What Happens After I Make An Offer On A House?
Posted on 28. Jul, 2010 by Eric Lowery in Atlanta Home Buying Tips
Ok. You’ve found a house you love. You’ve sat down with your agent, and you’re prepared to make an offer on a house. But after the paperwork is done, what happens next? Well, things happen a little bit differently in various parts of the country, and I’m going to provide the Atlanta version, but the idea is the same everywhere.
Negotiations
The first thing you’re going to do after making an offer to buy a house is wait for a response from the seller. In your contract, you give your seller a limited amount of time to respond (note: banks are a different animal don’t usually seem to care about abide by those limitations, so don’t expect much from them). Still, the seller may or may not take lots of time to review your offer so be patient.
Chances are the seller will not just roll over and accept your offer. He’ll probably make a counteroffer to you. In my experience, unless you are a veteran investor, you’ll probably feel best if there is a reasonable give and take between you and the seller. After all, if they just agree to everything you say, you’ll wonder what’s wrong with the house. Either way, the initial negotiation period may last a few hours or a few days.
Due Diligence Period
In most sales, you will also request in your original offer to have a due diligence period of X number of days once you come to a purchase agreement. During this period (I recommend about 14 business days), you’ll have the opportunity to perform whatever inspections of the property you see fit. This may include a general home inspection, or more detailed inspections by specialists for items such as the roof, A/C unit, plumbing, etc. During this period you’ll also have the opportunity to request repairs and, if you can’t come to a new agreement with the seller regarding repairs, you can cancel the contract. Please note: this is an option your agent will help you prepare as part of your offer. The “due diligence period” is not automatically included in a real estate contract.
Appraisal/Loan Approval
Once you’ve come to an agreement regarding needed repairs to the house, your lender will order an appraisal to make sure the loan you’re receiving is reasonable. After the appraisal, your loan package will be submitted to the loan underwriters for final approval and they will send your loan package to the closing attorney to finalize your purchase. During this period there’s not a lot for you to do but wait unless your lender needs additional documentation from you to process your loan.
Earnest Money
When you first submit your offer to the seller, you’ll also provide your agent with a check for earnest money. Earnest money is held by your broker (or the other broker) as an independent third party. Your earnest money is your display of good faith you intend to meet your obligations during the contract. Should you default on the contract, the seller may opt to accept your earnest money as damages in lieu of suing you in court to purchase his home. When you meet your contractual obligations and go purchase the hosue, your earnest money is credited towards your closing expenses.
Title Search
In Georgia, the closing attorney works with a title company to check for liens against your property. In some states, the title company may have a more involved role in closing your loan.
Closing /Settlement
Again this happens differently in different states, but in Georgia, the closing attorney generally represents the lender issuing the mortgage and makes sure all terms of the contract have been met and all financial agreements are properly disclosed on the final settlement statement (also called the Hud, Hud Statement, or Hud-1). The closing attorney will also insure all documents facilitating the transaction are properly signed as well as make sure your transactions is properly recorded in county records.
Title Insurance
Even though a title company will check all available records to make sure the title of your new home is clear, it’s possible there could be errors or unrecorded interest in the property. Title insurance is meant to help protect you against such errors.
And that’s about it. It might take a few weeks, or even months, to materialize, but that’s the entire process of buying a home. The mechanics may change, but the general idea is the same everywhere!
