Here are the most common steps in a home purchase. Remember these are just rules of thumb. Your sales associate will help you negotiate the offer that is most appropriate for your situation. It is important to keep in mind that not every transaction will require each one of the steps below.
Offer to Purchase – The property is usually taken off the market after you have accepted a deposit and signed/fully executed the Offer to Purchase on your property. The buyer will typically, but not always, have some time to perform due diligence on your property.
Due Diligence – The buyer will usually be given the opportunity to perform due diligence while the property is held off the market. Your sales associate will advise you along the way.
Home inspection – A licensed, independent home inspector conducts a home inspection. The inspector’s job is to find any visible defects in the house or on the property. The home inspector reviews the home for major structural, mechanical or other defects.
Pest Inspection – While a home inspector will generally look for evidence of wood boring insects, they are usually not experts, and thus, if you are concerned there may be a history or you want to ensure there hasn’t been past activity, you would hire a Pest Inspector.
Radon Inspection – Radon is an invisible, carcinogenic gas that is emitted from the ground. A radon inspection will test for radon levels above the safe, allowable amount.
Lead Paint Inspection – You have the option to inspect for the presence of lead based paint. For properties built prior to 1978, a lead paint test would be advised if a child under the age of 6 will be residing there.
Environment Inspection (21E) – There may be reason, due to history, to test the soil the home is built on for any hazardous contaminants.
Title V – Septic Tank Certification – This is performed when purchasing a single family or multifamily home that has a septic system on the property.
Review Leases (if applicable) – When buying investment property for income purposes, you should review the leases that are in place.
Review Cash Receipts (if applicable) – Also for an investment property, you want to ensure that not only are there valid leases in place, but that the tenants have paid rent on time.
Satisfactory Review of Condominium Documents – When buying a condominium, you always want to review the condominium documents including the master deed and declaration of trust, any rules and regulations, financial statements, minutes to condo association meetings (if available) and any accountant audits or reports (if available).
Execute a Purchase and Sale Agreement – After the buyer has performed due diligence and inspections, you will sign a second, more detailed contract called the Purchase and Sale Agreement. The buyer usually makes an additional deposit upon the execution of this agreement. The additional deposit is a confidence booster to the seller because it indicates that the buyer remains committed to purchasing the property assuming they are approved for a mortgage, and the there is a clean title to the property. The total deposits represent the buyers risk in the event they breach the contract.
Appraisal – Because the mortgage lender is usually taking the vast majority of the risk, they will perform an appraisal of value to protect against overpaying. Appraisal laws have changed dramatically and there are constantly many new wrinkles added. Your sales associate and mortgage lender should be up to date with these changes and able to guide you through this maze.
Mortgage Contingency/Commitment from Lender – A pre-approval letter is not a formal commitment from a bank. After verifying all of the buyer’s information including income, employment, assets, liabilities, the value of the property, etc., the bank will issue the buyer a formal commitment letter. In the event the lender rejects their application for a mortgage, the buyer, on or before the date indicated in the Offer to Purchase and later in the Purchase and Sale Agreement, may withdraw from the transaction and have all deposits returned. There are many more details that need to be followed to ensure the buyer receives either a timely commitment letter or a rejection letter on or before the mortgage contingency date. Your sales associate can advise you on the proper steps to take.
Title Search – A search of the property’s title history will be run to ensure that there are no encumbrances or liens on the property that may prevent the seller from selling the property with a clean title. The mortgage lender, before loaning the money, wants to ensure that title insurance can be taken out on the property.
Final Walk Through – Before the walk through, the buyer may want to perform a final walk through of the property to inspect it one last time and make sure that any items that were supposed to be fixed or removed have been. The buyer will want to test the systems one final time to make sure nothing has changed since the home inspection and the last time the buyer has been in the home.
Closing – You’re finally there. The buyer signs the majority of the documentation, and the sale needs to be recorded at the Registry of Deeds in the county in which the property is located.