From Contract to Closing: The Stages of Buying or Selling Real Estate
As always, the housing market in New York is hot. It seems that no matter the interest rates, buying and selling real estate does not slow down. On any given Sunday, you can spend hours at various open houses in your neighborhood. When you find your perfect home and receive an accepted offer, what happens next? You can’t just move into the home the next day of course. But how long will it be until you can move in and is the stress over? This blog is intended to give you insight on what happens after the buyer and seller reach a sale price.
Once there is an accepted offer, the lawyers step in. The broker will want to know right away who the lawyers are for the buyer and seller. This is why it is important to engage an attorney at the outset of your buying/selling campaign. The broker puts together what is called a deal sheet and sends it out to the parties’ attorneys. The deal sheet lists the names and address of the buyer and seller, as well as the address of the property being bought/sold, the names and contact info for the attorneys, and the purchase price.
The seller’s attorney will then prepare a contract of sale. The contract is then sent to the purchaser’s attorney. The purchaser’s attorney will then confer with the purchaser and send back to the seller’s attorney any amendments requested to the contract. Just because there is an accepted offer does not mean the property will be sold. Often, deals die at the contract negotiation phase because one party believes the terms are too much of a liability. This is why it is very important to hire an experienced real estate attorney to help negotiate the contract.
Once the contract is agreed upon, the purchaser signs the contract and returns it to the seller with a customary deposit of 10% of the purchase price. The seller’s attorney will then deposit this money into their escrow account, have the seller sign the contract and send it back to the purchaser. Once the fully executed contract is sent back to the purchaser, there is a binding contract. This is colloquially known as being “in contract.” Even at this point, there is a ways to go before the purchaser moves in.
With the fully executed contract, the purchaser must go to a bank for financing. The purchaser must get a letter of commitment from a bank within 30-45 days of being in contract saying that the bank will in fact give the purchaser a loan. During this time, the purchaser’s attorney will engage a title company. The title company will run a search on the property and parties in order to find out what may need to be remedied prior to title passing from the seller to purchaser. An experienced real estate attorney is also necessary at this stage in order to clear exceptions to title.
Once the bank is on board with funding and title is clear, a closing date is set. At the closing, the purchaser must come with funds equal to the balance of the purchase price. These funds are sometimes used by the seller to pay off their existing mortgage on the home. An experienced real estate attorney will know how to coordinate with the seller’s bank as well. These funds are also used to pay the commission of the real estate broker and the transfer taxes. The remaining proceeds go to the seller directly. At the end of a successful closing, keys to the property are exchanged, tax documents and payment are sent to the government, and the purchaser is allowed to finally move in.
As you see, an accepted offer is only the beginning of a complex series of events. From contract to closing, you are looking at an average of three (3) months. This blog is intended to give an overview of the real estate buying and selling process in a nutshell. Each sale is different and there will likely be additional, intricate steps for an attorney to handle. Having an experienced real estate attorney as your advisor and representative will allow you protection at the contract negotiation stage as well as a guiding hand through closing. Call our firm now for an experienced real estate attorney to assist you through your home buying or selling process.