This article can be found in The Argonaut, where Lisa Phillips is a regular contributor.
Q: Now that I know how to prepare my home for sale, and get it listed, what are the steps once I accept an offer?
A: This is a great question, as many home sellers don’t think beyond getting the highest offer and accepting it! However, the escrow process and the steps throughout are full of land mines for the unsuspecting Seller who is already spending their profits. In todays’ market, listing the property may be the easiest part, the internet and buyer savvy has ensured that any serious buyer will know about your home. Once you are ready to accept an offer, here are some general steps and issues to know about:
- Opening escrow-this is the first step after an accepted offer. Buyer and Seller will sign “Escrow Instructions” and the Buyer must submit their earnest money deposit- typically 3% of the purchase price, but can vary by agreement. Your escrow officer is a key player in the transaction, and a good one can make all the difference in keeping your sale on track.
- Title- Your agent will help you open an order for title. Your buyer and their lender will receive a title insurance policy, insuring that they are receiving clear ownership of the property. The preliminary title policy will be reviewed by the buyer for any “clouds” on title, including easements, judgments, tax liens, and mechanics’ liens. Unfortunately, sometimes surprises pop up here, but a good broker or attorney can help you resolve them.
- Buyers’ Due Diligence- This is a critical time in the sales process. The Buyer will typically conduct multiple inspections of the property- general, termite, sewer, chimney, for example. This can be a nail-biting time for the Seller; nervously awaiting to hear what may be wrong with the home you are proud of. Every home inspection will result in a report, and there are always items that come up for repair, to bring to code, etc. This is an important time, as many buyers will attempt to renegotiate the price, or demand repairs and/or credits. It’s important to remain calm and objective during this process, and not get caught up in emotion- many sales have been lost over issues that are not financially significant.
Sometimes, especially in older homes with deferred maintenance, I suggest the Seller obtain their own inspection prior to listing. Although the results must be disclosed to Buyers, it accomplishes two things. First, it allows the Seller to be informed of any major and minor issues, and gives the Seller the option to repair in advance, and telling the Buyer which issues are resolved. Second, and even more important, in these situations I give the report to potential Buyers prior to their submission of an offer, so that they have full knowledge of the property condition in considering their offer price. This heads off much of the re-negotiation that often occurs after the Buyers’ inspections.
- Contingencies- “Contingencies” in a real estate sale are conditions that the Buyer must individually release, and until the Buyer does so, may cancel the purchase without consequence, and receive their deposit back. It is important to ensure that deadlines for contingency releases are closely monitored and enforced, as a Seller cannot confidently plan their next steps until clear. Buyers’ inspection rights are just one of the contingencies that need to be released before the Buyer is legally committed to the sale. Sellers’ receipt and review of disclosures, HOA documents timely provided, etc., are another. Clear title, loan, and appraisal are also contingencies.
- Lending- unless your Buyer is paying with cash, they will usually have a loan contingency. Should they not obtain loan approval, they may back out. This is probably the most difficult contingency, because all parties are waiting for the lender to conclude its review process. With ever-changing loan criteria, the most diligent Buyer may take longer than expected to obtain approval. Some property conditions and/or HOA issues may cause a Buyer to not qualify for the loan. Often, there is a solution, although it may mean switching lenders mid-escrow, sometimes delaying the process. It’s important for the Sellers’ agent as well as the Buyers’ agent to remain informed regarding the progress of loan approval and to anticipate issues and solutions. When the loan approval is given, and the Buyer releases this contingency, everyone is put at ease that the sale will close.
- Appraisal- one contingency is that the property appraise for the purchase price. It usually does. However, in some situations, it may appraise lower. For example, if your sale is breaking neighborhood records (Yea!), the comparable sales may not be available for the appraiser to rely on. There is an appeals process, sometimes other appraisals are ordered, and it is important that the agents involved educate the appraiser on value, providing appropriate comparable sales, neighborhood and property information to give the appraiser necessary facts to justify the sales price. Even if there is a problem, good real estate brokers will help the parties find solutions.
- Final Walk-Through- several days before your scheduled closing, the Buyer is permitted to inspect your property, confirm that it is in the condition agreed, and that any agreed repairs have been made.
- Closing- You made it!!! In the days leading up to closing the sale, the Buyer will sign their loan documents, and submit the remainder of their down payment. The Lender will then wire the remaining funds to escrow. As Seller, you will receive an estimated closing statement, setting forth all of the expenses and costs of each party, and your proceeds from the sale. You will sign the Deed, conveying the property to the Buyer. Escrow simultaneously causes the Deed to record in the county upon transfer of funds. The Buyer will now be the owner, and you will receive your sales proceeds$$$.
While this is not an exhaustive list, this is a general outline of what you can expect as a Seller in the sales process. Your Realtor® will be a critical participant throughout the entire process, and a good one will keep you informed, yet provide solutions, and work to keep everyone calm and amicable throughout, with focus on getting your sale closed.
Disclaimer: This article is intended to be primarily for entertainment purposes, and is not to be considered legal advice.
ABOUT LISA PHILLIPS, ESQ./ CA Bureau of Real Estate Lic# 01189413
Lisa Phillips is an active Realtor® in the Los Angeles area, with more than twenty years as a Real Estate Broker and attorney. Lisa is also a member of the National Association of Realtors “Green Resource Council”, and achieved its “GREEN” Designation. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly to achieve the best results for her clients. For more information, please visit www.LisaPhillipsRealEstate.com.
