Real Estate Transaction Steps
Steps of a Real Estate Sale
Accepted Offer: Establish “meeting of the minds” on general terms of the sale, including Purchase Price, Closing Date, Type of Financing, and any on the table. All agreed terms should be confirmed in a real estate contract of sale and signed by all parties involved.
Attorney Review: Retain an attorney to represent your interests, which usually starts with by a “Letter of Engagement” to formally initiate representation. It is always a good idea for both the seller and buyer to have an attorney in mind before the sale. Attorney Fees for typical real estate transactions vary and should be discussed prior to engagement and may be paid at closing from the proceeds at the sale so that it is not an “out-of-pocket” expense.
Under Contract: The attorneys will negotiate the detailed terms of the contract, and once all parties will sign as required, the deal is officially “under contract”. Most contract timelines start on this day that the contract is signed. For example, the deposit may be due 10 days after the contract is signed. Other important terms negotiated into the contract include:
Deposits: Initial Deposit is usually presented with a written offer and deposited into an if that offer is accepted. An Additional Deposit with the contract least 5% of purchase price for initial deposit, but prefer 10%
Items included/excluded in the sale: Usually see kitchen appliances, Washer/Dryer included, and personal property excluded. Light fixtures are assumed to be included, such as dining room chandeliers, so if you plan on keeping any light fixtures it would be important to list them as specifically excluded in the contract. I would also recommend specifically listing window treatments as either included or excluded since there are often confusion on this item.
Inspection Contingencies: the standard realtors contract provides a specific amount of time (ie. 10 business days) to complete the inspection and request any remedies. That deadline marks when the buyers would have to request any repairs, credits, or cancel the contract. This process is negotiated between the attorneys and their respective clients.
Financing Requirements/Deadlines: If buyer requires a mortgage, the seller usually wants to see that a bank has vetted the buyer’s financials and have approved the loan terms required to complete the purchase. This is usually in the form of a pre-approval presented with the offer, and/or a mortgage commitment issued by the bank 30 days or so before closing. Consequences of an under-appraisal is also addressed here.
Closing Date: A rough date should be established in the contract with the understanding that it will only be finalized approximately a week before the target date by the attorneys.
Inspection: The buyer is responsible for paying an inspector to visit the home and provide a detailed report on any deficiencies. I would recommend both seller and buyer to be present at the inspection, which can take between 1-4 hours depending on the type/size of the home. For example, 7 Alida would take around 3-4 hours, whereas Sugarbush would probably take closer to 1-2 hours. The main inspector will provide a multiple page report with overview of general interior and exterior condition (including the attic and roof), heating and cooling, appliances, chimney, plumbing and electric. Buyers may also request an in-depth chimney inspection, a pool inspection, and sometimes a main plumbing line inspection (camera inspection of the main plumbing line that goes from the house to the street to ensure no roots have encroached, etc.).
Inspection Contingency Report: The inspector will provide the buyer with a detailed report outlining recommended repairs. Buyers attorney will provide seller’s attorney with list of repairs and/or credits (if any) with a copy of the inspection report. Seller can either accept, negotiate, or reject the request through their attorney. Once any requested repairs are complete, the buyer may request a re-inspection to confirm all remedies have been made to their satisfaction.
Appraisal: If the buyer is financing the home, the bank will arrange an in-depth appraisal with the homeowner. This usually takes between 30-60 minutes. If the home appraises at the agreed purchase price, there is no further action and the deal proceeds as intended. If the home appraised below the agreed purchase price, the consequences are usually defined in the initial purchase contract. However, usually the buyer can either put additional money down to cover the difference or may ask to renegotiate price to the appraised value. Sometimes the seller and buyer will agree to split the difference or may challenge the appraisal value with additional reports.
Obtain C/O: As the closing date approaches, it is the seller’s responsibility to obtain a Certificate of Occupancy from the town inspector. This inspection confirms that there are no open permits and certifies that there is a fire extinguisher in the kitchen, and smoke detectors outside bedrooms and the garage. (Each town will provide a list requirement to obtain a CO). Certificates costs range by town but usually cost about $100, which is paid by the seller once issued by the town. I would recommend obtaining a CO at least 2 weeks prior to closing, and they are usually valid between 3-6 months, again ranging by town.
Transfer Utility Accounts: About a week before closing, seller should contact utility companies (i.e. electric, cable, etc) to either cancel effective the day of closing or transfer accounts to next location. Buyer will do the same.
Final Readings: You may have to call the water company to obtain a final reading for the day of closing. They will send you a final bill which you can forward to your attorney, since the final payment will be paid by the title company at closing. This is to ensure the buyer that no debts are left for them the day of closing. Sometimes the title company can complete this step, but some water companies will only release that information to the account holder.
Day of Closing: The buyer should request a walk-through on the day of closing to confirm premise is left “broom-clean” and all personal property has been removed. Bring all keys, door openers, and garage code to the closing for the buyers once the closing is complete.
- Kobi Timmons