Buying A Home: A Denver Real Estate Transaction Timeline

Every time I help a home buyer find the home of their dreams, I warn them:  The next 45 – 60 days are going to be really emotional.  Then I walk them through each and every step before we even submit their offer.  I know that not everyone loves the ups and downs that a real estate transaction will bring.  So here is the little pep talk I give my buying clients.

There are 5 major hurdles to get through in the average real estate transaction after a contract has been signed.  Inspection, Title, Appraisal, Loan Conditions and Closing.  When you find the home you love and are ready to write your offer, it’s helpful if you have a general understanding of what happens next so that you can keep your emotions in check, plan accordingly, and know when to start packing.

Hurdle 1:  Inspection
Presuming you are not in a Short Sale transaction or a HUD transaction, the buyer’s agent will likely write the contract to close in 45 days, give or take 15 days.  (This is longer than it used to be because, in the current recession, loans are taking longer to close. It is very difficult to close a loan in 30 days right now.) It is important to work out a realistic time table so you can plan your life, move, and first backyard BBQ.  If the time table is too short, you’ll be changing your plans with every extension request.  If the time table is too long, both you and the seller are going to struggle to keep motivated on getting the deal done.

After the contract is signed by both parties the first thing you want to do is order a home inspection.  There is no better money spent when buying a home in Denver than this $$ here.  I will talk more later about the ins and outs of a home inspection, and when to have specialty inspections. Bottom line: Get one.  Currently a detailed home inspection costs more than $250 and less than $450 for most average sized homes. (Price is generally loosely based on the square footage of the home.)

Once you are through inspection, your agent will negotiate through the seller’s agent with the seller who will be responsible to fix any issues that came up during your inspection.  Generally, it is standard practice to request all “health and safety” items be repaired by seller.  This would include items such as a gas leak at the hot water heater, exposed electrical wiring, or missing smoke detectors.  You are welcome to ask for anything you want to be repaired, but this must be tempered with other data, like: how much $$ you negotiated off the price, how quickly you want to move in, and how badly you want the house.

All parties must come to agreement on what to fix by when and whom – by the Inspection Resolution Deadline.  This is usually no more than 10 days after contract acceptance. This date does not mean that the work will be completed by this date, just that it will be agreed to.  Generally speaking, the seller has until 48 hours prior to closing to complete the work, and if requested, to submit receipts to your agent.

Making it through Inspection Resolution is a big sigh of relief, but don’t unfasten your emotional seatbelt.

Hurdle 2:  Title Commitment
The next hurdle is Title Commitment.  While this is largely a Real Estate Agent deadline, as there isn’t any work for the buyer to do, it’s important all the same.  Title Insurance is customarily paid for by the seller, unless HUD or some banks own the property.    Title Commitment comes to your agent, the seller’s agent and you, by the Title Commitment deadline.  It’s a document of substantial size, 15 pages or more that outlines what the Title Company has discovered about the history of your property.  The Title Company is committing to insure that at the transfer of Deed in your transaction, you will be the only party with interest in the property.  There aren’t any outstanding liens against the property, such as an unpaid water bill or mechanics lien from the owner 15 years ago.  A good agent will read this document in its entirety and make sure all exceptions and agreements meet the intended use of the property.  Just the other day, I was reading a Title Commitment, and found a clause about “mountain view restrictions”, which had mistakenly been inserted from another home’s neighborhood requirements. Had we not found and cleared that requirement, it would have been a huge problem for my buyer who planned to scrap the home on the property and build a new 2 story home.

This may be an invisible step for you the buyer, but it there are issues on the Title Commitment document that affect you negatively, you’ll be having discussions with your agent about how to proceed.  Many transactions do not have any issues during this hurdle and after the Title Commitment deadline you can consider starting to pack your out of season clothes.

Hurdle 3:  Appraisal
Next comes Appraisal.  This cost is paid by the you, the buyer, at closing. Currently these cost about $450.  Some lenders will pay this fee for you, but typically you’ll be paying for it somewhere else.  The appraisal is a big deal for first time home buyers due to FHA guidelines.  Most first time home buyers get an FHA loan rather than a conventional loan because the down payment requirement is only 3.5%, rather that 20% for conventional.  While this is a huge help to many, there are additional hoops to go through to make FHA happy.  The house has to be in fairly good condition.  FHA appraisers use a different check sheet than Conditional Loan appraisers and look for things like water damage, peeling paint, rotted wood, broken windows, and electrical lines obscured by trees.  (This is not a complete list by any means).  Many times, a family will not ask for anything at inspection because they just want to move in, and they intend to fix the problems as they go.  While this is fine in theory, FHA may want to protect their asset more than you and they can require repairs to the property in order to insure it meets their standards.

You generally don’t get to see a copy of the appraisal.  Your agent will hear from the lender that all went well or that repairs will be required.  In a HUD deal, the properties are pre-appraised but sometimes there are repairs noted that are not disclosed on their website.  This can be frustrating, and additional required work is never a fun surprise.  Never.

If your dream home appraises for the agreed purchase price (or more) and there are not any surprise repairs asked of the seller, now is the time that you order the truck and get some boxes off Craigslist.  Appraisal is usually a week before loan conditions deadline, which is just around the corner from CLOSING DAY!

Hurdle 4: Loan Conditions
Finally, loan conditions is d-day.  You’ve made it through Inspection, Title and Appraisal.  You have all your bank documents and student loan deferral papers into your lender.  His number is now on speed dial in your phone.  Appraisal is in; your loan has been sent to “underwriting” for review.  They work behind a magic curtain, and I have never seen an “underwriter” out in broad daylight.  I think they are a part of the witness protection program because they will make or break your financial future with a final approval saying that they will in fact be funding your loan.

If you hear from your lender that you’ve come through underwriting with a green light, your loan has been approved!  You are very very close to being a home owner.  The Loan conditions deadline is usually a week before closing so that everyone has time to get all paperwork to the Title/Closing Company to prepare final documents.  If you can’t get approved for a loan, you are usually able to get out of the contract at this point with your earnest money. The emotions of getting this far, doing this much work, and then not getting a loan closed can be brutal.  The better route is to fight tooth and nail to secure that loan and make the infamous “underwriters” salivating over funding your loan.

Hurdle 5: Closing
So, now you’ve made it through four big hurdles, all that’s left is taping the boxes, labeling them and loading the truck.  The final hurdle, closing day is in a week or so!  If this whole process has gone faster and more smoothly than expected, all parties may agree to move the closing up.  Otherwise, get busy figuring out where your nearest new grocery store is and get your Cashier’s check with the amount of money you need to bring to the closing table from your bank.  Your agent or lender will get you a statement called Buyers Settlement Statement with the amount you will need to bring on closing day.  Your lender should go over this statement with you line by line until you are comfortable with every number on it. Don’t feel bad about asking.  Mortgage brokers who love there job, love to talk about this sort of stuff (like a good mechanic likes to talk about car engines). You are not a hassle, you are their client, and they want to discuss this stuff with you.

Closing day!  Breathe a sigh of relief, you’ve made it.  A word to the wise: Plan your closing date for a Wednesday if you can. Don’t schedule your friends and moving truck for an hour after you expect to be done at the Closing table.  So many things must come together at the last minute; it’s like 500 birds all landing on one picnic table at the same time.  Book time in for the unexpected, because the unexpected WILL happen.

Plan to move 48 hours later AT LEAST to allow for push backs and delays. Consider scheduling a few days to clean up the new property or paint some rooms before you move all your gear in.  You won’t believe how much easier your life will be if you don’t have additional pressure from a UHAUL reservation or 30 moving buddies scheduled.

Once you make it through closing, take yourself to dinner to celebrate and move in the following weekend.  At closing you get the keys to your new home. That’s the finish line.  Now you can take a deep breath and step out of the real estate roller coaster.  With my clients, I work hard to keep the entire ride enjoyable and fun.  The joy of buying a new home is wonderful, but the process has some important hurdles to jump over.  Knowing them before you even begin means you can be prepared for the right type of race.  Good luck and we’ll celebrate at the finish line.