When Does Closing Happen?
The technical meaning of closing is when the seller gets his or her money. This is the date the buyer legally owns the property, which is when they get the keys. Folks often use the term “closing” to mean when parties go to escrow to sign final documents, but this isn’t its legal meaning and it is important to understand the distinction.
Closing usually takes place within three days after signing. This gives escrow time to get all the paperwork to the lender, and the lender time to get the money to escrow. This means if your Sale Agreement says closing needs to take place in 30 days, you should make sure you’re ready to sign all documents within 27 days. Make sure you’re not out elk hunting or on a cruise during this time!
Your Oregon First agent will make sure that all the parties to the sale are aware of the various deadlines in the transaction — preliminary title approval, the inspection period, property disclosure windows, etc. We keep sales on track so no one loses their earnest money, no one loses the new house they were trying to buy with the proceeds from the sale of their current house (what is sometimes called a “contingent sale”), no one gets taken advantage of by a buyer who keeps flouting deadlines, etc.
What Is Title and Escrow?
Back in the olden days, when someone had a place to sell, they would meet the buyer out at the property and hand them the deed in exchange for a bag of money. Unfortunately, sometimes the buyer didn’t have any money, but they still took the deed — at gunpoint. And sometimes, the seller didn’t have a deed; in fact, sometimes they didn’t even own the property! But they still took the money, also at gunpoint.
So people started meeting at lawyer’s offices. Eventually, they didn’t even bother to meet at the lawyer’s office. They would just have the Pony Express bring the deed, or money, to the lawyer’s office and the lawyer would make the exchange once the other half of the transaction showed up. The lawyer would be given instructions about when the deed or money could be handed over. The seller might tell the lawyer to pay off some of their bills with the money before sticking the rest on a train back east (or west). The buyer might insist, as a condition of the sale, that their money be used to pay off seller debts, if those debts involved liens against the property.
Pretty soon, lawyers started hiring assistants to do a lot of the administrative tasks, and they expanded into areas like partnering up with insurance companies to offer insurance policies to buyers against the possibility that someone might show up with a claim to their property — perhaps a colorful mother won the property in a poker game, and when she died, the claim passed to her son, who’s now shown up saying, “Get off my land.” The lawyers and their assistants would, therefore, do a lot of research before issuing one of these policies, and they would share their findings with the parties to the transaction — what we today call a “preliminary title report.”
So you can see the genesis of the modern title and escrow company. They still have a lawyer heading things up. They still act as neutral depositories of earnest money. They still research the condition of the title. They still collect everything that’s needed, and then once it’s all together, give the seller their money and record the new owner’s interest in the property with the county. This means waiting for the insurance binder that the buyer’s lender requires, or using seller funds to pay for repairs the buyer required (so the buyer knows the repairs were paid for and won’t become liens against their property), etc.
But for all title and escrow companies do, they still only follow the instructions of the parties. You still need an Oregon First agent on your side making sure you write protective clauses into your deal, and then following up to make sure those clauses are honored. Do you know what your rights are if the buyer misses their deadline to deposit earnest money? Who do you talk to if the preliminary title report shows an unpaid water bill on a foreclosed property? Every transaction has a few little bumps, but a good agent keeps the transaction from becoming a roller coaster ride. We can never completely remove risk, but we can give you information specific to YOUR situation. This is important, because every transaction is unique. There’s no way to learn all you need to know on the Internet. Have an Oregon First agent on your side.
What’s the Different Between an Inspection and an Appraisal?
Inspections are paid for by the buyer, generally running around $450. They help the buyer learn as much about the property as possible. The inspection report is the property of the buyer and the inspector works for the buyer (although the seller may have a right to ask for a copy if you ask for repairs).
The appraisal, on the other hand, is to protect the lender. When a lender agrees to loan 95% on the value of a property, for example, they mean 95% of the agreed upon sales price or 95% of the appraised value, whichever is less. The buyer does end up paying for the appraisal with all their other loan costs, so laws now require lenders to give buyers the results of the appraisals they pay for.
If you are buying, your Oregon First agent can help you find a licensed, bonded, & insured inspector (the lender will hire their own appraiser). A real estate agent can also help you understand your options should an inspection uncover defects in the property you are buying or should the appraisal come in at less then your agreed upon purchase price.
If you are selling, your Oregon First agent will help you understand your options when a buyer requests repairs from an inspection, or when the appraised value of your home falls under the agreed upon sales price.
How Much Earnest Money is Reasonable? If a Sale Fails, When Does the Seller Get to Keep the Earnest Money and When Does the Buyer Get it Back?
This is where it’s really important to have an Oregon First agent with you, helping you understand the specifics of your contract — and, perhaps more importantly, helping you to negotiate a contract from the beginning that reflects your particular needs.
Depending on the contract used, it’s often the case that the earnest money is the only compensation a seller can get from a buyer who leaves them in the lurch. So, from a seller’s perspective, the earnest money should be what it needs to be to adequately compensate a seller if the buyer abandons the sale at the last minute.
Buyers, on the other hand, don’t usually want to put down (the earnest money is almost always part of the downpayment) more than one to two percent of the purchase price in earnest money. And most contacts give them many opportunities to withdraw from the deal and get their earnest money back if, for example, they reject the property based on a professional inspection, or the property fails to appraise for the purchase price, or they are within the Property Disclosure period, etc. But buyers have to hit certain deadlines to use these rights, which is why they need an Oregon First agent working for them; and sellers need to protect themselves by being aware of their own rights and responsibilities as well as the rights and responsibilities of the buyer.