Once you have received an acceptable offer for the purchase of your home or property on the East End, there are seven steps involved in consummating the sale.
1. Retain Counsel. First, you must retain an attorney to prepare the contract, which includes all the terms and conditions of the sale. The contract is the most important document in the transaction, since neither party is bound to proceed with the sale until both parties have signed the contract.
In order to accelerate the transaction, property owners usually retain local counsel who are familiar with local zoning and building department regulations and title company requirements. Documents used in the original purchase of the property, such as the deed, title report, and survey, together with the current tax bill, should be sent to your attorney for used in preparing the contract.
If furniture is to be included in the sale, a detailed, room-by-room list of the items included should be prepared and also sent to your attorney.
2. Brokerage Agreement. The next step is to secure a brokerage agreement from your broker, setting forth the agreed commission, which will be paid as, if, and when title passes to the purchaser. In the event the broker has secured a binder from the purchaser, it should be forwarded to your attorney prior to your signing it. Generally, such "binders" are not binding but are viewed as a revocable offer on the part of the purchaser, pending his/her signing a complete contract.
3. Conditions. The third step is to determine what the offer is conditioned upon. The purchaser's attorney frequently requests conditions of sale that have not been previously discussed. For example, an offer that was made "all cash," upon clarification, becomes an offer of all cash provided that purchaser can secure a mortgage from a lending institution.
Other conditions could include termite and water potability inspections, a delayed closing, or the seller granting a purchase money mortgage for part of the purchase price. If the property is a vacant parcel, than the sale is conditioned upon the lot becoming buildable.
Sometimes, buyers request that the contract be conditioned upon a satisfactory engineer's report, but since this provides a large loophole for cancellation of the contract, it is rarely agreed to. It is, therefore, common for purchasers to have an engineer's report prepared, especially on houses ten years old or older, prior to entering into a contract.
4. Contract of Sale. The next step is the preparation of the contract of sale by your attorney. In addition to spelling out in detail the terms and conditions of sale, the contract generally provides that the premises are sold 'as is,' except the seller generally agrees to the roof being free of leaks and to all appliances being in working order at the time of closing.
The seller also agrees to produce "marketable" title, which means there can be no liens or encumbrances on the property unless previously agreed to in the contract.
An inventory of all personal property included regarding escrows, closing date, details of any purchase money mortgage, notice requirements, and other procedural agreements.
5. Post-Contract. Once both parties have signed the contracts, the next step begins. It is the obligation of the seller's attorney to eliminate all liens and encumbrances on the property. If the title report indicates tax liens, judgments, estate tax liens, outstanding mortgages, improper prior deed or dues owed to property owners' associations, your attorney resolves these matters prior to arranging a closing date.
The seller's attorney must also secure an updated Certificate of Occupancy from the local building department once the purchaser has provided a new survey.
In the event there is an existing mortgage which is to be satisfied at closing, a letter must be secured from the bank setting forth the premises amount of principal and interest due on the closing date.
In the event a neighbor's fence or structure encroaches onto the seller's property, a boundary line agreement must be prepared for the neighbor's signature.
6. Pre-Closing. The sixth step involves items that must be completed in the week or so before closing. The seller must arrange to deliver the house in a broom-clean condition, all appliances must be in working order, a fuel reading must be secured so that the seller can be reimbursed for whatever fuel remains in the tanks. Electric and water utilities accounts must be transferred to the purchaser's name. And, finally, the buyer generally makes an inspection of the premises a day or so before closing.
7. Closing. The last step involves the closing itself. Generally, the seller is present, although a Power of Attorney is sometimes used if his or her presence is difficult to arrange. The seller must bring the keys and his or her checkbook to pay the brokerage commission and transfer tax, and the fuel reading for reimbursement.
The office prepares, after the closing, a bound closing statement setting forth in great detail all that occurred at the closing with copies of all instruments and checks, together with an accounting of all calculations, included credits to the seller and buyer.
This statement is generally given to the seller's accountant so that proper tax treatment can be given to the transaction.
Finally, you can relax.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.