Completing the Transaction
Legacy Brokers receive extensive training in all areas of real estate and are well-equipped to handle any type of transaction. Whether you are a Buyer, Seller, a first-time or a repeat customer, you can trust our Brokers to offer the best advice, to protect you through the proper legal terms and contract contingencies and to ensure you stay informed and updated during each step of the complex transactional process.
Steps for a Standard Offer and Transaction
1. Offers Submitted, Received, Reviewed and Selected
2. Open Escrow & Deposit Earnest Money
3. Preliminary Title Report Review
4. Buyer Financing
5. Seller’s Property Disclosures
7. Negotiate and Complete Repairs
9. Final Buyer Walk Through
10. Close Escrow, Final Loan Approval & Signing
11. Keys & Move-In
12. Your Legacy Agent for Life
Once Buyer and Seller have reached mutual agreement on the terms of an offer, the offer is deemed “accepted.” All of the timelines outlined in the sales agreement begin the first full business day after both parties have accepted and signed the agreement. A “business day” is considered to be Monday through Friday, with the exception of any state or federally recognized holidays.
Open Escrow & Deposit Earnest Money
Earnest money is a deposit the Buyer puts down with their offer to purchase a house, signaling your “earnest” intention to purchase your home. The title company holds this deposit and it is counted toward the Buyer’s down payment at the close of the transaction.
Once the Seller has accepted an offer, the first official task is for the Buyer to submit their earnest money to escrow. The listing agent will “open escrow” by notifying the title company that an offer has been accepted, and will send all the associated sales agreement documents to the title company.
The standard timeline for an earnest money deposit is three business days from the date the offer was accepted, unless the sales agreement states otherwise. Earnest money is paid by check to the title company or through electronic funds transfer. Once the earnest money has been received and processed, both agents will receive a copy of the check and a confirmation. The earnest money will remain in the secure escrow account until all of the terms of an agreement have been met.
Types of Contingencies
There are several types of contingencies built into a standard sale agreement. The Buyer must sign off on each contingency in order to have a successful closing. If for any reason, a contingency cannot be met, a Buyer can terminate the transaction and is entitled to a reimbursement of their earnest money.
Once an offer is mutually accepted, the Buyer’s agent will receive a Preliminary Title Report from the title company. This report shows the history of ownership and vesting. It also details anything recorded against the property, including liens, encroachments, or easements. The title company compiles this report from a search of county records in order to issue title insurance, and any liens against the property are listed as “exceptions” to title insurance.
The Buyer will be advised to review the Preliminary Title Report closely, ensuring that the title is as clean, that there are no liens, outstanding taxes or judgements against the property. They will also check that the legal description is accurate.
Other Important Sections Outlined in the Title Report:
If there’s an easement recorded against the property and another owner has access to the property via the easement, that would be recorded against the title report. This stays with the report until both parties agree to remove it.
If your property is subject to Covenants, Conditions and Restriction (CC&Rs), these will appear in the Report. Any new Buyer who is purchasing the property is subject to the rules and regulations documented in the CC&Rs and must abide by them.
The Seller must convey a marketable title to the property by statutory warranty deed that is free and clear of all liens of record, except property taxes that are not yet payable, zoning ordinances, building and use restrictions, reservations in federal patents, easements of record that affect the property, and CC&Rs.
Inspection Contingency Period
Once an offer has been accepted and signed by both parties, the Buyer typically has 10-12 business days to complete all inspections and negotiate any repairs with the Seller. This is known as the inspection period. (Refer to your sales agreement for the exact timeline.) If a Buyer is dissatisfied with the condition of the home in any way, they can terminate the transaction at any time during this 10-12 day period. In order to terminate, the Buyer must submit their unconditional disapproval of the property based on the findings of the inspection report. Once the unconditional disapproval is signed and submitted, all earnest money deposits are to be promptly refunded, and the transaction officially terminated. If an unconditional disapproval is not submitted by 5 pm of the final day of the inspection period, the Buyer is considered to have accepted the condition of the property.
Negotiating and Completing Repairs
After reviewing the inspection report, the Buyer’s agent will communicate any concerns the Buyer may have along with the findings. Bids are often obtained for necessary repairs. These repairs will be listed in a document known as a ‘repair addendum’ and submitted to the Seller. Buyer and Seller will then, through the mediation of their respective agents, negotiate the necessity of and responsibility for these repairs. If Buyer and Seller cannot negotiate a repair agreement prior to the end of the inspection period, it may be necessary to extend the inspection period with an additional written addendum.
Completion Date for Repairs/Corrective Action
A mandatory completion date for any negotiated repairs will be identified in the repair addendum. The Buyer will then have 2-5 days to complete a re-inspection, ensuring all repair work is completed and satisfactory. The repair addendum also states that all repairs requiring the use of a contractor (e.g., any electrical, HVAC, plumbing, or similar specialty work) are to be performed by Oregon licensed and bonded contractors in accordance with all applicable laws, codes and ordinances.
Final Walkthrough and Verification of Repairs
Once the Buyer’s agent receives notification that all repairs have been completed, the Buyer is able to walk through and verify the repairs and the condition of the house. Depending on the extent of the repairs, Buyers may opt to do a re-inspection with the original inspector for a fee. All electrical wiring, heating, cooling, plumbing and irrigation as well as the overall state of the structures and the land, must remain in similar condition until the Buyer takes possession of the property.
Buyer Financing Contingency
The Buyer must be able to secure and show proof of specific financing from a lender. This contingency states that in order to enter into a purchase contract, the Buyer must qualify for financing. It also states that the home they are purchasing must appraise at value.
Failure of Financing Contingency
If Buyer receives actual notification that any financing contingencies have failed, the Buyer must promptly notify the Seller. The parties then have 2-5 business days following the day of Seller’s receipt of such notification to determine next steps. The possible next steps are:
- Terminate the transaction by signing a Termination Agreement (OREF-057) or such other similar form as may be provided by escrow.
- Reach a written mutual agreement upon such price and terms that will allow the transaction to continue. Neither Seller or Buyer is required to reach such an agreement.
If neither (a) nor (b) occurs within the time period identified, the transaction automatically terminates and all earnest money is promptly refunded to the Buyer. Buyer understands that upon termination of the transaction, Seller has the right to immediately place the property back on the market for sale upon any price and terms that the Seller determines.
Buyer’s Responsibility Regarding Financing
By signing the Sales Agreement, the Buyer is making the following legal representations to the Seller:
- Buyer will submit a completed loan application to their lender for purchase of the property no later than 3-5 business days after the date of the mutually signed sales agreement.
- Buyer will complete all necessary paperwork in a timely manner and exercise best efforts (including payment of all application, appraisal and processing fees) needed to obtain the loan.
- Buyer will order the lender’s appraisal no later than expiration of the Inspection Contingency Period in Section 10 of the Agreement, or if the Professional Inspection Addendum (OREF-058) is used, the expiration of the Inspection Period.
- Buyer has liquid and available funds for the earnest money deposit and down payment sufficient to close the transaction. The Buyer is not relying upon any contingent source of funds (e.g., from loans, gifts, sale or closing of other property, 401K disbursements, etc.), unless outlined in the Sale Agreement.
- Buyer authorizes the lender or mortgage broker to provide non-confidential information to the Seller regarding the Buyer’s loan application status.
- Buyer agrees to notify Seller if, after signing this Agreement, Buyer substitutes another Lender for any reason. Buyer is not permitted to select a Loan Program different than the one selected in Section 4B of the Sales Agreement, without Seller’s advance written consent.
- Buyer agrees to keep Seller informed of all other developments regarding Buyer’s financing and the timing of Closing.