As a future home buyer, it's a good idea to understand as much as you can about the process so little comes to you as a surprise when you get started. Many first-time buyers or buyers who have been out of the market for awhile often think the process takes much longer than it does, while many others think the process happens much more quickly than it really does.
The Offer to Purchase:
Once you’ve lined up your financing and found a home that suits your needs, the next step would be to make an “Offer to Purchase”. You and your real estate agent would discuss what you think the property is worth and if that number is what you're willing to pay for it. When the OTP is submitted to the selling parties, it will have the price you're offering as well as several contingency clauses. Contingency clauses are stipulations in the OTP that protect your interest and prevent the purchase from moving forward if they are not met. Two of the most common clauses inserted into the offer are the “Home Inspection” and the “Mortgage” contingencies. We will discuss each of these.
At the time of your initial offer, a small deposit ($500-$1000) must be submitted to the selling party. This deposit is to “bind” the offer and is fully refundable if the seller does not accept your offer or if one of the contingencies are not met. The buyer will typically allow the seller 24-48 hours to respond to the offer with acceptance, rejection or a “counter offer”. If the seller counters your offer you will negotiate back and forth until both parties have an agreed upon price & terms or decide to walk away.
Home Inspection Period:
Once you’ve come to an agreement with the selling party on price and terms, you will enter the “Home Inspection Period”. This period typically lasts about 10 days and during this time you are allowed to hire a home inspector to professionally review the property you intend to purchase. The home inspectors job is to walk through the property with you and bring to light any current issues with the home as well as things that may arise in the future. She will also provide you with a full written report of her findings after the inspection is completed.
There are 3 paths you can take after the home inspection takes place.
- The inspection reveals there is nothing wrong with the home and everything is in great condition. At this time you would inform the seller that you will be moving forward with the purchase.
- The inspection reveals there are some minor issues with the home and based on these issues you would like to lower the price you initially offered the seller. You may then go back and forth with the selling party until both parties have again agreed on a new price.
- The home inspector found issues with the property that are beyond your comfort level and you no longer wish to purchase the home. At this point, you will inform the seller that you are backing out the transaction. The initial deposit will be refunded to you per the home inspection contingency.
Purchase & Sales Contract:
Assuming you selected to move forward with the purchase of the property in either case 1 or 2 above, you would now move into the purchase and sales contract. The "P&S" is the contract that further lays out the details of the purchase. These details will include dates, times and "to do list" for both the seller and the buyer. Some of these items will include:
- What date the buyer will need to have his financing in order for the purchase
- What items of the sellers are included in the purchase and which are not
- How tenant finance will be handled (if the property is a multifamily building)
- What date will the buyer take possession of the property (the closing date)
At the time of the purchase and sales agreement, the buyer will be required to place an additional deposit with the selling party. This deposit will typically be 3-5% of the total purchase price. This is again to bind the contract and will be refunded if for some reason the buyer failed to be approved for the mortgage. This return of the deposit is outlined in the purchase and sales "Mortgage Contingency".
The closing day usually takes place about 45-60 days after the initial offer to purchase was accepted by the seller... assuming everything goes smoothly. The closing day is when both the selling and buying parties get together and make the transaction official. As the buyer, you will need to bring any final money due to the table. The seller will need to make sure any outstanding bills in connection with the house are paid off allowing you to take over with a clean slate. On this day the transaction will be recorded with the local registry of deeds and the buyer becomes the new owner.
Still have questions? Please call us and one of our agents would be happy to provide you with some assistance! 617-297-8641 or email Contact@MandrellCo.com