What happens after the buyer’s offer is accepted by the seller?
If you read my article “Steps to Buying a Home in Massachusetts—Part I,” we discussed all the steps that led to an accepted offer. In Part II, we will discuss the steps after the buyer’s offer is accepted by the seller.
Submit the binding deposit: The first step the buyer is required to do with an offer contract signed by the seller is to submit the binding deposit, usually the same day or the next day with the seller’s approval. Technically, a binding deposit is due at the same time an offer is submitted and not cashed until the seller receives it and moves forward with the transaction. In practice, buyers just send a deposit check image when they submit an offer and a real check the same day if the seller accepts the offer. The buyer is not required to pay the deposit if the seller does not accept the offer. The binding deposit is a deposit that binds both parties to the offer contract. Without the binding deposit, the offer signed by both parties is not valid.
The buyer submits the binding deposit to a third-party escrow agent, usually the seller’s attorney or brokerage, who holds the deposit until closing. The escrow agent holding the deposit in an escrow account prevents the seller from taking the money before the property is transferred.
Choose an attorney: within 1-2 business days after the offer contract is executed, the buyer and seller will confirm which closing attorney they will work with. The closing attorneys handles the drafting and review of the Purchase & Sale Agreement, condo doc review (if you are buying a condo), and closing. They also work with title attorneys to review the title of the property. The buyer’s attorney and the seller’s attorney work with each other during the whole process. Successful transactions are done when the interactions between the buyer’s attorney and seller’s attorney are cooperative.
The cost of working with a real estate attorney is relatively inexpensive compared to other kinds of attorneys. Closing attorneys are hired to handle the Purchase & Sale agreement and the closing procedure. The average cost usually ranges from $500-1500 for each transaction depending on how complicated the transaction is. This attorney cost is part of the closing cost which is usually about 1% of the total purchase price (it can be higher or lower depending on your package with the lender).
While hiring a real estate attorney is relatively inexpensive, it is important to work with an experienced attorney who handles the transaction and negotiation properly. I have seen real estate attorneys (thankfully not mine or my clients’) turned transactions into disasters or totally clueless. Having worked with many real estate attorneys over the years, I have a list of experienced real estate attorneys good for particular kinds of transactions and charge reasonable prices. It’s important to go with the right attorney for your transaction, but don’t stress about it. If you go with an experienced attorneys who are known to charge reasonable prices, you can’t go wrong. At the same time, don’t be too surprised if occasionally there are clerical errors in real estate documents. This happens to all the real estate attorneys. The good attorneys just don’t make clerical errors as often as the bad ones.
Keep in mind that real estate attorneys usually work a strictly Monday-Friday 9-5 schedule, and they aren’t expected to be as responsive as real estate agents when answering emails. The nature of the roles for real estate attorneys and agents are very different, so make sure to set your expectations accordingly. The real estate attorney answer all legal questions about the Purchase & Sale agreement and closing, while the real estate agent facilitates between buyer and attorney. Technically, the attorneys take over the transaction after the offer is signed and work with the loan officer to complete the transaction, while the realtor takes on a more supportive role during this stage as a facilitator.
Inspection: depending on your agreement with the seller and how competitive the property is, there may be an inspection to be done within 1-7 business days. Your real estate agent can assist you with finding an experienced inspector to work with. Inspectors usually charge $250-800 for each inspection depending on the condition and size of the property. It’s a one-time fee paid by the buyer and usually takes 2-4 hours to conduct an inspection. Inspectors in general will warn you about as many issues as possible. No homes are perfect. Their job is to prepare you as much as possible, so don’t be surprised if he discusses a lot of potential problems. It’s their job.
Some issues such as major structural issues that cost 50-100k then I’d advise the first-time home buyers to back out if they aren’t familiar with renovations or repairs of this nature. Technically almost all issues can be fixed. It’s a matter of how experienced the buyer is or willing to take on a potential repair project. Some sellers might offer to repair items if they are eager or desperate to sell within a certain time frame. In the seller’s market, many buyers have to waive the inspection to stand a chance of being considered by the seller.
The majority of sellers (especially sellers of entry level homes at competitive locations) will not consider doing any repairs. This is because generally there is a greater number of buyers than the number of properties available. So don't take it personally. :) Many buyers coming from other regions or countries are surprised by how competitive it is to buy a home in Boston. In general, buyers should expect to do some maintenance or repairs before and after moving into their first home. For investment properties, expect to do some work or basic maintenance during the transition period after the property is transferred as well. Maintenance is the responsibility of the new home owner.
In most cases, buyers of new construction homes choose not to do a home inspection because their homes come with one-year warranty so they can still contact the developer or management company if any issues come up after they move in. Some buyers prefer the hassle-free lifestyle of new construction condos.
Optional radon test: Radon test is not a standard part of home inspection, and is sometimes done by buyers who plan on using the basement as a living space. A home inspector will explain what a radon test is during the inspection. If radon test result is positive, it is easy and inexpensive to install the radon mitigation system to completely eliminate the problem. If the result is positive, most sellers agree to install a certified mitigation system and allow the buyer to test it again after P&S is signed and before closing. When the seller agrees to install a radon mitigation system, I usually advise the buyer to write the installation agreement into the P&S for the seller to hire a professional to install a certified mitigation system and test it negative. All my buyers before who had positive radon results all moved forward with the transaction after understanding this information and how it works. We got the seller to professionally install the mitigation system and got negative results later.
It might be harder to get the seller to do work if they are physically unable to do so due to old age or sickness, being out of state, or too many qualified buyers competing for the same property. The average cost of a radon mitigation system currently m is $800-1200. Some sellers might be willing to do a closing credit instead.
Purchase & Sale agreement (P&S): it usually takes 3-7 days for buyer’s and seller’s attorneys to work together to draft and review the P&S. If the buyer is buying a condo, the buyer’s attorney also reviews the condo documents for the buyer’s protection. In many cases, the attorneys don’t finalize the P&S review until the deadline indicated in the offer so the buyer may not have more than 24 hours to review the document and sign. Keep in mind that it is possible to ask the buyer’s attorney to request an extension with the seller, but not all sellers would agree to an extension. In some cases, The best way is to make yourself relatively available on the day the P&S signing is due.
P&S deposit (usually 5% or 10% for pre-sale condos minus the binding deposit already paid. This deposit is due upon P&S signing so please make sure to arrange the wiring or check submission in advance. If submission by check, the check is usually submitted to the seller’s brokerage or attorney’s firm.
Mortgage application: according to the standard offer contract, the buyer are expected to submit the mortgage application within two days after the P&S is signed. Buyers usually have about 7-9 days from offer acceptance to mortgage application deadline to talk with different lenders and shop for rates and packages. Once the buyer confirms the lender they will move forward with, the mortgage application is officially submitted so the lender can start processing their application under strict deadlines. Failure to meet the deadlines may result in penalty fees, so it’s important to work with an experienced loan officer who can keep track of all the documents, besides shopping for the best rates. If you are buying a pre-construction home, make sure to discuss with your loan officer about their rate lock policy because for closing dates that are very far out (like 6 months later or 1 year later), the lender may not be able to honor the rates they give before as rates tend to fluctuate. Thankfully, we are still in a historically low interest rate environment right now compared to 10-20 years ago, and prices are still relatively stable.
Mortgage commitment: the mortgage commitment date is the date by which the bank/mortgage company must issue a letter stating that the loan is good to go. Until you receive this letter, there is no assurance that the transaction will go through. Make sure you keep track of your deadlines and check with the loan officers periodically to meet the deadlines. The most important deadlines for the mortgage are mortgage application date, which is usually 2 days after P&S signing, and mortgage commitment date, which is usually 7 days before closing. There can sometimes be penalties if the closing is delayed, so check with your lenders about the process every week or so if possible.
If you are buying a pre-construction condo and have an extremely far out closing date, such as 6-12 months from offer acceptance, make sure to keep in touch with your loan officer at least one month before closing.
Wiring the rest of the payment: make sure to have your funds ready about 3-5 business days before closing. 1-2 business days before closing, confirm with your attorney about the wire instructions. To prevent wire fraud, make sure to call the firm and have them verify the wiring instructions before you wire. It is better to be on the safe side and wire the fund via the fastest method. Your attorney will also have you review the closing disclosure 1-2 days before closing.
Closing: closing usually takes place at the buyer’s attorney’s office and takes about 1-1.5 hours (or less than an hour if it’s a cash transaction). The buyer is expected to bring their driver license or ID. They can also bring a check book in case there are any errors in the documents. Although this rarely happens, I once had a buyer who wrote a $3 check to correct the mistake. Once you sign the papers, it usually takes less than 12 hours for the title to be recorded at the registry of deed. If the closing takes place at the end of the day, the title may not pass until the next day if the registry is closed. Your attorney will notify you when the title passes. The buyer usually receives the keys on the closing day. If you are buying a new construction condo, expect to schedule an appointment with the management company to pick up the keys. Depending on the availability time slots of your appointment, the delivery of keys may not happen on the same day.