The day has come that you’ve found THE house of your dreams and you’re ready to make an offer. So, what comes next?
Your Realtor will prepare a Division of Real Estate approved state purchase contract. The contract will feel overwhelming at first glance so let us break down the facts and the important parts to pay attention to. Every date within the contract is the day by which each item much be completed. They are also dates by which you can terminate the contract while still receiving your earnest money deposit back in full as long as you attempted to, in good faith, fulfill the obligation.
So, what does each deadline mean?
- Acceptance Deadline Date & Time – This is the date that the seller has to accept your offer. One common question we are asked is what happens if this date passes and we don’t hear anything? The answer is simply that the contract expires and no further action needs to be taken unless you’d like to update your offer to extend the acceptance date and time.
- Sellers Property Disclosure Deadline – This is the date which the seller needs to provide you with their Sellers Property Disclosure (and in most cases the Source of Water Addendum and Square Footage Addendum). The SPD document is the seller’s opportunity to tell the buyer the property’s “dirty history” – anything they know about repairs, problems, age of furnace, age of roof, etc.
- Loan Application Date – This is the date by which you must have completed a formal loan application. Our firm’s policy is that we want to make sure you are fully approved for a loan before we take you out and risk you falling in love with a property you might not qualify for. Therefore, when working with us, this will always say “Complete” next to it.
- Inspection Objection & Resolution Deadline – The inspection objection date is the time by which you must complete your formal property inspection if you choose to do one. Most buyers will elect to do a full property inspection (ranging in cost from $350-500) as well as a sewer scope (around $120) and sometimes a radon inspection (around $135). If you find anything unsatisfactory, your broker must put together an inspection objection asking for those items to be replaced or repaired and submit it over to the listing agent by the inspection objection date. The inspection resolution date is the time by which the seller has to send over what their plans are to resolve your inspection requests.
- Title Deadlines – These deadlines all pertain to the title work on the property. It is very important that properties are conveyed through sale with clear title. As a buyer, you have contractual “outs” if you are not satisfied with the way the title documents read and/or any off record title issues disclosed by the seller. (An example of an off record issue would be if the seller agreed to allow their neighbor to cut across the back corner of the property for the next 5 years but no written document was recorded reflecting this).
- Property Insurance Dates – This is the time you must have your property insurance lined up. If you were unable to insure the property, you would reserve the right to terminate the contract by this date. Things to pay attention to for this would be whether or not the property is in a floodplain and in need of flood insurance, etc.
- Association Documents (HOA Documents) – This set of deadlines only pertains to your contract if you are purchasing a property within a Homeowners Association. This is your time to review the governing documents such as covenants and restrictions. This is also an important time to check the HOA’s financials to see how strong the association is and to help you predict any potential “special assessments” (dues charged above and beyond your normal monthly HOA to help pay for a large, typically unforeseen, improvement or repair). We always advise our clients to check the minutes as well to get a feel for how the community is run and what concerns or complaints the neighbors have.
- Survey/ILC Deadline – This pertains to your offer if you are purchasing a property that you need to determine a lot line or boundary. (Not applicable in townhomes, condos). For example, we advise our clients to always get an ILC on acreage properties to make sure they are very clear on their boundary lines. An ILC (Improvement Location Certificate) is not an actual survey but does show where the home and improvements are within the property boundaries. An ILC will run between $250-500 depending on the size of the property and a full blown survey could run upwards of $2000-3000 (but well worth it so you know what you are truly purchasing especially if you are planning to do new construction on a vacant lot).
- Loan Objection – This is your last contractual “out” and can only be used as a means to terminate the contract if you are unable to get your loan or are unsatisfied with the terms of your loan. All of the lenders that our firm works with regularly will almost always have your loan approved far in advance of this deadline with little, to no, surprises. But, should you not be approved for the loan, you can terminate by this deadline and still receive your earnest money deposit back in full.
- Closing Day = You’ve made it! If you are taking possession any other day than the closing day, this will be noted as well. This is not uncommon in our Denver market and if possession is delayed by more than a few days, we generally put together a Post Closing Occupancy Agreement for both parties (more about that document later!).