"Congratulations, your offer was accepted!" Once you get over the initial excitement the question that is always asked is, "Now what?" While some of the times and events will vary, the following should provide a reasonable understanding of the steps.
The first step in the closing process is to open escrow at a title company. The title company is a neutral party; they do not work for the buyer or the seller. Their job is to execute the terms of the purchase contract. Escrow can be opened by either the buyer's or the seller's agent.
Wire Earnest Money
The title company will send wiring instructions to the buyer's agent for the Earnest Money Deposit (EMD). Within two business days, you must wire the earnest money. Note that the funds MUST be wired; you cannot send a personal check, ACH, a cashier's check, cash, etc. If you do anything other than wire the funds, the title company will not accept the funds and you will breach the contract. Typical cost for a wire is $35. Please get a wire receipt with the wire number. In case the funds are not received by title we can track the funds with the wire number. The wire cut-off time is 2PM; if the funds are wired after 2PM they will not be received by title until the following business day.
Due Diligence Period
The due-diligence period starts on the day the contract is executed and typically runs for 10 days. The due-diligence period is when we have the property inspected by a licensed and experienced inspector. We've used Ron Cooper, Cornerstone Inspections for several years. He has inspected hundreds of properties for us and constantly does an excellent job, The cost of an inspection depends on the size of the property and whether it has a pool. Typical cost for a property without a pool is $300. Here is a sample inspection report. Note that every property has defects. Many do not matter, some are very important. About twice a year a major flaw is found and we require the seller to repair the item(s) or we cancel the contract.
Once we have the inspection report, we will work with service providers to get estimates on any significant repairs. We have standardized costs for most items and will be able to quickly provide a ballpark estimate.
A common question is, "Will the inspector find everything?" No. Inspectors cannot see inside walls or predict what will happen. All they can do is to determine the condition of the home at the time they inspect the home. This means that what works perfectly during the inspection could fail immediately after you own the property. This is why you should always get a home warranty for the first year from a trusted provider. We will cover the home warranty later in the document.
We will immediately send a copy of the purchase contract along with the contact information of the title company to your lender. Your lender will order an appraisal which typically costs about $500. If the appraisal comes back less that the purchase price, section 2.C of the purchase contract becomes very important and is show below:
2.C APPRAISAL: If an appraisal is required as part of this agreement, or requested by Buyer, and if the appraisal is less than the Purchase Price, the transaction will go forward if (1) Buyer, at Buyer's option, elects to pay the difference and purchase the Property for the Purchase Price, or (2) Seller, at Seller's option, elects to adjust the Purchase Price accordingly, such that the Purchase Price is equal to the appraisal. If neither option (1) or (2) is elected, then Parties may renegotiate; if renegotiation is unsuccessful, then either Party may cancel this Agreement upon written notice, in which event the EMD shall be returned to Buyer.
During the closing process your lender will need additional information from you. Providing the lender with what they need on a timely basis is very important.
You will want to get quotes on hazard insurance immediately. The reason is that if there is a problem with insuring the property you want to know it during the due diligence period so the contract can be terminated or the problem corrected. We will send you the information you need on the property in order to obtain a quote. If your insurance agent has additional questions, please have them contact us.
We will order a home warranty plan for you and it will be paid through escrow as a part of your closing costs. We feel that a home warranty covering the first year of ownership is critical. There are many things that can fail in a property which can be quite expensive. We know of only two home warranty companies that deliver good service: HSA and Old Republic. Here are links to the respective companies: HSA and Old republic. With both companies the cost for the upgraded protection plan is approximately $465 for one year. Note that these policies do not cover everything and you may wish to add additional coverage. For example, the refrigerator is not included in the typical plan. So, please read the policy to know what is and what is not covered. For both plans, the typical service fee is $75/call-out.
HOA Disclosure Package
By law, if the property has an HOA (Home Owners Association), you must be provided a disclosure package. HOA's typically take about 10 days to provide the documents. What is likely to matter to you the most is the section on restrictions of use. This section is typically called CC&Rs (Covenants, Conditions & Restrictions). Since we are not lawyers, we cannot review the package for you. However, if we see something that we think you should read, we will let you know.
Preliminary Title Report
Within 10 days of escrow being opened, the title company will issue what is called a Preliminary Title Report. This document lists all the liens, easements, taxes, etc. that are recorded against the property. You do not need to be concerned about liens, the title company is responsible for paying off all liens and issuing you a "clear and marketable title." The reason the title company does this search is to determine whether they will issue title insurance. Title insurance is a form of insurance which insures against financial loss from defects in title (your ownership of the property).
The walk through occurs immediately before close of escrow. The walk through is not a re-inspection. What we will look for is a material alteration of the property. For example, if the property was flooded or burnt, then the property has been materially altered. If the property has been altered, then we will either stop the sale or work with the seller to have funds escrowed for correction of the material alteration.
If you are not present for the walk through, we will video the walk through and send it to you for your review. Also, if you are not present for the walk through, then you will need to sign a walk through waiver document (you waived your right to be present for the walk through).
The closing documents for cash transactions are simple and require no notarization. If the property is financed, then there will be a number of (loan) documents to be signed and notarized. The title company will arrange for a mobile notary to come to you at a time that is convenient for you. Typically, a mobile notary costs $150.
Close of Escrow
Close of escrow means that the title to the property has been transferred to you. This occurs once the title company has received all the needed documents, funds have been received and the deed recorded. Once this occurs, you will receive the keys to the property. Typically, what happens is that we will obtain the keys and work with various service providers to make the property ready. This could be just having the rugs cleaned or a major remodel. It depends on the condition and the purpose of the property.
We are still here after the close. If this is an investment property, we will oversee the market preparation and the hand off to property manager for you. If this is a residence, we can provide referrals for most services that you may need. Also, you will receive a number of "special offers", most of which are cons. Do not send money or sign up with these "services" without contacting us first.
While the closing process for each property is slightly different, the above is a good general description of the processes and events. Please contact us if you have questions or concerns.
Want to know more about investing in Las Vegas real estate? Contact us today. You will be glad you did.
Eric Fernwood, Realtor | 702-358-8884 | EricFernwood@gmail.com
Cleo Li, Realtor | 512-296-0425 | CleoYLi@gmail.com
Vegas International Properties Group (VIP Realty Group)
7570 Norman Rockwell, Suite 140
Las Vegas NV 89143