Taking Your Home Purchase from Contract to Close What you need to know and do before sitting down at the closing table
You’ve found a house and you’re under contract—much closer to owning that home! But there’s still work to be done before the closing. Keep working with your real estate agent to be sure that you’re able to get the house you want. The day the last party signs the contract is the binding agreement date, and that date sets the clock ticking for contract contingencies, including a home inspection during the due diligence period and the financing and appraisal contingencies. With that in mind, below are a few items to be aware of before the closing.
Home inspection. Your contract will set the due diligence period. This period is typically five to 10 days—and the longer the better for the buyer. During this period, you can have an inspection done and terminate the contract for any or no reason and receive your earnest money back. Hire a professional home inspector to inspect the property for any defects in construction or with the systems in the home. Any problems uncovered during the inspection must be addressed during the due diligence period when you can still terminate the contract. You can work with your real estate agent to negotiate any remedies. Those could include asking for a price reduction, requesting repairs or deducting repair costs from the seller’s proceeds to pay directly to a contractor that you choose.
Financing and appraisal. Your contract may also include financing and appraisal contingencies; you’ll have a certain amount of time (usually 21 days) to obtain final loan approval and have an appraisal performed. Under this contingency, the home must appraise for at least the purchase price. During this contingency time, if the lender is not able to qualify you for a loan or the appraisal falls below the purchase price, you can terminate the contract and receive your earnest money back. Work closely with your lender to quickly provide all of the requested financial documents so the lender can approve your loan within the contingency deadline. To be sure that the lender will qualify you for the loan, you shouldn’t make any big purchases or incur new debt during this time.
Title review. During this time, the lender will have requested that the closing attorney perform a title search on the property and prepare a title commitment. As the buyer, you can ask the attorney to review the title commitment with you. That report will show whether the property is subject to any easements, restrictions or covenants and may include a survey. Surveys are not required in Georgia, so there may not be one of record. If you’d like a survey, you can include a separate contingency in the contract. Surveys may take several weeks to order and perform and would likely not be completed by the end of the due diligence period.
Property walk-through. On the day of closing, you should schedule a walk-through of the property. This is especially important if the seller agreed to any repairs. It is not uncommon for a buyer to discover at the last minute that a repair was not undertaken or not completed properly.
The period from contract to close is a busy time. Ask your real estate agent to help calendar the different events set forth in the contract to make sure nothing is missed. Planning ahead will protect your remedies under the contract, give you time to negotiate any repairs and help the closing go smoothly so you can get the keys and make the house your own.
William Phalen is a partner with the firm of Sherman & Phalen, LLC. For more than 20 years, Sherman & Phalen, LLC, has conducted residential and commercial real estate closings in Georgia, Florida and South Carolina. Phalen is the past president of the Georgia Real Estate Closing Attorneys Association and is on the Executive Board of the State Bar of Georgia’s Real Property Law Section. As a board member of both organizations, he has worked on legislative matters that include defining and policing the unauthorized practice of law when performing real estate transactions, the licensing of attorneys with the insurance commissioner’s office and the manner of issuing liens for unpaid water bills, among others.