You’ve made your offer, and the seller has accepted — you’ve reached mutual acceptance. But what comes next, and what do you have to do to close the deal on your home? Here’s how it works, in the broad strokes:
- Mutual acceptance: Mutual acceptance is the point at which the buyer and seller agree on the price and terms of a deal, as laid out in a Purchase and Sale agreement. Once both parties sign this contract, they’re officially at mutual acceptance.
- Earnest money: Once the buyer and seller reach mutual acceptance, the buyer’s next step is usually to deposit an earnest money check. This check will be held by a neutral third party — either an attorney or an escrow company, depending on state law.
- Seller disclosure: Depending on state law, the buyer may get a disclosure from the seller that lists any known problems with the property. This disclosure usually arrives shortly before or after mutual acceptance. This varies by location, but the typical disclosure form may include information on:
- Structural, electrical, or plumbing issues
- Hazards such as lead paint, radon, asbestos, and toxic mold
- Pests or wood-destroying insects
- Flood or wildfire danger
- Toxins in the local soil or water
- Water rights (in dry or desert climates)
What happens if the seller fails to disclose an issue?
It depends on state and local law. If the omission was the result of a simple mistake or lack of awareness of the issue, the seller is often not held liable. However, if the buyer can prove that the seller purposefully and/or maliciously failed to notify the buyer of a known issue, the buyer may be able to sue for damages. If the seller’s real estate agent was aware of the issue at the time of the sale, he may also be liable for damages.
- Title: While you’re talking to lenders and scheduling inspections, your attorney or title company will be reviewing the ownership history of the home. They’ll check the home’s title for liens, encroachments, and easements.
- Inspection: In the days immediately following mutual acceptance, the buyer should schedule a professional inspection of the home. A home inspector will carefully examine the home for electrical, plumbing, safety, and structural issues. As soon as the seller has accepted the buyer’s offer, the buyer will usually arrange for an inspector to come out to the home and examine it for problems, defects, and safety issues. The inspection will give you an accurate picture of the home’s condition. The inspector will examine the exterior and interior of the home, checking the condition of electrical, plumbing, ventilation, structural, and finish elements throughout, as well as the condition of appliances that will be transferred to the buyer at the time of purchase. An inspection generally takes a few hours, and at the end of the process, the inspector will provide the buyer with a report of all the issues discovered during the inspection.
Also, most purchase and sale agreements include an inspection contingency. This gives the buyer the right to use the results of the inspection to negotiate with the seller to cover the cost of repairs, or to back out of the deal altogether. Under the terms of most inspection contingencies, the buyer has the right to back out of the purchase and reclaim their earnest money after reading the inspection report.