Under Contract, Now What?
Congratulations, you are on your way to owning your very own home! Follow these suggestions so that while you're under contract everything will go as smooth as possible.
During this period of purchasing your home, you are going to need a settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The settlement company will hold your deposit and coordinate much of the activity that goes on during this period. This deposit check may also be held by a settlement company or in Long&Foster's escrow account. Make sure that there are sufficient funds in your account to cover this check. I have several great title companies I do business with that are the best in the area.
The earnest money deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home, towards your down payment. If for any reason the sale does not go through, you may be entitled to receive all of your deposit back. I will explain this in person as each contract is unique. In certain instances, the seller may be able to retain this money as liquidated damages.
The period that you are "under contract" in the DC market area is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you are under contract, we have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
- Inspection Contingency: this should be completed as soon as possible, usually within 10 days after the contract to purchase is ratified as unsatisfactory results of the inspection may mean that you may want to cancel the contract. Rest assured, I work with the best inspectors in the business who will give you the most honest opion and point out everything from fixes to recommendations on upkeep to giving you a 90-day warranty.
- Financing Contingency: once the contract is signed, you have a period of time to get the loan commitment--usually about 14-21 days. If you are unable to secure financing during the period of time in the contract, you will be able to cancel the contract and not risk losing your deposit. You may choose to cancel the purchase contract if the lender denies you financing. But this choice is theirs and not yours to make.
- Appraisal Contingency: A lender-approved appraiser will come and appraise the house. The appraisal should ideally come in at or above the sales price. Should it come in lower you have the right to re-negotiate the contact to the appraisers price or cancel the contract altogether, again receiving your earnest money back.
- Condo/Co-Op Document Review Period Contingency: If you are purchasing a condo or a co-op, you will get a statuatory review period to look through the financials and by-laws of the buiding and have the option of canceling the contract (earnest money returned) if the documents are not satisfactory to you.
A requirement that the seller must provide marketable title.
The title agent will review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership.
- You'll need to get homeowner's insurance by the time of settlement. This will be required before you can close. It would be in your best interest to apply for insurance as soon as possible after the contract is ratified.
- Contact local utility companies to schedule to have service changed into your name starting the day of settlement.
- We'll schedule the final walk-through inspection, usually the day of settlement. At this time, you should make sure that the property is exactly as it should be, that everything is in working order (unless its an AS-IS contract).
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!