A lot needs to happen once you and the buyer have a signed purchase agreement. A typical agreement specifies a 30 day escrow – which may seem like a lot of time, but it will fly quickly! Some contracts can have a shorter or longer period, so the timeline can vary significantly. However the following real estate closing timeline is typical, and makes a good example to look at.
Within 3 days of going under contract, the buyer will need to deposit their earnest money into escrow. This is typically between 1% and 3% of the purchase price, but can be more or less. If the buyer fails to put their money into escrow, the seller can force the buyer to cancel the contract.
Within the first two weeks or so, the buyer will be performing their due diligence and completing a number of inspections on the property. If you have taken the time to create a full disclosure package, you can often negotiate a shorter due diligence period, but you should not waive it completely. The buyer must be allowed time to make additional inspections and or do further research on the property. As a minimum, we recommend giving the buyer at least a week to do their own due diligence, regardless of how well prepared your disclosure package is.
The buyer’s lender will order an appraisal on your home – again, regardless if you’ve already done your own appraisal. An appraiser will come to measure and inspect the property, and take photographs. It typically takes at least a week for the appraiser to come out, but the appraiser should definitely have paid a visit within two weeks of going under contract – if not, it’s likely to lead to a delay in closing, and you’ll need to extend the buyer’s loan and appraisal contingency period.
Once the buyer’s inspection is complete and the appraisal report is in to the lender’s underwriting department, the deal will firm up – or fall apart. The appraisal may come in low, or may require repairs. The buyer may also request that some repairs be made, or ask for a credit or price reduction. Unless previously written into the contract, the seller is under no obligation to make any repairs, issue credits, or reduce the price. Again, if you have a full disclosure package ready for the buyer before an offer is made, you significantly reduce the chances of any re-negotiation occurring at this point.
If the buyer does discover some significant facts about the property that do warrant that the seller make some concession, this can be negotiated. It will be very advantageous at this point to have a strong backup offer in your hands, as you can use that as a powerful tool to limit the buyer’s ability to renegotiate anything. At the end of the buyer’s inspection period and loan and appraisal contingency, the buyer will either agree to release all their contingencies for the sale (with or without any concessions made by the seller), and agree to proceed with the purchase. The buyer will typically increase their deposit in escrow at this time, and sign paperwork indicating that the deposit is non-refundable, that if for whatever reason the deal fails to close at this point, the money can be kept by the seller as “liquidated damages.”
The next milestone is that the buyer’s lender will draw loan documents for the buyer to sign. The title company will also create some documents for both the buyer and seller to sign as well. You will need to make an appointment with the escrow officer to come in and sign the grant deed and other paperwork.
Around day 29, the buyer’s loan will fund, and the money will transfer from the buyer’s lender into the escrow account. Once the loan has funded, the escrow account will release the grant deed to be recorded down at the county recorder’s office the next morning, and on day 30, the deal will close. You will no longer be the owner of your home! Typically you will have already moved out of the house by this point, although your agreement may enable you retain possession for some days after closing, or perhaps you may be doing a rent back for a specified period of time.