Ok, You have been looking at homes and maybe written several offers that weren't accepted but now your offer is accepted. So now what? You ask yourself. How much money do I need before going to close? What is the timeline? What are the next steps? Do we just hang out and coast along until closing?
Well here are the answers to those questions and more!
Lets start with the acceptance of the offer.
Remember it's not a contract until all parties have signed every document. Then on that day the "Effective Date" or "Execution Date" is put on the contract and now the offer is a contract between the seller and buyer. The Realtors, the Title Company people and the Loan Originator are facilitators of the transaction all with the same goal. Get the transaction closed on time!
The Execution Date is very important because that is the date all other critical dates are based on. Such as the Option Period, usually 7 to 10 days, when buyers loan approval must be received and any other time sensitive dates within the contract.
The next outline cash flow and timelines will be from the point of view of the buyer.
Execution date: Earnest Money and Option Fee
Contract and disclosures delivered to the Title Company. Earnest Money delivered to title and option fee delivered to seller. This must be done within 48 hours or buyer will lose the option period and contract will go Pending. Either of these checks can be personal checks or money order. Title Company will not accept cash. Generally the Earnest money is 1% of the sales price and the option is usually $100 to $250.
These amounts are per the contract. Earnest money check is made out to the Title Company and becomes part of the downpayment. The Option is made out to the seller and is nonrefundable and also becomes part of the downpayment if the transaction closes. If it does not close the seller keeps the option.
Generally inspections are done during the Option Period and any repairs are negotiated. If no agreement is reached then buyer may opt out of the contract and receive the earnest money back.
Generally home inspections will cost $250-$400 for homes under 2000SF paid at the time of the inspection. Other inspections that should be done depending on the property would include: Septic, well, termite, static water tests, foundation, scoping of the sewer and water lines. The costs of these additional inspections vary with the propeties.
The appraisal generally is ordered by the underwriter. What does this mean? The underwriter works for the investor who will actually loan you the funds on the property. The appraisal is done to varify the property has the value equal to or above the sales price on the contract.
Lenders vary when this needs to be paid. Some ask for the appraisal fee when your file goes to the underwriter, others when the appraisal is done. Both of these options are POC or paid out of closing. Others allow you to pay at closing and the cost is in your closing costs. Cost generally is $500 for residental on city lots. FYI, appraisals for properties in the country with acreage can be more. The are variables for completcated properties such as horse properties or multi-famly and be several thousand dollars.
What happens if appraisal comes in short of value? One, Your Realtor can dispute by providing comps that support value that the appraisor didn't use. This sometimes works to get the value up. Two, there are (3) options. 1) Buyer makes up the difference in value which means, if the value is $2000 short you'll have to come up with and additional $2000 at closing to cover the shortage. 2), the seller reduces the sales price to meet the appraised value. 3) Both parties walk away and you get your earnest money back and start looking for another property to buy.
Other Expenses you need to budget for:
Deposits for utilites
Eranest money: 1% of sales price
Option Fee: $150
Survey: $500-This is usually added to you closing
Utility deposits: $1000
Moving and Transistion costs:$1000