“Patience” isn’t the word you want to hear after you finally ratify a contract on your first house and are waiting anxiously to get the keys to your new castle. But it is necessary because there are many steps that must be completed before you finally stroll through your new front door.
It takes, on average, 30 to 45 days to get from contract ratification to settlement. “A traditional resale is probably the shortest transaction and then secondly comes the foreclosure and then third in line is the short sale,” said Danilo Bogdanovic, a Realtor with Market Advantage Real Estate in Northern Virginia. “It really depends on a number of things.”
The main factor is financing. Immediately after ratification, the buyer’s real estate agent sends a copy of the contract to the lender to jump-start the mortgage-approval process, said Susan McNeill, co-founder of the TRS Group, a real estate firm.
“If you’re doing conventional financing, then most lenders can get that done in three to four weeks, no problem,” said Bogdanovic, who runs LoudounScene.com, a blog about real estate in Loudoun County, Va. Federal Housing Administration financing takes about two weeks longer, he added. If the deal is a foreclosure, tack on another couple weeks for bank paperwork; possibly another few months for short sales subject to bank approval.
While the bank is handling the financing, the title company, chosen by the buyer, starts making sure the title on the property is free of liens and can be transferred.
The lender then arranges for an appraiser to visit the property. The appraisal must come back at least at the contract sales price. If it comes back lower, buyers may need to renegotiate, which could add two to three weeks to the process, Bogdanovic said.
Home inspections are a crucial part of the pre-settlement process and typically happen within seven to 10 days of contract ratification, McNeill said. Inspections let the buyer have the property examined for problems and then negotiate with the seller to fix them or offer credits. Buyers who for whatever reason have a change of heart can use the inspection report as a way out by simply notifying the seller the deal is off.
Inspections differ from the final walkthrough, which happens a day or so before closing to make sure promised repairs have been made and the house is in the same condition it was in at the contract signing, she added.
If the property is part of a homeowners association, the HOA will make a visual outside inspection of the property and prepare a report. Buyers usually have three days to a week to review the documents, negotiate with the sellers to fix any deficiencies and then accept the documents. Buyers who receive HOA documents but do not respond in the given time are viewed as accepting the HOA documents and are responsible for any problems noted in the report. Should the buyer want to get out of the contract, this is one of the last times they can do so without reason.
Keep in mind the contract will be specific on how many days are allowed for back and forth negotiations on appraisals, inspection repairs and issues that arise from property deficiencies identified in the HOA documents.
It is possible to expedite the monthlong process. “When it was a competitive market that was needed a lot of times,” said McNeill, who has had clients go from contract to settlement in 10 days. “Now it’s not so necessary.”
Bogdanovic said the only way to speed things along is to pay in cash. “You have all these different third parties that are all working behind the scenes that must have the time to do their jobs, and then one can’t do their job until another has done theirs.”
Tasks that buyers handle before the settlement include transferring utilities to their name, purchasing homeowners insurance — and, of course, calling the moving company.
