You’ve searched high and low, and finally found a great house in your price range. Congratulations! We’ve talked previously about how to prepare yourself for negotiations (so you don’t get bullied). But what happens once you agree on a sale price?
Unfortunately, the journey isn’t over. Here’s a quick breakdown of the steps you’ll walk through from offer to closing in Grand Rapids.
1. Escrow
When both parties are represented by a realtor and the house is bought from the MLS, an escrow deposit is expected. This is a good-faith deposit from the buyer, often 1% of the purchase price. This money is deposited with a neutral third party, such as a title company, realtor, or attorney.
If the transaction ends up closing, this amount will be applied to the purchase price. If the buyer backs out of the agreement for any reason not specified in the purchase agreement, this money is given to the seller. This serves two main purposes. First, it shows the seller that the buyer is serious. Secondly, it allows the seller to collect something in exchange for taking the house off the market.
While this can vary in other situations (such as all cash sales, or situations where a very fast closing is necessary), an escrow deposit is typical.
2. Title Work
Next, you will want to employ the services of a title company in Grand Rapids. They perform two major functions – conducting title searches and granting title insurance.
First, they will closely examine the ‘chain of title’ for the property, and ensure that the current owner has the sole right to sell the property. They will also check for liens against the home (from contractors, back taxes, etcetera), missing documents in the chain, and any missing signatures on paperwork. If there are problems, they will let you know.
Once the title company is confident that no one (other than the seller) has a claim on the property, they will issue title insurance. This protects lenders and buyers from any future claims against the home’s title. If anyone challenges your ownership of the property, the title company is liable for the costs.
3. Inspections
Next, professionals should come inspect the home. Don’t go cheap on this step! You want the best inspectors you can find.
There are many different types of contractors. Some will inspect the structure and general condition of the home. Others may look at the foundation, well and septic systems, or check for evidence of pest infestations. We recommend that you conduct ALL inspections. You don’t want to be surprised by anything when you move in to your new home in Grand Rapids!
4. Mortgage Documentation
If you’re getting a mortgage for your home, the lender will ask you for many, many documents. Depending on your loan type, they will request pay stubs, tax returns, W-2s, and more. Don’t be surprised if you feel like you’re showing your entire financial life to your lender.
Make sure to ask about what kinds of loans you may qualify for. You might be able to get a reduced down payment, better terms, or other excellent benefits.
This process will likely involve many phone calls and emails with your mortgage provider. Multiple officers, underwriting, and processors may need to approve your file, and requests for additional information are common.
5. Appraisal
In order to get your mortgage approved, an independent appraiser will assess the value of your home. They will compare your house to others that have sold recently, and really dive into the market value of each feature. Size, lot area, home condition, numbers of beds/baths, and upgrades are all factored in to the calculations.
This is a detailed process, and the appraiser is kept as neutral as possible to ensure fairness to all parties. If the appraised value is at or above the offer price, the process can move forward. However, if the house appraises lower than the offer price, additional steps may be necessary. The sale price may need to be adjusted, or the buyer may need to bring more money to the table.
6. Home Insurance
Lenders in Grand Rapids require buyers to have home insurance. Feel free to shop around for these services, and carefully compare your options. Different providers may offer you vastly different coverage and prices. Be careful!
7. Removal of Contingencies
In most purchase agreements, there are contingencies built in. For instance, the buyer may have the right to cancel the agreement if the inspection is not satisfactory. Or, the contract could depend on the buyer’s ability to get a mortgage at a reasonable rate.
As the closing process moves forward, you will slowly remove these contingencies. Once the house has been inspected, the buyer will sign a document that details any requested repairs (or accepts the house as-is). Once the loan has been approved, the mortgage company will give a ‘clear to close’. One by one, the barriers to closing will drop.
This causes a lot of back-and-forth between the buyer, seller, and their Realtors. It can take a long time, and is often mentally draining. However, once you have taken care of all contingencies, you are very close to closing.
8. Closing Day
Once all of the steps are completed, all of the paperwork will be submitted to the Grand Rapids title company for review. They will approve the documentation, and pull together the final numbers for taxes, commissions, and cash to the seller/buyer.
Once everything is approved, the title company will set a closing date. Remember, until all parties sign the paperwork, nothing is final.
At the closing table, you will have many documents to sign. Everything from disclosures to verification papers, from loan notes to property deeds. Do not feel pressured to rush through the process. Take as long as you need, and read everything you want to. Remember, you are likely signing a 15-30 year contract. Details are important!
Finally, after long weeks of deliberation, work, and worry, you will close on the house. The seller gets a check, and the buyer gets the keys. Congratulations!
While the process can feel overwhelming, remember that millions of people have successfully bought or sold a house. You can do it.
In the end, just take everything one step at a time, and get help when you need it. Closing on a house is not an impossible task. Take a deep breath, and make it happen!