Selling Your Home: The Process.
If you’ve never sold a home before, this simple overview will help give you a sense of the general process, important steps involved, and a better understanding of the mechanics of buying and selling a property.
While there are many nuanced elements to every sale, and no sale process will be exactly the same, the elements that almost every real estate sale will have are:
1. purchase agreement (the contract);
2. disclosures;
3. contingency period;
4. an escrow; and
5. closing.
Purchase Agreement (The Contract)
There are romantic notions of our word being our bond and handshake deals. However, the reality is that there are many risks involved in buying and selling a piece of real estate and many details need to be agreed upon. A written contract setting forth all of those details with specificity is critical to making sure that everyone involved understands their rights and responsibilities. The purchase agreement is designed to accomplish that goal.
The purchase agreement will contain essential terms such as the purchase price, the amount, if any of the buyer’s initial deposit towards the purchase price, a timeline for the purchase, what, if any, inspections/investigations will be completed before the closing, and the circumstances under which the buyer and/or the seller may back out of the deal.
Often, buyers and sellers will rely on their realtors to provide them with “standardized” purchase agreements, but as every deal has unique elements, there is no true one size fits all agreement and some customization should be expected. Where the parties are more sophisticated, they may be able to customize agreements on their own, but if not, it may be advisable in some situations to engage the services of a real estate attorney.
Disclosures
In real estate transactions, the term “disclosures” refers to a seller’s obligation to inform a buyer about their property. Disclosure requirements vary state to state and even city to city. But no matter where you are located, the odds are that as a seller you have an obligation to make certain disclosures about your property. These can range from knowledge about leaks, to presence of mold or lead, structural problems that you are aware of, even recent deaths that occurred in the home.
Contingency period
The contingency period refers to an agreed upon period of time during which the buyer can complete various investigations including physical inspections of the property, zoning review, environmental review, title research, and assess other potential risks before the buyer has a contractual obligation to purchase the property. In other words, before the contingency period ends, the buyer has a right to walk away from the deal. While not always the case, the physical inspection of the property is often the key element of the contingency period. The inspection is often completed by a professional home inspector who will create a detailed report about any problems with the property.
Escrow
The escrow refers to the use of a third party (think Chicago Title, Fidelity National Title, and First American Title) to assist in the management of the purchase and sale process. The escrow/title company assign an escrow officer who will be the main point of contact for the buyer and seller. The escrow officer will collect the buyer’s initial deposit, conduct research to confirm that the seller has “clean title” (essentially meaning that the seller has the right to sell the property, that the purchase price will pay off any existing debt, and there are no unexpected problems with the seller’s ownership), collect the remainder of the purchase price from the buyer, provide the buyer with title insurance, provide both buyer and seller with essential documents to sign including the deed that will transfer ownership to the buyer, and at the closing transfer the purchase money to the seller and record the deed with the county.
Closing
The closing simply refers to the day on which the escrow officer will complete the purchase and sale by delivering the buyer’s purchase money to the seller and providing the buyer with a copy of the signed deed while also sending the executed deed to the county recorder.
Please be advised that nothing in this blog constitutes legal advice. If you have particular concerns that you wish to have addressed, please contact a lawyer directly so that your specific circumstances can be evaluated.
