From Contract to Close in Easy and Simple Steps
November 7, 2020
In our past blogs, we have painstakingly covered the process of selling your home. From listing to marketing, pricing to negotiation, and staging and preparing your home, we have discussed many topics. Those blogs and ideas are convenient for sellers, buyers, and anybody who is generally going to invest in real estate. You can be selling your first home and looking for clues on how to list your home on a website. Or you could be a buyer wanting to purchase a new home in a new town. Our blogs and posts will put you in the driver’s seat. The ideas that we have shared summarize and specify how you can achieve an optimum selling price and negotiate deals with expertise. As a seller, there are many steps one has to finish before even closing the deal. As a buyer, you want to know the home you are buying is worth the price. Today we shall discuss the process of going from contract to closing the deal.
Wait a minute, are you telling me signing a contract doesn’t count as closing? Unfortunately, in real estate, it doesn’t. There are a lot of aspects to cover before you can finish a deal and sell your home. For sellers, it means ensuring the buyer gets to the closing without changing their mind. For buyers, it means not uncovering anything shocking or wrong about the home or the seller. Agents and professionals try to smooth any issues that arise during this time. But sellers and buyers must know what they are getting into.
The signing of an offer to purchase is not the end of home selling. Signing a contract leads to a long process of due diligence and research for the buyer. The real estate agent or legal professional will assist the buyer during this time. What can you do as a seller?
*Be honest about your expectations
*Be transparent about the home and related issues
*Cooperate with the buyer
*Get the buyer to the closing table without any hassles
*Avoid giving up value or reducing your selling price
Let’s see what the buyer has to do after the contract is signed. A smart and practical buyer will have done some basic research before quoting an offer. By the time the agreement is negotiated and signed, the buyer should have a reasonable knowledge of the property. However, it is always better to not leave anything to chance. After the contract is signed, buyers should arrange for a home inspection and surveying. You have to be firm and persistent because there are many risks for you as a buyer. You will have to arrange your finances, appraise the property for a loan, examine the title, and survey the lot. Expert negotiators will have maintained friendly and civil relations with the seller, so they have all the inside information. Buyers should also check the neighborhood to inquire about general information and details. The ideal outcome would be no surprises or secrets. But sadly, that’s not how most deals go. There will be something or the other that the seller may not have revealed or themselves been unaware of. These issues can mean that you will have to offer a lower price than earlier quoted. General or common issues that arise during due diligence are structural issues, property covenants, title-related matters, government regulations, or zoning and permit rules.
Should any issue arise, what can you do if you are the buyer? You have to debate whether you should back out of the contract. You have invested a lot of time in money in due diligence and negotiating the deal. It would be exhausting to start over the process with a new buyer and seller for everyone involved. Compare the issue arisen with your time and effort? If it’s trivial or something that can be handled, change your offer price or try getting the seller to handle it. There are several ways to fix due diligence issues. Exhausting those would be better than restarting the process to find a new home for buyers. Do you want to back out of the deal because of a broken window or poor lighting? Buyers will tend to blow things out of proportion to demand lower prices. But these tactics often end up backfiring. With affordable, good quality homes in no urgent need of money, sellers will just withdraw the deal and move on. You have to decide if it’s worth letting your dream home go for a few basic repairs.
Some customs and rules differ from state to state, but the buyer will ask for concessions or push for further allowances if they believe they can get it. Listen to your real estate agent during this time. They will have practical, reasonable advice that could benefit both parties involved.
Now, as a seller, there is very little you can do between contract and closing. Before that, what you can do is have the home inspected, pull a copy of the previous survey, price the home appropriately, and keep the title clean. These should avoid any significant concerns or surprises when the buyer undertakes their due diligence. There are two types of risks you can face during this period.
Now, as a seller, there is very little you can do between contract and closing. Before that, what you can do is have the home inspected, pull a copy of the previous survey, price the home appropriately, and keep the title clean. These should avoid any significant concerns or surprises when the buyer undertakes their due diligence. There are two types of risks you can face during this period.
*Buyer requested repairs
*Delay of Closing
Again, similar to the buyer, the seller has to weigh the risks versus the benefits. The value of the final closing should be worth taking the trade-off risk. For example, a home inspection undertaken by the buyer reveals construction flaws. It could be minor such as lights not functioning or a broken lock or significant such as a crack in the foundation or marks on the floor or rotted wood. A buyer will ask for negotiations or repairs, depending on the extent of the damage. They will also consider the expense of undertaking it themselves in the future and ask for a lower price than earlier agreed. This is a common tactic taken by buyers to force the seller into negotiating.
Some sellers will agree if the repairs and the costs involved are minimal. If the damage is considerable, they will have to take a lesser price because the buyer now has advantages. This negotiation process is very similar to negotiating the offer. The only difference is the buyer can threaten to pull out or ask for dollar credits. Sellers should be cautious before committing to anything. Understand what the buyer’s inspection has revealed. Get an approximate idea of the cost and time required to fix the problem. Is the problem that important? Or you can repair it yourself? You can offer a dollar credit to the buyer at close. Decide a range and maximum credit in mind and have conclusive reasoning behind it. If your buyer is being stubborn and asking for $10,000 of credit for items that are already incorporated in the home, say no. You have to be firm and confident about your product. The buyer will then take a call if they should agree to accept lower credits or pull out of the deal.
Credit is a low-risk option for repairs that are time-consuming and require a professional. Repairing the issue may delay the closing and cause further issues, which can mean expenses on both sides and a long drawn out closing. Sometimes fixing a pipe can uncover further plumbing problems. This would mean a significant repair cost. Smart and knowledgeable sellers offer credits to buyers to resolve the requests themselves and handle the negotiation quickly. Sellers have to learn to be flexible about issues that could be fixed easily. Emotions about selling your home have no place in this legal and financial transaction. You should also consider the buyer or the family’s costs and risks when deciding to decline a repair request.
A delayed closing looks weak for the seller and the real estate agent. It increases holding costs, and buyers looking to move in immediately can create additional living expenses. A delayed closing indicates that the deal is not going as progressed, and there are complications. For homes that go back on the market after a long negotiation process, this can decrease their selling prices. Prospective or future buyers are bound to ask the agent what went wrong or why the deal didn’t go as initially planned. Delays due to financing or government regulations are out of your control. But it is better to keep yourself updated as a buyer and as a seller. Both parties want a smooth, efficient, and seamless deal after all the kinks have been worked out. Sellers should be proactive during this period. Simply check in regularly with the buyer or their agent. Keep yourself updated about any issues or financial matters concerning the property. Let all the involved parties understand your urgency and commitment to having a fair, reasonable deal. You should also check all your paperwork and keep it updated. Inform the buyer or their agent about any impending travel plans, so they know where to contact you. Treat the buyer fairly and don’t hide essential matters. A buyer may use your urgency to negotiate a lower selling price, but it is necessary to be transparent and communicate clearly.
Going from contract to close should be tough but not impossible. Both buyers and sellers just have to be honest, flexible, and willing to compromise. A great deal is possible when both parties understand the power of effective negotiation and communication.