for liability reasons regardless.) Check with an insurance company what the insurance rate will be for the specific address and make sure insurance is available for the property.Per the contract you should check with an insurance company and ensure the home is insurable within 7 days. The lender will require the insurance company information.It happens that a property is non-insurable or insurance is expensive due to excessive claims in the past or other known defects known to the insurance company. You need to know this so you can decide if you want to proceed with the transaction.You may get a discount from your current car insurance company so try them first and then shop around.
- Is the home in a floodplain or resource protect area ? (within 7 days of ratification)
Verify if the home is in a flood plan or a Resource Protect Area (RPA.) Your insurance company or lender likely will check to see if the home is in a floodplain too, but that doesn’t usually happen until later in the transaction and you may not have a contingency at that point.Owners will typically disclose this if they know – but floodplains and RPA boundaries change from time to time.Flood Plain Info: http://soldsense.com/is-your-fairfax-county-home-in-a-floodplain/
RPA Info: http://soldsense.com/what-rpa-means-and-why-should-you-care/
- Do Home and Radon Inspections (usually within 10 days of ratification)
You typically will have a 5-10 day inspection period from the ratification date. We always recommend getting the home inspected as with the new sales contract the home is typically as-is otherwise. In the “old days” all mechanical, electric and plumbing often had to be in “normal working order” at closing (often irrespective of what was agreed to at the home inspection.)We generally recommend doing the home inspection as soon as possible. This is useful when something major is found during the inspection and a secondary inspection or opinion is needed. You do want to do inspections during daylight hours (if you work during the week the weekend may be your only option.) You should be present at the inspection as the inspector will show you the issues and educate you on the operation of your home. You may also learn the location of things like shutoff valves, attic fan switches etc. The home inspection depends on the size of the home but may typically take about 2 hours for a condo and 3-4 hours for a single family home. You will want to call a few certified home inspectors to check on availability and pricing. It is usually best to not have children present as you won’t be able to focus on what the inspector says and the inspector may be distracted. A home inspection depends on the size of the home but usually is in the $300-$600 range.
- Do Follow Up Inspections – If Needed (usually within 10 days of ratification)
The home inspector will do a general inspection only. If issues are found you will want specialists to come by to check things out (hence do the home inspection ASAP.) Common follow-up inspections include a sewage inspection (RotoRouter charges about $550), chimney inspection(for any home with a fireplace – about $100), tree inspection (root issues, dead trees, leaning trees, large trees), HVAC inspection (old heat and cooling system – maybe $150), electric inspection (old electric panels, subpanels, aluminum wiring), plumbing inspection (old leaking pipes, PVC pipes), roof inspection, structural engineer (broken roof trusses, cracked foundation) etc.We will be there with you and can recommend and arrange for whatever additional inspections are needed based on the home inspection. For a condo, the number of additional inspections needed are typically limited.
- Order Closing, Title Work and Survey (within 10 days of ratification)
When the home inspection contingency has been removed we typically will go ahead and order closing with the settlement company. The closing company is generally selected by the purchaser – it has to be specified in the contract prior to ratification. We often order the closing for you by sending a copy of the contract and contact information of all the parties to the settlement company. The settlement company will then contact everyone and request whatever information they need (lender, insurance etc.)The closing company will also (hopefully) offer title insurance on the property. A lender will require a lenders title insurance policy. The owners title insurance policy is optional. This protects you against some claims against the property in the future and we always recommend you get the owner portion as well. The title insurance company usually offers an extended policy that is more expensive but protects you more. Ask the closing company to send you a comparison sheet on what each plan offers.The closing company will also give you an option to order a survey. The lender or title insurance company may require this – and it is very likely a great idea even if they don’t. A survey will show location of the home, fences and lots. It will usually also show any easements and restrictions. For a condo a survey isn’t usually required.
- Review Resale Documents (typically 0-14 days after ratification)
If your home is in an HOA or is a condominium/co-op you should receive a resale document package. The resale documents should be ordered, paid for, and provided by the seller to you. When you receive them, please read through them thoroughly. You may want to have an attorney review them if you have any questions or concerns. You can also ask the homeowner association questions.The resale documents are typically the last contingency you have that will allow you to cancel the contract with no penalty – you will typically have a 3 days to review the documents after receipt. Make sure you are ok with the financial situation and the rules of the community. Things to look for would be any pending lawsuits, the reserve study and budget, recent board minutes and also the rules and regulations. If you have animals, please make sure the community allows them (some condominiums do not permit cats and/or dogs, or limit the size of them.) If you plan to have a large fish tank, piano or water bed in a condominium – please make sure those are permitted as well. Communities may limit your ability to rent out the home, have chickens in your backyard, run a daycare or park your commercial vehicle or camper.
- Appraisal Contingency (typically within 3 weeks after ratification)
The appraisal will be ordered by the lender and the lender will not send the loan for final approval (“underwriting”) until the appraisal has been approved. The lender will coordinate with the seller for access and will typically have the results to you within 3-4 business days after they do the actual appraisal inspection. The appraisal is the lenders way of determining the value of the home. The appraised value is the price the bank will use to calculate what they will loan you. If the appraisal value is below the agreed to gross sales price, the appraisal contingency will kick in and negotiations between you and the seller will take place as to how to proceed. See http://soldsense.com/what-does-a-low-home-appraisal-value-mean/ . In a hot market a buyer may be willing to pay more for a home than the lender is willing to lend, creating a situation where a buyer will have to bring more cash to closing or the transaction may fall through.
- Termite Inspection Contingency (inspection done maybe 1-2 weeks before closing)
The termite inspection may be ordered by the seller or by the purchaser based on the contract. The inspection is typically$50 and is paid by whomever orders the inspection. However, if termites and/or termite damage is found, the seller is responsible for termite treatment and repairs. The seller is obligated by the contract to get rid of any termites found, make structural repairs and get things re-inspected and found complete prior to closing.
- Check Up On Financing (throughout the process)
With the appraisal done, we should at some point get a clear to close. The lender may do some last minute verifications and checks and ask for updated income and bank statements at this point. As soon as they are satisfied the lender will send paperwork to the settlement company and the settlement company will prepare a Closing Statement. In a perfect world you would have this closing statement 2-3 days before the settlement date – however, in most cases you will receive it the day before.
- Schedule the utility switchover (7 days before closing)
Call up Gas, electric, water, internet and cable companies to switch the utilities over after the time of the closing. In Virginia it is the responsibility of the seller to keep the utilities on through the settlement date. If you close on a Friday you may have to start your utilities on the first business day, usually the Monday.
- Check up on the draft Closing Statement (1-5 days before closing)
The Closing Statement will show all the money flowing back and forth between the parties with prorations for taxes and HOA/condo fees, payoffs of the sellers old loans, fees for some of your inspections, closing costs, taxes, local fees, attorney fees etc. On the bottom of the page are two numbers. One is how much the purchaser will need to bring to closing to purchase the home (down payment plus closing cost minus the EMD). The other number is the amount the seller will take away – typically positive but not always.You should be able to obtain an approximate number for the funds needed to close. You will need to transfer this amount to the closing company ahead of closing. Please make sure you don’t use any wire information from emails or phone calls you receive – call the closing company directly and verify their bank wire/transfer information.
- Do the Final Walkthrough (1-3 days before closing)
The final walkthrough is to make sure the home is in the same condition as on the day of the home inspection. If there are any changes like roof leaks, wet basement, broken windows or similar it is the sellers responsibility to make the repairs to bring it back to the same condition. Also, if the seller promised to make any repairs as part of the home inspection, you will have received receipts for those repairs and will want to verify that the work was completed as agreed.
- Go to settlement (closing date)
At settlement you will bring a picture id and your personal checkbook (for any last minute minor adjustments.) After you have signed your loan documents and handed over the check you will be handed the keys to your new home.
- Congratulations on your new home!
We will guide you through this whole process and be with you every step of the way.
Disclaimer: We are real estate brokers/agents only. Every contract is different – please consult an attorney before taking any actions based on this article.