Home Buying Steps from Contract to Closing

From Janet Wickell, former About.com Guide

Real estate transactions are different in every part of the United States, so there's no one list of "typical" events that can be used to prepare buyers and sellers for the progression from contract to closing.
Below you'll find a short look at closings where I work, in western North Carolina. Attorneys do title searches and acquire title insurance for buyers in our state, but some other items I mention for my region might not be typical throughout all of North Carolina.

The Home Buyer's Offer to Purchase Contract

The majority of residential sales contracts are written by real estate agents using standard forms provided by the North Carolina Association of Realtors. These "fill in the blanks" forms were developed by attorneys and comply to our state laws.
Home buyers sometimes ask their attorneys to draft offers for them.

Home Inspections, Contingencies

Home inspections normally take place after the contract is accepted by all parties. Inspections are typically paid for by the buyer.

• Contingencies for basic home inspections and pest inspections are part of the main body of the contract. Dates are inserted to indicate when buyers will complete inspections and when requests for repairs, if any, will be given to the seller.
• Contract contingencies for some types of inspections, such as those for septic systems and radon levels, are added by including a special addendum with the offer. The same is true for many other contingencies, such as appraisal requirements, buyer possession before closing, seller financing and more.
• Other standard contingencies include financing provisions, a description of items to remain in the home (or be removed), clarification of association dues.

Residential Property Disclosure

NC law requires that most sellers furnish a residential property disclosure that describes the condition of all systems in the home.

Boundary Surveys

Buyers in my area usually pay for surveys, but sometimes ask the seller to share in the cost. Most lenders do not require a survey, but we usually recommend them

Closing Highlights

• Attorneys do title searches, acquire title insurance for buyers, and handle the closing transaction
• Attorneys and real estate agents work with lenders to coordinate the closing, making sure everything is handled on time.
• Attorneys prepare deeds for sellers.
• Buyers and sellers contract with the attorney of their choice. We usually recommend that home buyers and sellers use different attorneys so that each party has unbiased representation if problems develop that require negotiation.

Typical Home Buyer Expenses

• Home inspections
• Surveys
• Their share of yearly property taxes, property association dues, and other similar fees (prorated for date of closing)
• Fees for a title search and duties performed by their attorney, title insurance policies, hazard insurance for a year, downpayment and lender fees, flood zone certification fees
• Cost to record the new deed
• Funds to open lender escrow accounts for property taxes and insurance that will be paid by lender the following year

Typical Home Seller Expenses

• Deed preparation (attorney fee)
• Tax stamps, an excise tax based on sales price
• Their prorated share of: property taxes, property association dues, other similar fees
• Real estate commission if an agency is involved
• Fees associated with loan payoff or transferring funds into a checking account (overnight fees, electronic fund transfer)
• Any costs they've agreed to share with the buyer

Typical Buyer's Step-by-Step Progression

1. Buyer makes offer, seller accepts (that sure sounds easier than it actually is!)
2. Buyer's earnest money (good-faith deposit) is placed in the listing agency's trust fund
3. Lender orders appraisal (buyer or agent might order it for a cash purchase)
4. Inspections are ordered after an acceptable appraisal is received (If time is a factor, and we're confident the home will appraise, inspections can be done earlier)
5. Any repair issues are negotiated with the seller
6. Termite inspection is ordered (must be within 30 days of closing)
7. Surveys are ordered after a successful appraisal and inspections--buyers don't want to invest too much into the property until they are sure it's a go
8. Buyer applies for hazard insurance and the information goes to the lender and closing attorney
9. Nearing closing date, buyer arranges for utilities to be switched over
10. Closing takes place at the office of the buyer's attorney. The seller's attorney has forwarded signed deeds to the closing attorney
11. Buyer gives attorney certified funds to pay for closing and signs loan papers and other required documents
12. Attorney records new deed at the courthouse and disperses funds due to all parties