Congratulations! You have completed your home search. You have found a home you want to buy. You placed an offer and maybe negotiated some with the seller and their real estate agent. Ultimately, your home purchase offer was accepted. Now, what happens?
Just because your offer was accepted doesn’t mean it’s time to kick your feet up and wait for moving day. In fact, there is still a lot that needs to be done. The closing process is complex and be a little stressful if you are not prepared for everything that is about to happen. That’s why I prepared this step-by-step guide to everything you should expect heading into closing.
Step 1: Escrow Opens
Once a home purchase offer is accepted and both parties agree to the key contractual details, the contract goes into escrow. The escrow process is overseen by a third-party independent service provider who will ensure the purchase contract is followed. Both the buyer and seller (along with their agents) will have responsibilities to fulfill throughout each stage of escrow.
Step 2: Pay the Buyer Deposit
As a buyer, you must pay a deposit (unless the contractual agreement stipulates otherwise) within three (3) business days of escrow opening. It is typically 3% of the home purchase price and will be wired directly to the escrow company. Do not procrastinate on this step because it can delay the escrow process. Paying your deposit on time (or early) will show the seller that you are serious and will help make the rest of the transaction go smoother.
Step 3: Alert Your Lender
As soon as escrow opens, you should reach out to your mortgage lender and alert them to the news. This will ensure that they get started on the final loan approval and underwriting processes as soon as possible. They will also need to perform a final appraisal on the property within a specified timeframe. Even if you have taken the smart step of getting pre-approved for the home loan, these final loan approval steps will need to happen. However, having your pre-approval letter already will certainly help minimize the risk of encountering any major hurdles at this stage.
Step 4: Order Your Home Inspections
Home inspections should be ordered by the buyer right away. In my opinion, four are vital:
1. General Home Inspection
2. Fireplace/Chimney Inspection*
3. Termite Inspection
4. Sewer/Septic Inspection
*Obviously, a fireplace and chimney inspection will not be needed if the house or condo doesn’t have a fireplace.
The general home inspector may also recommend a secondary inspection by another home inspection specialist if they encounter any concerns or if the property has any unique features. Examples may include roofing, foundation, plumbing or electrical. Unless you, the buyer waives, certain inspections (which is not at all recommended unless you are purposely buying a real fixer-upper for investment), they are crucial to completing the closing process.
Step 5: Negotiate Repairs or Credits
After the home inspections are complete, you have the option to negotiate specific repairs or credits for work that needs to be done. This is your final chance to leverage any inspection findings, work out any new stipulations and resolve any existing contingencies in the original contract. If significant damage is found during inspection, you have the right to renegotiate certain terms of the purchase agreement or perhaps even pull out of the contract altogether if major problems were not properly disclosed upfront.
Step 6: Order Homeowners Insurance
One step that is often overlooked until the last minute is ordering home insurance. As the buyer and a new home owner, you are legally responsible to insure your property. It takes time to get a home insurance policy designed and finalized, so don’t hesitate. You are required to have fire insurance and homeowners insurance, which can often be combined into one policy. In some high-fire-risk neighborhoods like in the San Gabriel Valley foothills, a separate fire insurance policy may be required. You will also want to research specialized hazard insurance policies for Southern California home—earthquakes, floods and/or mudslides—which may not be covered in your primary homeowners insurance policy.
Step 7: Transfer Your Utilities
The final step is to get your utility accounts in order. Typically, the seller will turn off the utilities at the property first. Then, you can schedule them to be turned back on under your name. We’re talking about water, electric, gas, cable/internet and trash. If your new home is part of a homeowner’s association, you will want to know what utilities or services (if any) are tied into your HOA dues.
Here is a quick video I put together for this topic:
There may be some other minor things to do along the way (including packing up and getting your moving plan ready), but these are the 7 primary steps that need to be taken by a home buyer after the home purchase offer is accepted by the seller and escrow opens. And if you think about it, steps 1-4 (and possibly 6) should all happen pretty much simultaneously—in other words, as early as possible in the closing process.
If you and the seller are working with Realtors®, you should be able to count on them to help guide you through the closing process and help coordinate some of these steps in conjunction with the escrow company. Buying a home is a very exciting time, especially once your purchase offer is accepted by a seller. However, it is not without its stressful moments. It surely helps to have a real estate expert on your side.