Once an Offer Is Accepted on a House, What Happens Next?
An offer's accepted! Learn the crucial, often overlooked steps from this milestone to finally owning your new home.
A verbally accepted offer on a house is the first step in the home-buying process. Buyers then begin a structured sequence of actions to ensure the property meets expectations and financial arrangements are sound. The path to homeownership involves several distinct phases, moving from an initial agreement to a legally binding transaction.
Formalizing the Purchase Agreement
After a verbal offer is accepted, the next step is to formalize the agreement through a written purchase agreement, also known as a sales contract. This legal document outlines the terms and conditions of the transaction, becoming the blueprint for the home purchase. It includes details such as the purchase price, a description of the property, and the target closing date. The purchase agreement also specifies various contingencies, which are conditions that must be met for the sale to proceed. These include provisions for a satisfactory home inspection, an appraisal that supports the purchase price, and the buyer securing financing.
An important component of formalizing the agreement is the earnest money deposit. This deposit, a percentage of the purchase price, demonstrates the buyer’s intent and commitment to the transaction. Earnest money amounts range from 1% to 3% of the sales price, though this can vary based on local market customs and property value. A neutral third party, such as an escrow agent or title company, holds these funds in an escrow account until all conditions of the sale are satisfied. This arrangement protects both the buyer and seller, ensuring funds are released appropriately once the transaction closes or returned if specified contingencies are not met.
Property Assessment and Contingency Management
With the purchase agreement in place, buyers proceed with due diligence, beginning with a home inspection. A professional home inspection provides an evaluation of the property’s condition, covering major systems and components such as structural integrity, electrical wiring, plumbing, and heating, ventilation, and air conditioning (HVAC) systems. The inspector identifies defects, safety hazards, or areas requiring repair. Buyers receive a report outlining these findings, which allows for negotiation with the seller regarding repairs or credits. This non-invasive inspection visually examines accessible areas, without opening walls or destructive testing. Inspectors do not test for environmental hazards like mold or radon unless specifically requested.
Another step, often required by lenders, is the property appraisal. A licensed appraiser conducts this valuation to determine the home’s fair market value, ensuring it aligns with the purchase price. The appraiser considers the property’s condition, features, and recent sales of comparable homes in the area. If the appraisal comes in lower than the purchase price, the lender may not approve the full loan amount, requiring the buyer to bring more cash to closing or renegotiate the price with the seller. The appraisal contingency allows the buyer to address such a discrepancy, providing options to renegotiate or withdraw from the contract without penalty if a mutually agreeable solution cannot be reached.
Securing Loan Approval and Title Clearance
After property assessments, the focus shifts to securing financial approval through the loan underwriting process. Loan underwriting involves a review of the buyer’s financial profile by the lender to assess the risk of extending a mortgage. Underwriters scrutinize financial documents, including income verification through W-2 forms, pay stubs, and tax returns, and bank statements to confirm assets and cash reserves. They evaluate the buyer’s credit history and debt-to-income (DTI) ratio, which compares monthly debt payments to gross monthly income, to ensure the borrower can repay the loan. This stage can take several weeks, with the underwriter requesting additional documentation or explanations for unusual financial activities.
Concurrently, a title search confirms the property’s legal ownership and identifies any claims or liens against it. This process involves examining public records for the property’s history, including past deeds, mortgages, easements, judgments, or unpaid taxes that could affect clear ownership. The goal is to ensure the seller has the legal right to transfer the property free of encumbrances. Following a title search, title insurance is purchased to protect both the buyer and the lender from unforeseen issues regarding the property’s title. A lender’s title insurance policy is required by the mortgage provider, while an owner’s policy, though optional, protects the buyer against financial loss due to title defects discovered after closing.
Final Preparations and Closing Day
As the transaction nears completion, a final walkthrough of the property is conducted by the buyer, within 24 to 48 hours before the closing appointment. The walkthrough verifies the property is in the agreed-upon condition, that all negotiated repairs have been completed, and that all items included in the sale, such as appliances, are present and functioning. Buyers should check all systems, including plumbing, electrical outlets, and heating/cooling, and ensure no new damage has occurred since the inspection. This is the last opportunity to address any discrepancies before ownership officially transfers.
Prior to closing, federal law requires the lender to provide the buyer with a Closing Disclosure (CD) at least three business days beforehand. This five-page document details final loan terms, projected monthly payments, and a breakdown of all fees and costs associated with the transaction. Reviewing the Closing Disclosure is important to ensure accuracy and compare it against the initial Loan Estimate received earlier in the process. Any discrepancies or questions should be addressed with the lender before proceeding to closing.
The closing appointment is the culmination of the home-buying process, where all parties, including the buyer, seller, real estate agents, and a closing agent or attorney, gather to finalize the transaction. Legal documents are signed, such as the deed, the mortgage or deed of trust, and the promissory note, officially transferring ownership and establishing the loan agreement. Funds are transferred, including the down payment and closing costs, to the seller and other service providers. Once all documents are signed and funds are disbursed, the buyer receives the keys to their new home. The final step involves recording the deed with the local county recorder’s office, documenting the change of ownership in public records.