Tip for buyers – the contract
You sailed through the home shopping process. You were pre-approved, hired a buyer’s agent and found your dream home. You obtained an accepted offer and you completed the inspection. The seller agreed to repair a few items and it is now time to get the contract signed. What does that really mean? How long might it take? What should you know?
The following describes the process for Orange County, New York. This process does differ depending on where you are purchasing your home.
After the inspection items have been discussed and it’s time to get a contract signed, your agent will supply various documents to your attorney. Those documents might include a copy of the listing and the purchase offer. They might also include a Memorandum of Agreement which defines additional info such as attorney contact information and real estate license numbers. Your agent will also include a list of what was agreed to in terms of repairs. There may be other items supplied as well.
The listing agent will be sending the same information to the seller’s attorney. Using those documents, the seller’s attorney will draft a contract. Typically they use boiler plate contracts, changing or eliminating sections that do not apply. When completed, the contract will be forwarded to your attorney. In the past, this would be done by US Mail or overnight mail which could take additional time, but now of course, the contracts are typically emailed.
Once your attorney receives the contract, he will review it. Usually he will also prepare an addendum with additional buyer-related caveats. Sometimes the attorneys will discuss the addendum right away, which could add time to the upfront process. Other times, the attorneys may discuss issues after the buyer has signed which also adds more time to the process. Regardless of which way this works, after your attorney has reviewed the contract, he will set up an appointment with you to come in and sign the documents.
The day you sign the contract is the same day your down payment must be provided to your attorney. The attorney’s office will let you know how to write the check. The money will go into an escrow account where it will stay until the closing. It does not go to the seller at the time of contract signing.
After you’ve signed the contract, you are still not officially “in contract.” The contract is then sent back to the seller’s attorney. If there were not already discussions about the same, the attorneys may discuss any issues with the addendum. Conversations may be held with both the attorneys and their clients. At the end when agreement is reached, the sellers will go into their attorneys office and sign the contract.
Now that both parties have signed, you have a fully executed contract and the mortgage process can begin.
A few other thoughts on this process
Contract signing impact on purchasing timeframes
In Orange County NY, the time required to sign the contracts could add from a week or two to the purchasing cycle. Depending on the availability of both attorneys, the speed and methods of sending documents back and forth, the efficiency of the attorney’s staff, the signing of a contract could take quite a while. Many sellers still allow showings of their home until the date the contract is signed. All parties in the process should make an effort to speed things up. For example, when your attorney’s office contacts you to sign your contract, you should pick the first available time and make a point to get there ASAP!
Time is of the essence (not)
Also in the Orange County NY area, dates in contracts are not usually handled in a “time is of the essence” manner. For example, if you have negotiated a specific closing date with the seller, it is important to note this is NOT a set-in-concrete date. In fact, attorneys will tell you that the closing date could be plus or minus 30 days. And if indeed you are 30 days past the agreed-upon closing date and still have not closed, there is an additional process required to “force” the parties to the closing table. So please do not schedule time off of work for a closing until you have actually been notified by the attorneys of a closing date.
Review your contract
Also, you should carefully review your contract before you sign it. Hopefully your attorney will send to you in advance so you will have already read it and will have your questions ready. If not, read pertinent paragraphs while you are with the attorney. Make sure the closing date is the same as what you agreed to during the negotiation process. Also confirm that the down payment and mortgage amounts are correct. You should check to ensure that any items that are supposed to be included or excluded in the sale are listed properly. If you had asked for any contingencies, those should be reviewed for accuracy as well. This is the document that will shape the rest of your purchase process. It needs to be accurate.
And that’s it! Once your contract is fully signed, you should receive a copy via email, which can be used to get the mortgage process fully underway. Getting to the closing table is now mostly in your hands, and those of your mortgage representatives.
For more buyer related tips, click here.