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Once You Are in Contract, Timing is Everything
The home buying process can be an intimidating amount of work if you look at the entire process all lumped together, but it is much friendlier when you can sit back and take a look at it broken apart into pieces. We also must tell you that no timeline is set in stone. As with all things, life happens and priorities change so this is the typical home buying timeline but is not necessarily applicable to every home buying experience.
Purchasing a home is by far one of, if not, the single largest financial transaction that a person makes. Choosing your REALTOR® is also very important because he or she will be able to provide you with the knowledge and expertise that will help you make the right decisions for you and your family. This is an important time for you to research many things, including but not limited to: Area (city, neighborhood, etc), schools, commute to work time, lenders and so forth. Your REALTOR® can help you narrow your search for a home so that it is exactly what you want and will also help make the home buying process rewarding and simple.
After you have found a REALTOR® and have been pre-qualified for a loan, it is time to begin looking at homes. Your REALTOR® should prepare for you a list of homes to look at that meet your criteria for purchasing a home in the Phoenix Metro area. Your REALTOR® should also give you a copy of all the paperwork you will be required to sign ahead of time so that you can review it and ask any questions you may have before you submit an offer. Once you have decided upon a home that fits your criteria, it is time to submit an offer.
Now that you are ready to submit an offer, it is important to discuss with your REALTOR® the documentation (in particular, the Purchase Contract) that you will be required to sign and submit as your offer to the Sellers.
This is where the process becomes more involved. Once your offer is accepted by the Sellers, certain criteria/deadlines must be met in accordance with the contract. All timelines are spelled out in the purchase contract, which you have just been acknowledged and agreed to by signing your name on the offer.
For all intents and purposes, the term “day” in the Arizona purchase contract is a full 24 hour day. Many people wonder if day (or days) includes weekends & holidays and the answer is YES. Another important thing to remember is, if the purchase contract identifies a day (or date) which specifies a call for action by a particular party, and this date passes without the action item being fulfilled, the defaulting party is in potential breech. Once there is a potential breach of contract, the defaulting party will receive a Cure Period Notice from the other party in the transaction. This, in effect, puts the defaulting party on notice that they now have 3 days to correct the non-performing action item or they will be in breach of contract, at which time the non-breaching party in the transaction has the right to cancel the contract.
In Arizona, an escrow company is used as a neutral third party in a real estate transaction. Once a contract is accepted, your earnest money is deposited with the escrow/title company typically by the next business day. Earnest money is offered to show the Seller that you are serious about buying their home. Within the first 5 days after contract acceptance many things are required from both sides of the transaction. For you, the Buyer, you must submit to your Lender your loan package with all the needed documentation. We also recommend that you choose 2 lenders to apply for loans; this way if one lender fails to perform you have a backup ready to go. There is no extra cost involved for you if you apply for two loans, as long as the backup Lender will accept the appraisal which was done by the other lender. The Seller, on the other hand, must provide a SPDS (Seller Property Disclosure Statement) for you to review. Once you and your REALTOR® have reviewed and accepted the items disclosed within the SPDS, you must sign and return it within five days or the end of the home inspection period, whichever is greater.
Should the home be built before 1978 it is required by Federal Law that within 5 days (upon contract acceptance) the Seller provide the Buyer a lead based paint disclosure form. Upon receipt of this document, you have 10 days to inspect the property (this is known as the assessment period). As the Buyer, you have the right to cancel your contract based on your findings during your assessment period. Because the Federal Law requires this document, it must have an original signature and cannot be faxed.
Next, the Seller has 5 days (upon contract acceptance) to deliver a CLUE report for your review. A CLUE report is a statement of property insurability and claims history. Upon receipt of the CLUE report, you have 5 days to disapprove and cancel the contract or until the end of the Inspection Period, whichever is greater. If you do not disapprove of any items, then you have 5 days after receiving the CLUE report to obtain homeowners insurance.
The Seller also has 5 days (upon contract acceptance) to disclose if the property is located in an unincorporated area.
The inspection period in the contract is ten days and begins once the contract is executed. This means you have the right to cancel the contract at any time (and for any reason) during the first 10 days. During the inspection period you can bring in various inspectors and other people to inspect and evaluate the home. This is the time to scrutinize the home to ensure that you expose any issues in the home that might make you change your mind about purchasing it. Towards the end of the inspection period your REALTOR® will review with you the data collected from the inspections that were performed and help you determine what items you consider relevant. Your REALTOR® will then fill out a form called the Buyers Inspection Notice/Sellers Response (BINSR) where you will decide whether to cancel the contract, accept the property as it is, or allow the Seller an opportunity to correct any items reasonably disapproved. The BINSR has to be submitted to the Seller by the end of the 10th day. Once the BINSR has been submitted to the Seller, a couple of things can happen: If you accepted the house with no repairs requested, the Seller just signs off and the process moves forward. If you requested repairs then the Seller has 5 days to respond to your request at which time the Seller can elect to repair some or all of the requested items, or can elect to not perform any of the requested repairs. Once you receive the BINSR back from the Seller you have 3 days to respond. The decision to continue escrow is in the hands of the Buyer. You can accept what the Seller has agreed to and continue forward with escrow. However, should the Seller not agree to your requests to your satisfaction, you can cancel the contract and receive your full earnest money back.
Upon delivery of Title Commitment/CC&R’s (Home Owners Association Rules/Bylaws) from the title company, the Buyer and Seller are to review the entire document and bring attention to anything out of the ordinary. The Buyer has the right to cancel the contract within 5 days of delivery of the Title Commitment. For questions regarding timeliness of this document and any other potential problems it addresses, be sure to keep your REALTOR® informed of when you receive this document. Should you have any questions or concerns, your REALTOR® and Title Company will be able to best advise you of your position, especially if the Title Commitment has identified existing liens against the property.
If you are financing any portion of your new home, your lender is going to require an appraisal. The appraisal is typically ordered by the lender and paid for by you the buyer. Even if you are paying cash for your new home it is a good idea to have an appraisal performed. This will help ensure that your purchase price is in-line with the properties value. If the appraised price is lower than your contract’s purchase price, you have a few options:
- You can cancel the contract and receive your full earnest money back.
- You can accept the appraisal and purchase the house with the contract being unchanged.
(depending on how much money you are using for your down payment your lender may
require that you make up the difference between the appraisal and contract purchase price)
- You can re-negotiate the sales price with the Seller.
As the Buyer, you have 5 days after delivery of the appraisal to decide which of the above works for you.
Within 7 days of the close of escrow (COE) date, you must call the escrow company to schedule a signing for 3 days prior to COE (or sooner if your loan documents arrive earlier) and notify your REALTOR® of the signing date. If you are unable to attend your own signing at the title company because you live out-of-state or have other reasons preventing you from doing so, the escrow company can send the documents to you via an overnight service (at your expense). You will then have to take the documents to a local notary as some documents require notarization. Regardless of where you sign your documents, you will need your driver’s license (to prove your identity).
During the escrow period it is a good idea to check on the status of your loan weekly. You should also contact your lenders to ensure that your loan documents will be completed & arrive at least 3 days before close of escrow (this is a required timeframe & action item set forth in the purchase contract). Per the purchase contract, the loan documents are to be received by the escrow company and signed 3 days prior to close of escrow. If there is ANY doubt with your Lender's ability in being able to complete the loan, please contact your REALTOR® immediately so you have ample time to resolve the issue and therefore prevent a possible delay to your closing date or breach of contract. Also, during this time it is a good idea to go ahead and get your utilities ordered for your new home. Your REALTOR® can provide you with a list of utility providers in your area. Our website provides a list of utility providers and their contact numbers for your reference. You should schedule your utilities to be transferred into your name on the close of escrow date so that when you move into your new home you have electricity, water, cable service, garbage collection, telephone service, etc. Should your close of escrow date change during the escrow period, you must notify your utility providers of the new date.
Three to five days prior to COE, your REALTOR® or Title Company should send you a preliminary HUD (Closing) Statement so that you can review the charges and dollar amount needed for your closing. If your loan documents do not arrive by the 3 day prior to COE timeline set forth in the purchase contract, then you will not know what dollar amount is needed to close the loan. This is why it is imperative that you be in constant contact with your lender and know your loan’s status at all times.
A final walk-through of your new home should also be performed 3 days prior to COE. This final walk-through is to ensure that all repair requests have been completed (and receipts of repairs have been provided by the Seller for your review). It is also for you to check to see that the property is still in the same condition as it was when you wrote an offer on it. If all of the repairs have been completed and the property is in acceptable condition, you must sign the document.
Now that you have the dollar amount needed to close escrow from your HUD statement, you can wire this amount directly to the title company, or you can bring to your signing a cashier’s check. If you choose to bring a cashier’s check to your signing, you should check with the title company first to see if your bank’s cashier’s check will be accepted as immediate funds. Some banks that issue cashier’s checks may not process their checks fast, which could potentially delay your closing.
You can deposit your funds required to close as soon as you receive your HUD statement, or you can deposit your funds on the day of COE. The lender and the title company will have already made arrangements to transfer funds required to close escrow. Each lender has their own procedures they require before releasing funds. For example, some lenders will accept your signed documents in the form of a fax or email and they will then wire funds to the escrow company. Other lenders require that your originally signed documents be back in their possession before funds are wired to the Escrow Company.
Once the lenders have released funds to the title company, your documents are then sent to the county to get recorded. In Maricopa County, this is done electronically, and it is very fast. In Pinal County, a courier is sent to hand deliver the documents to the County Office where they will be recorded. In either situation, once your documents have been recorded with the County, you are officially the new homeowner. Your REALTOR® will have already made arrangements for you to pickup (or for the REALTOR® to deliver) the house keys, garage door remotes, mail box keys, etc.
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