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The "Bare-Bones" of a Home Sale Transaction.

 Most recently, my long-time and beloved next-door neighbors shared with me their opinion that my articles should “speak to the people, not the lawyers.”  Thus, this article will deal with a subject many of “the people” (including lawyers) have been, or will become, involved in -- the sale of a home.  To keep you and my neighbors reading, I have strived to provide only a “bare-bones” description of a typical home sale transaction leading up to a closing.  While every deal is unique, the following applies to most.


The Players:


·        Seller – owner of the home for sale.

·        Listing Agent – licensed real estate professional contracted by the Seller to list, advertise and show the home to other agents and/or prospective buyers.

·        Buyer – someone interested and capable of purchasing the Seller’s home.

·        Buyer’s Agent – licensed real estate professional who assists a Buyer in locating and contracting for new home.

·        Seller’s Counsel – attorney retained to represent and protect Seller’s interests relating to the sale of the home.

·        Buyer’s Counsel - attorney retained to represent and protect Buyer’s interests relating to the acquisition of the home.


The Paper:


·        Listing Agreement - contract between the Seller and the Listing Agent setting forth the terms of their relationship, including certain performance obligations expected of the Listing Agent, and the manner in which the Listing Agent shall be compensated.  The duration of the Listing Agreement is usually 6 months and the compensation is usually a percentage of the sales price, typically ranging from 5% – 6%.  If a Buyer’s Agent represents the Buyer, this compensation is split between both Agents.

·        Contract of Sale – contract negotiated between the Seller and Buyer, usually through their respective Agents, setting forth the terms under which title to the property will be conveyed. (i.e. price, timing, contingencies, etc.) 

·        Inspection Report – prepared by a certified home inspection company retained by the Buyer after the conclusion of the attorney review period to ensure the condition of the home is acceptable and free from latent defects.  Typically, the inspection report must be prepared within 20-30 days of the conclusion of the attorney review period to preserve the Buyer’s right to demand that the Seller make certain repairs.

·        Appraisal Report – report compiled for the Buyer (and Buyer’s lender), setting forth the current appraised value of the property to ensure that the purchase price represents the “fair market value” and that the Buyer is not over-paying for the property.

·        Title Work – compilation of documents and other information relating to the property and the Seller and Buyer.  Obtained by the Buyer (and Buyer’s title insurance company) to ensure title to the property is free from any claims or defects, such as a lien or other encumbrance, not known or disclosed by the Seller.

·        Survey – map of the property obtained by the Buyer depicting the precise location of the property lines and any structures thereon, together with a “metes and bounds” description of the property.


The Process:


·        Attorney Review Period – within three (3) days of executing the Contract of Sale, Seller’s Counsel and Buyer’s Counsel must review the Contract for Sale and either approve or disapprove of its terms and conditions.  This is known as the “attorney review period”. At the conclusion of the attorney review period, the Contract of Sale is binding upon both parties. In many cases, either Counsel will send a letter to the other disapproving of the Contract of Sale. This simply keeps the attorney review period from expiring so that the attorneys have sufficient time to review the Contract of Sale.

·        Post Attorney Review Action – after the attorney review period has concluded, the Buyer should immediately (i) retain a certified inspection company; (ii) complete its mortgage loan application process (this will include the retention of an appraisal company by the lender); and (iii) engage a title insurance agency.

·        Contract Contingency Period – typical Contract of Sale contingencies include, but are not limited to: (i) mortgage contingency (i.e. Buyer needs to get a loan to complete the transaction); and (ii) house-sale contingency (i.e. Buyer needs to sell its current home before purchasing the property). Usually, a time limit is put upon these contingencies, after which the contingencies are deemed waived or the Contract of Sale can be terminated.  Also, while not technically a contingency, a Contract of Sale typically provides the Buyer with a “right to inspection clause” (i.e. right to inspect the home and demand certain defects be repaired prior to closing).  If the inspection uncovers defects that the Seller, after demand by the Buyer, fails or refuses to correct, the Buyer may terminate the Contract of Sale.

·        Post Contingency Action – after all contingencies have been satisfied, the Buyer should immediately (i) retain a surveyor; (ii) ensure all mortgage commitment requirements are satisfied; (iii) ensure the balance of funds necessary for closing, including closing costs, are immediately available; and (iv) schedule a walk-through of the property immediately prior to the agreed upon closing date/time.  The Seller, meanwhile, should (i) ensure all agreed upon repairs to the home have been made; (ii) arrange for moving and cleaning services prior to the walk-through; (iii) ensure that utilities to the property have been transferred to the Buyer on the day of closing; and (iv) have all keys, codes, openers, etc. ready to turn over to the Buyer at the closing.


Believe it or not, the above represents only a snapshot of the typical, uncomplicated, home sale transaction leading up to closing.  I tried to avoid boring you, “the people”,  with discussion about the several documents drafted and exchanged between the attorneys, such as the Deed, Affidavit of Title, Seller’s Residency Certificate, HUD-1 Closing Statement, etc.  In addition, the survey, certificate of occupancy and title insurance policy must be issued and numerous mortgage loan-closing documents must be finalized and executed.  Competent counsel is critical to guide you through the process and will make your move as easy as possible.  Whether you are a Seller or a Buyer, Kelly Law, P.C., is ready, willing and able to protect your interests and close your deal -- even yours, my friendly neighbors…