Contract Signing, Mortgage Application, Appraisal And Approvals
CONTRACT SIGNING
Once due diligence is completed to the buyer’s satisfaction, it will be time to sign the contract and put “contract deposit” in escrow. Contract deposit is typically 10% of the purchase price, though it can be less in rare instances. In New York City, offers are non-binding until both buyer and seller have signed a contract, created and negotiated by their respective attorneys. This means that until the contract is signed, either the buyer or the seller can walk away from the deal without penalty, and the seller can continue to entertain offers from other buyers. For this reason, it is in the best interest of the buyer to sign a contract as quickly as possible, once due diligence is complete.
MORTGAGE APPLICATION
Once the contract is fully executed (signed by both buyer and seller), it will be time for the buyer to submit a mortgage application (if financing). It will be important to note any “mortgage contingency” deadlines outlined in the contract to avoid a potential default. Most buyers have already started the required paperwork with their mortgage banker/broker so they can submit the application quickly once the contract is signed.
APPRAISAL
If the agreement is contingent upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. A buyer of a commercial property may also have a complete environmental audit performed and/or soil test, if required by the lending institution.
UILDING APPROVALS
If the property that you are purchasing is conditional upon approval of a condo or co-op application, it will be important to start working on that application as soon as the contract is fully executed. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, take the time to review possible questions and interview topics with your broker, so you are well-prepared to make a good impression.
