Let’s start with the Purchase Agreement for a home. Agreements for the purchase of real estate in Berks County, PA are aptly named because they are endorsed by both the home seller and buyer who agree on price, terms and conditions.
Price is easy to understand but real estate agents in Berks County know the devil is in the details. Things like the settlement date, escrow deposits, financing contingencies and home inspection contingencies play a huge role.
So here is a different answer to the question posed…”When all the terms and Conditions of the Agreement Have Been met”.
So when does this take place? It depends on the terms and conditions. Home inspection contingencies allow the buyer to void the Agreement at their discretion during a time period agreed to by the parties. In many cases this is 15 days. Sellers often think that if buyer finds an issue with the home that needs repair or remediation they will have the right to fix it and keep the Agreement valid. Not so. That is one option the buyer has but not the only option. The buyer has the option to call it quits, period.
The next condition common to most Agreements is the buyers home financing. This one gets interesting. Mortgage Lending institutions loan money to prospective buyers. The Lenders interest is to make money on their investment and protect themselves against loss. Most understand that the buyer needs to be qualified but fail to understand that the home has to qualify as well. Home qualification is done by the Lender sending an Appraiser to the home to investigate the value of the investment. This appraisal is paid for by the buyer but is the property of the Lender. Most Lenders now supply a copy of the appraisal to the buyer.
In many cases there is also a home appraisal contingency in the Agreement as well. The financing contingency can last weeks or months, depending on what is agreed by the parties. This means we still do not have a SOLD home.
The agreed upon day comes and the buyers Lender issues a Mortgage Commitment. It has conditions like buyer must obtain flood insurance, receipt of buyers bank records, etc…the last statement on the conditioned commitment may say the following “The Lender has the Right to Decline the Buyers Funding at the Lenders Discretion”. What the lender is saying is that they need more information on the Buyer and if something happens that they do not like they can decline the loan until the time of settlement.
Do we have a SOLD home yet?
While all this is taking place families are planning the move. Most settlements in Berks County take place the same day the seller gives the buyer occupancy of the home. This means that you, the seller, could have all your things in the moving truck and on your way to the next home you are buying. You are at settlement and something goes wrong. The funding for the buyer is an issue and the Lender cannot disburse funds. Not a favorable position. The opposite scenario can happen to a buyer when the seller cannot be out of their home due to some circumstance beyond their control.
Some solutions…Settlement in Escrow. This is not often done in Berks County but is available. It means you have a settlement date and a separate occupancy date. Pennsylvania is one of 33 States in the US that allow this.
Allow home showings under the Active-O category. This means your home can have a conditioned purchase Agreement with a buyer and still show your home to prospects. This allows for a plan “B” buyer. In some purchase scenarios I will use this as an option until the buyer agrees to make the escrow deposit non-refundable. This means all conditions are removed and if the buyer does not show up for settlement the seller keeps the escrow deposit. This does not mean the home is sold but it does compensate the seller. So be sure and ask for a decent deposit.
The best solution is to have a Real Estate Agent who has a plan that serves your interests and makes you aware of the options that exist. This option will give you a better idea of when your home is really SOLD!
Knowledge is Power!
Jeffrey C. Hogue
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