Once the seller has received an offer, one of three things can happen:
- They can accept the offer at what the buyer has offered
- They can counter the buyer’s offer with a price that is closer to the original asking price
- They can return the offer to the buyer without any counter
Once a mutual agreement is reached, the timelines for contract contingencies start. They always start on the first business day AFTER mutual acceptance.
The main milestones in the timeline are the following:
A) Option Period Begins: At this point, the option period has begun, which is typically a 7 to 10 day window that gives the buyer the indisputable right to cancel the pending transaction. Although it’s not a hard-and-fast requirement, the option fee is included in most real estate contracts. It’s calculated as a tiny percentage of the total cost of the property in question, and rarely exceeds $500. The purpose of the option fee is to provide a potential buyer with enough time to arrange inspections of the property that he or she intends to buy. Since option fees are generally paid directly to the seller and are immediately deposited by the seller, they’re rarely refunded.
A) Deposit of Earnest Money: Generally the earnest money is one percent of the sales price, and earnest money goes to a third party escrow officer at the title company. This is essentially a deposit on the home and occurs upon acceptance of the contract. Once you close, the earnest money is credited back towards the closing costs or down payment. Typically it is paid within 2 business days of executed date of the contract. These funds will need to be available upon receipt of the check. If buyer terminates contract during option period, the earnest money will be refunded.
B) The Home Inspection: (plus us any other requested inspections): Inspections need to be scheduled as soon as possible, and completed within the option period. The goal is to have the first half of the option period for inspections, and the second half of the option period for negotiations of repairs. Ultimately you will want to have all things worked out by the end of the option period, or an extension will be requested. Once an inspection is completed the buyer may request repairs or a reduction in sales price of the home in lieu of repairs. Negotiations can go back and forth until an agreement is reached or in the case that both parties can not come to an agreement the buyer may terminate the contract and be refunded their option money. Per the timeline spelled out in the contract, if buyer doesn’t respond during the option period they are accepting the home as it is.
C) Appraisal: Once there is a completed agreement, we will send a copy of the final contract to the Lender. They then continue the process on their end with ordering the appraisal. Sometimes an appraisal can come in with a lower value than the agreed upon sales price. This will need to be addressed and negotiated with the buyer bringing additional funds to closing, the seller accepting a reduction in price or some combination of both.
D) Closing: Once all of the conditions are cleared with the lender then they will issue a “clear to close”. Once the Lender releases the loan documents to the Title company, we can then set up a closing date. At closing, a final settlement statement called a HUD-1 will be reviewed and signed to show the final costs associated with the transaction and the proceeds being paid to the seller. Several legal documents will be signed by both buyer and seller and the deed will be transferred to the buyer. Once everything is signed and approved the lender releases funds and the closing is complete!
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