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COLUMN: Steps to get you closer to the closing table

Natalie Roth, Special to the Daily Sentinel
Posted 11/1/22

This is the second part of a series describing key terms and procedures in real estate. You have a signed purchase offer, now what?

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COLUMN: Steps to get you closer to the closing table

Posted

This is the second part of a series describing key terms and procedures in real estate.

You have a signed purchase offer, now what?

Okay, so now the initial paperwork part of the transaction is complete, but there are more steps in the process to get you to the closing table. Today we will discuss the inspections, mortgage commitment, and the appraisal, and what it means to you as the buyer,

HOME INSPECTIONS: As the buyer, hopefully your agent negotiated a contingency for some home inspections, which will protect you against any structural issues discovered, water and septic issues, and mold or radon issues, to name a few.

Your agent will assist you in scheduling these inspections with a licensed home inspector, attend the inspections with you, and go over the results with you to determine if you are going to move forward with the purchase as is, ask for some repairs, or credits, or exercise your option to walk away from the sale.

Normally, as these are contingencies written in to protect the buyer, you, as the buyer, will pay for the inspections. Any repairs, credits, etc. can be negotiated with the seller and their agent once the inspections are completed if so desired.

As a seller, your listing agent should discuss having a pre-listing inspection done to prepare you for any issues that may exist in the home prior to listing it.

MORTGAGE COMMITMENT: Like many buyers, the purchase of a new home is often contingent upon obtaining a mortgage. Hopefully, you were already pre-qualified with the lender of your choice prior to looking at the home, as discussed in Part 1 of this article. Now that you have an accepted offer, your lender will gather all the necessary information, including the fully executed purchase contract, tax returns, proof of income, bank statements, etc., and prepare your paperwork to send to their underwriting department. Once it clears underwriting, your lender will issue a mortgage commitment letter, hopefully to you, your attorney and your agent, so everyone can move on to the next step.

APPRAISAL: Congratulations! You have a mortgage commitment letter! Now what happens? Your lender will order an appraisal, to make sure that the property you are purchasing is worth the amount of money you are asking them to borrow. Once the appraisal is ordered by the bank, the appraiser will reach out to the listing agent to gain access to the property and conduct their appraisal. The appraiser will then put together an appraisal report, and send it to the bank. As long as it comes in at value, or the sale price, all is well in your world and theirs! If it comes in under the sale price, there will exist what is called an “appraisal gap,” which is the difference between the appraised value, and the amount it went under contract for. Now you might ask yourself, “What do I do now?” If you have the cash to make up the appraisal gap, and are willing to, as the buyer, then you will work with the agents and your lender to adjust the contract. If you are not willing, or cannot make up the difference, you, as the buyer, through your agent, can ask the seller, through their agent, to renegotiate the price to match the appraisal. Sometimes a seller is willing to, as they now have legitimate proof of the value of their home. But often times, a seller will not, and will hold out for a cash buyer who does not require an appraisal. That, unfortunately, means that the mortgage contingency cannot be met, and the contract is null and void. In short, back to your search for another home.

The next article will bring you through the clear to close, the final walk through, and, finally, the actual closing day! Stay tuned!

Natalie Roth is the owner and broker of Benn Realty.

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