So you “sold” your house, now when and how do you get paid? The final transfer of money for the deed of a home is called Closing. There are several steps in the selling process before you can close the transaction and get paid. Below I will walk you through the process and give you an estimated timeline.
- Agree on Purchase Terms: Once you have found a buyer you will need to agree on terms of sale. In Indiana there is a standard form real estate agents have access to called a purchase agreement. In this agreement all the purchase terms are laid out. Sales price, how the buyer will pay for the home, who picks the title company and pays for what closing costs, inspection time frame and closing dates are some of the terms that need to be negotiated. If you are not using a real estate agent you can have a lawyer at the title company put together an agreement for purchase. This step can take a few minutes or a few days depending on each party’s desired terms.
- Open Escrow and Order Title Insurance: After terms are agreed upon the buyer will open escrow and a title search will be ordered. Opening escrow means earnest money will be placed in an escrow account of either a real estate brokerage or a title company to hold until the time of closing or otherwise laid out in the purchase agreement. A title search is a search of public records to determine the legal owner of the property and to see if there are any liens on the property. Title searches can take up to two weeks depending on the county and title company. Check out these videos to learn more about title and escrow.
- Have an Inspection: Next it’s time for an inspection, if agreed to in the purchase agreement. An inspection can be done a few different ways. The buyer can hire a licenced inspector to visit the property and do a full report. This will take a few hours and the inspector will look at and test the homes systems. They will look at the foundation, plumbing, electrical, hvac, windows, flooring, exterior, roof and everything in between. The home may also be inspected for mold, termites and radon. The inspector will then write a report about each item in the home. Some investor buyers like me will wave a formal inspection and have a general contractor assess the home for them. If the buyer is planning on making improvements to the home they are more interested in what it will cost to repair than knowing about every little flaw in the home. The purchase agreement will specify a timeframe of when an inspection needs to be performed. Usually this is one to two weeks to give the inspector time to schedule and write the report.
- Order an Appraisal: If the buyer is using a mortgage to purchase the home an appraisal will have to be ordered. This is something the lender will order and schedule with the seller. The lender will have a licenced appraiser look at the recent sales and conditions of the homes in the neighborhood to give the lender a market value of the home. If the buyer is using cash they may choose to skip the appraisal.
- Renegotiation: The terms of the sale may be able to be negotiated even after the purchase agreement is signed. If an inspection reveals a major defect that needs to be repaired the buyer may ask for the seller to have a qualified person make repairs or they could request a reduction of the sales price. If the appraiser determines the home is not valued at the agreed amount the bank will not lend the buyer more than the appraiser says its worth. The buyer will either have to make up the difference with cash or renegotiate the price of the home.
- Clear to Close: The lender will review the appraisal and all of the buyers documentation needs to get a loan they will give the buyer the clear to close. It takes at least 30 days for a buyer to receive the clear to close. If the buyer is using cash a clear to close is not necessary and the transaction can move much quicker. Pro Tip: If the buyer says they are using all cash for the transaction ask for proof of funds this will help you determine if the buyer really has the funds to close. Ask for a bank statement within the last 30 days (account numbers blacked out of course) or a letter from the bank stating they have enough liquid funds to close the transaction.
- Final Walkthrough: Either the day before or the day of closing the buyer will want to do a final walkthrough and make sure the home is in the same condition as when they signed the purchase agreement. The buyer will also want to make sure the seller has moved out of the home if that is what they agreed to do. This final step protects the seller and buyer from claims of breach of contract.
- Closing: Finally its closing day! The title company will prepare all of the documents needed to transfer the title. They will also prepare a settlement statement, the statement will break down the charges to the buyer and seller. The title company will collect the balance due from the buyer and pay the seller their net balance owed. Ownership is officially transferred at the time of closing.
These are the main steps needed to get your home form sold to closed. Average time frames can vary per transaction and are usually based on the buyer’s financing. A new mortgage will take 30 to 45 days to close where a cash sale could take as little as 10 days depending on the title company. All time frames can be negotiated to best fit all parties in the transaction. As an investor buyer I buy homes cash, wave inspections and use title companies that can move quickly. I’m also flexible with my closing timelines. I love talking about real estate so give me a call and we can talk about the best solution for you and the sale of your home 317-854-6291.
You can also fill out the form for a fast, no obligation, “as is” offer. You will receive an offer within 24 hours of your request.
