Do you have a strategy for selling your home? Selling a home is among the most significant financial decisions in your life and it’s something we at Compass take very seriously. Our goal is to help prepare you and your home for sale and to guide you confidently and successfully through the process. We are trained and skilled at both being strategists in preparing and introducing your home to the market and in being your ambassador while presenting your home to the market as well as your negotiator when offers are in play, working with you through the close of escrow and beyond. Your agent will work with you guiding you through ideas for enhancing your property’s best features, strategizing with you on the best list price to meet your timeline goals, formulating a marketing plan for exceptional exposure, properly preparing the property to provide you with a smooth and worry free transaction and providing transparency in the interest of being your trusted advisor. We also have relationships with vetted escrow companies and title companies to provide the necessary expertise, protection, and assistance to ensure a smooth transaction and closing.
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2. Negotiating Offers, Working Through Buyer Contingencies
PREPARING THE HOME: The first step is the initial consultation with your agent to discuss possibilities, timing and budget. It’s important to understand that when your home goes to market it should be presented in its best light. Some ideas to consider could include: • Curb appeal • A deep cleaning • Neutralize any strong colors • De-personalize • De-clutter • Make repairs • Consider professional staging • Fresh coat of paint • Consider refinishing floors or replacing old carpet • Update light fixtures These expenses up front will pay dividends with a faster sale and a higher price. PROACTIVE DUE DILIGENCE: Proactive due diligence is often overlooked while preparing the home but it’s just as important. It’s a good idea to begin with a preliminary title report to verify all is as expected with regard to delivering a clear title to your buyer. Ordering this report upfront allows time for any corrections needed and no surprises when opening escrow. It’s also a good idea to order any city required reports or inspections in advance and to prepare a seller’s disclosure package. With proper preparation your agent will be able to speak intelligently on your behalf and you will be ready for offers on day one!
GOING TO MARKET: Your home is on the market. You’ve prepared so well and now you have an offer, or multiple offers! Now the real excitement begins... Purchase offers are often complex and it’s important that sellers have a clear understanding of all contract terms in addition to the purchase price offered. Once a seller has accepted an offer, in writing, they generally do not have the unilateral ability to cancel the transaction, so it’s most important to be sure all items are negotiated in a seller’s best interest. The following pages will outline the basics of the Residential Purchase Agreement as well as specialized investigations a buyer may choose to perform, additional provisions to be aware of and highlights of the escrow process. At Compass we also go above and beyond to help you vet buyers prior to a seller accepting or countering any offer. This includes helping you understand how you can verify a buyer’s financials. We want you to find a buyer that has their funds readily available; whether paying all cash or financing. If a buyer is obtaining financing, we will also check in with their chosen lender to be sure they are responsive and have actually verified a buyer’s ability to obtain a loan. The below list of questions is an example of what can be asked of the buyer’s lender in order to vet a buyer’s ability to obtain financing: • Are you a direct lender or will this loan be brokered out and if so to whom? • Are you able to share Mr. and/or Ms. Buyer’s FICO® scores and will they meet lender guidelines? • Has the lender sourced and verified the down payment? • Have tax returns and pay stubs been reviewed? • Does the buyer’s Debt-To-Income (DTI) meet lender guidelines? And finally, please confirm that a 30 or 45 day escrow and 21 days for loan and 17 day appraisal contingencies are realistic for you.
THE PURCHASE AGREEMENT: The Residential Purchase Agreement (also known as the RPA) is the contract that California Association of Realtors® has created for the purchase of residential property. Compass real estate professionals regularly attend intensive contract classes and meetings so that they may better explain key aspects of the contract. It’s important, as you receive offers, to carefully review each aspect of the contract and how it pertains to your sale. This is the time to ask any questions that you might have.
PHYSICAL INVESTIGATION, LOAN AND APPRAISAL: The contract contains contingencies that are essentially contractual protections that allow the buyer to cancel the contract based on certain conditions. Your buyer will, typically, have a time period to investigate the property, obtain financing, verify the value of the property, and also exit the contract, if needed,without penalty.
CONTINGENCY CLAUSES INCLUDE: PHYSICAL INVESTIGATION CONTINGENCY: Your buyer will have the right to investigate any and all conditions and elements of the property. They will engage the services of multiple advisors and inspectors. This is usually the primary contingency where a buyer will decide whether to move forward with the transaction, and will include inspections to make sure all the home’s systems and components are in good working order. If defects are discovered, or repairs are needed, the contract may need to be renegotiated. PROPERTY INVESTIGATION: This is when your buyer will check into schools, crime, permit history and anything else that may be pertinent to a buyer’s decision to purchase. TITLE REPORT: The Preliminary Title Report (prelim) is typically provided by the seller. The buyer receives the Preliminary Title Report which specifies any encumbrances, easements and any legal matters that may affect title to the property. Title insurance insures that there are no “clouds” on title to the property. SELLER DISCLOSURES: This includes but is not limited to Real Estate Transfer Disclosure Statement (TDS), Seller Property Questionnaire (SPQ), Natural Hazard Disclosure (NHD), Lead-Paint Disclosure if the house was built prior to 1978 and HOA documents, if applicable. 9A/MUNICIPAL REPORT: If applicable, this report will tell you if the property is connected on sewer or septic. It will also show pending assessments, if any. It’s important that this be ordered early in the escrow, or ideally prior to opening escrow, as the time period to receive this report varies from city to city. Some cities may not require one. C.L.U.E. Report (Combined Loss Underwriting Exchange): This report is typically available via the buyer or seller’s insurance company and will list any insurance claims made on the property within the past five years. 17V
LOAN CONTINGENCY: If your buyer is unable to secure a loan, mortgage terms and maximum interest rate as stated in the contract they may legally cancel their offer.
APPRAISAL CONTINGENCY: If the appraised value determined by your buyer’s lender’s appraiser is less than the agreed-upon purchase price your buyer will have the option to ask you to renegotiate or cancel the agreement. The buyer’s contingencies remain in place until they are actively removed by the buyer. They do not expire. In the event a buyer is not performing in removing their contingencies, the seller may issue a notice to perform at the appropriate time. This will allow the seller to cancel the sale. ADDITIONAL PROVISIONS | HOME WARRANTIES: A home warranty can offer buyer protection against some of the things that can go wrong early on following the close. Often the seller will provide a one-year home warranty plan to the buyer, which offers protection on the property if any of the covered items fail during the first year. DISPUTE RESOLUTION: Mediation and arbitration of dispute. The contract provides preliminary agreements on dispute resolution. Mediation is part of every contract and both parties can agree to arbitration in the event of a dispute. LIQUIDATED DAMAGES: Liquidated damages, if agreed to, determine a settlement in the event that the buyer defaults after all contingencies are removed. Typically, the buyer may be at risk of forfeiting their initial deposit, usually limited to 3% of purchase price. When you are considering offers for your home, be sure to go over all of these provisions carefully. Of course, if a Compass real estate professional is representing you, we will cover these details with you. ACCEPTING THE RIGHT OFFER: As you can see there are a lot of terms to consider when reviewing offers; above and beyond the best price. Depending on the market you may find yourself reviewing multiple offers or waiting for an offer. In either case most sellers would, ideally, like a high price but most also are looking for a buyer who will close escrow. Offers are often imperfect and usually the beginning of a conversation so it’s important to take some time with your agent, ask questions and craft a counter offer that addresses most of your wants and certainly all of your needs. FINAL WALK THROUGH: You’ve accepted the right offer, the right buyer made it through your buyer’s contingencies and is moving towards closing. During the last five days of your escrow the buyer will have a right to conduct a final walk through of the property. This is not a contingency but is to verify that the condition of the entire property is essentially the same as it was when the offer was accepted and to verify that any required or negotiated repairs have been completed. EXPERTISE – COOL UNDER FIRE: It all comes down to keeping cool under fire. Most brokers know how to get an offer accepted for their clients. What defines expertise is being able to navigate through the entirety of the deal with ease and efficiency, maintaining open communication with all parties and handling any issues which arise with integrity and poise.
WHAT IS ESCROW? The escrow company is a neutral third party with the responsibility of overseeing the contract to make certain that no funds or property will change hands until all terms and conditions of the purchase contract have been met and to make sure that the interests of all parties to the transaction are protected. The escrow company is determined and agreed upon between the buyer and seller (this is a negotiable item as with all the other terms of the contract). Upon acceptance of the RPA by buyer and seller the escrow process begins and the contract is now officially active. The Realtors® will provide the purchase agreement to the escrow officer and include the contact information for all parties. The escrow officer then reviews the contract, reaches out to the buyer and seller, and provides instructions for the deposit of buyer’s earnest money; which is typically 3% of the purchase price. The earnest money deposit is due into escrow no later than three business days from acceptance, and is held in-trust by the escrow company. After reviewing the contract, the escrow officer will prepare the escrow instructions. These instructions outline the duties of the escrow company, including those set forth in the RPA, and incorporate the legal description of the subject property, and include the contingency dates as agreed upon in the contract. The escrow officer will generate opening packages that contain documents that need to be signed, completed, and at times notarized. The opening package is to be returned to escrow within five days of receipt. Escrow will help guide you through the package. The escrow officer will also open a title order, if not already done by the listing agent, and will review the preliminary title report. Escrow will work with the seller and the title company to ensure that clear title will pass to the buyer at the close of escrow. This means all encumbrances, liens, property taxes, or other obligations that may be against the property will be paid. The escrow officer works with every party in the transaction and is a great resource to go to with any questions, updates, or concerns. *Wire fraud is on the rise, so buyers should always contact the escrow officer by phone to confirm the wire instructions that they’ve received from escrow. This is just another measure of safety and should be a standard practice anytime funds are being wired. It is extremely important to use an escrow company that is in compliance with the CFPB (Consumer Financial Protection Bureau). Escrow companies that are not in compliance with the CFPB can put a buyer’s and seller’s personal information and money at risk.
The Closing Process The closing date (the target date to close the transaction and transfer ownership) is determined by the buyer and seller when the parties have agreed to and accepted the terms of the purchase agreement. This date may be amended by the mutual agreement. The escrow officer confirms that all the conditions of the purchase agreement have been met, including but not limited to: • All required documents have been delivered to escrow holder. • Clear title has been verified. • Buyer’s signed loan documents (if applicable) are complete. • Seller’s notarized recording documents have been delivered to escrow. • Estimated closing statements have been reviewed and approved. • Buyer’s closing funds have been received by escrow. • If the buyer is getting a loan, the completed loan documents are returned to the lender by escrow, the buyer’s closing funds are deposited with escrow and the buyer’s loan funds. The escrow holder will then call the title company, confirm the final details of the transaction, order the title insurance policy as called for in the purchase contract, and release the file for recording (also known as “closing”) with the county recorder’s office for the next business day. Close of escrow happens when the notarized grant deed that the seller has signed is recorded at the county recorder’s office. This deed transfers title of the property from the seller to the new buyer. Upon the escrow holder’s confirmation from the county recorder’s office that the deed has been recorded, the escrow officer will notify all parties. Keys are exchanged between agents, seller and buyer, as outlined in the RPA. The escrow holder will then process the closing, balance the final figures of the file, disburse the funds accordingly (including any refunds to the buyer), and generate and disburse the final closing statements.
CONGRATULATIONS! YOU HAVE OFFICIALLY SOLD YOUR HOME!