Hot markets can sometimes oversimplify the real estate market. It looks like houses sell as quickly as they come on the market. The signs change each hour or day: For Sale, Under Contract, Sold. What's so hard about that? It appears that all you have to do is place your property in the local MLS, plug a sign in the yard, and voila, it sells -- multiple contracts, high prices, run to the bank laughing insanely.
If it would only be so easy. A smooth transaction guided by a professional Realtor is a lot like having an experienced projectionist at the movie theater -- you only notice him when something goes wrong.
Drawing a contract in a hot market isn't as easy as it may sound -- at least, not a good contract. And that's what Realtors battle with a lot today -- is this a good offer from a reputable buyer who can actually perform on the contract they have presented?
After the sale, it goes to settlement and that requires a lot of paperwork and expertise to ensure each step gets completed so no one gets sued. Here are a few of the items that have to be taken care of from Sold to Settled:
Ratified contract: first of all, you have to get everyone to sign off on every little item and remove all contingencies as soon as possible. Once all contingencies are removed (financial, inspections, sale of home, etc.), then your first step toward escrow has occurred. This one is pretty extensive because of all the forms required by law: agency disclosure, lead disclosure, property disclaimer/disclosure, RESPA disclosure, all the addenda (several dozen are possible).
Apply for mortgage. I mention this here only because it's assumed in most markets that you're already pre-approved -- but now you have to turn that lender letter into an actual loan.
File all the documents and get them to the escrow company. The settlement company is going to conduct title search and make sure everyone gets paid. Your agent couriers all the materials to the settlement agent who starts a case file and begins checking off who's going to be at the settlement table and compiles a list of names, addresses, invoices, etc., to pay everyone.
Order all inspections: termite, home, radon, lead -- any of these may be required depending on what's happening in your area. These have to be ordered quickly so that repairs can be completed or addenda can be written to agree who's going to take care of them.
Insurance: set up your insurance with the new property (both hazard and title). The hazard insurance is your homeowners insurance policy and must be in place the day you settle. The title insurance is also purchased at the table. Buyers be sure to find out how long the policy from your seller has been in place. You may be able to receive a discount if you can transfer the policy instead of purchasing your own.
Order/supervise repairs. If defects, termites, radon or lead is present in the house it has to be dealt with. Some of them must be corrected according to the contract, others must be fixed because of federal law, while still others may not have to be fixed at all if the house is being sold "as-is" or if the buyer agrees to not having it fixed. Just because you may be in a sellers' market doesn't mean you've relieved yourself from any repair jobs -- it just depends.
Draft post-contract agreements: this could be a pre- or post-settlement occupancy agreement; agreements to take possession of the property before settlement to start contract work on the place; or various other arrangements between buyer and seller.
Performing the contract: here's the hard part. Once the contract is ratified each step has to be completed:
- coinciding settlements
- seller purchasing a home of choice
- drafting a gift-letter for the buyer
- gaining a third-party approval of the contract
- drafting and pulling in all necessary powers of attorney
- getting home owners documents to the purchaser in a timely manner, then the buyer getting them inspected in time
There are scores of items that are required according to your contract and you and your agent had best be ready to coordinate them appropriately or lose the house.