Over the next 12 weeks, this blog will focus in on the many parts of purchasing a home. We know that purchasing a home—whether it be your first or your fifteenth—can be stressful and confusing.
But it doesn’t have to be! We help people buy homes all the time! This series explores and explains the typical roadmap to purchasing a home. Some steps are more cumbersome than others, but if you know what to expect you won’t be taken off guard if (and when!) complications arise!
For the fifth part of this series, we'll be looking at what happens once a contract “goes binding.” What does “binding” mean? What are your responsibilities? How much longer will it be before my home closes??. All of those important questions. Read on!
Once you’ve submitted an offer on your home (see our previous blog post for more on submitting offers), the next 1-2 weeks are both the most important AND most hectic of your home buying process.
An offer goes “binding” when
- both the seller and buyer agree on the offer price submitted
- both the seller and buyer agree on the the terms of the deal and all contingencies
- the contract is signed and sealed
- something of value is exchanged
Once everyone’s in agreement, a number of important timelines begin. Since you’re under a deadline at that point, be sure to have all necessary paperwork ready to go. Having your hands on these important documents is necessary if you want to avoid delays.
Besides the kickoff of all these timelines, earnest money is also due at this time. Earnest money is that “something of value” from the list above. Earnest money, as discussed previously in this series, ensures that the buyer is serious about purchasing the home. However, sending earnest money is more than an act of goodwill, as the earnest money also goes toward the buyer’s closing costs and/or purchase price of the home at closing.
Feel free to read the entirety of your contract. It is your future home, after all. Our agents are trained to write comprehensive, watertight contracts, but we’re still human, and it’s generally a good idea to closely read all important legal documents. After signing, you’re contractually obligated to comply with the terms of the deal, so if something seems fishy, let your agent know ASAP.
Another important element to take note of is your contract’s date of expiration. Real estate contracts tend to be extremely time-sensitive. As a result, most—if not all—of the legal documentation you’ll be signing is also going to be tied to a hard-and-fast date by which the contract will be fully executed or will default. Be sure you’ve got those dates saved in your calendar, and our transaction coordinator will be sure to let you know when your contract is approaching expiration.
Finally, familiarize yourself with the ramifications of default. I’s never fun, but it happens. For whatever reason, your deal may fall through. Assuming that the seller defaulted, a common protection is that the seller will give back the earnest money to the buyer. Similarly, if for some reason the buyer defaults, what usually happens is that the buyer forfeits their earnest money. But, of course, the ramifications of default vary by the specifics of your deal.
If you’ve just gone binding, then congratulations! You’re on your way to closing on your home. There’s still a long road ahead, but with the right agent and preparedness, you’ll find it a breeze.
Next time, we’ll discuss due diligence—that exciting period of time during which we do fun things like… scheduling inspections!… writing amendments!… and much, much more! Until next week, or if you have concerns or questions that we didn’t touch on in this post, give us a call!
The Better Buyer Series
- Searching for a Home
- Costs Associated with Buying a Home
- Putting an Offer on a Home
- Binding Contracts
- Due Diligence
- Finance Contingency Period
- Things to Remember (Credit Bureau Scoring, Making the Mortgage Process Easier, etc)