From Offer to Closing: A Simple Process to Purchase Your Next Home
Once you’ve found a property you’d like to make an offer on, it helps to understand what happens between that first offer and the day you finally close on your new home. There are several important steps along the way, and while some details vary based on your location, financing, contract terms, and local practices, the overall process is fairly consistent. Here’s a simple overview of what you can expect.
OFFER
The document commonly called the “purchase agreement,” “offer to purchase,” or simply the “offer” outlines the terms you’re proposing to the seller. In addition to the purchase price, it may include the property address, proposed closing date, financing details, contingencies, and other conditions. Once your offer is presented to the seller, there are generally three possible responses:
- Acceptance
If the seller accepts your offer and the agreement is properly executed, the transaction moves into the next phase. Depending on the contract and local practice, you may be required to provide an earnest money deposit, which will be handled according to the terms of the agreement. Those terms will explain when the deposit may be credited toward your purchase, returned to you, or potentially placed at risk. - Rejection
If the seller rejects your offer, there can be several possible reasons, including:- The offered price or other terms didn’t meet the seller’s expectations;
- The seller preferred different financing or other terms;
- Another offer was stronger overall;
- The seller’s circumstances or priorities changed.
If your offer is rejected, the next step will depend on the situation. You may decide to pursue another opportunity, consider a different approach if circumstances allow, or continue looking for another property.
- Counter-Offer
If the seller is interested but doesn’t want to accept your offer exactly as written, they may respond with a counteroffer. This could involve changes to the price, closing date, contingencies, concessions, or other terms. At that point, you can review the changes and decide whether to accept, reject, or respond with another counteroffer.
You may find some useful information in another article titled “How to Write an Offer That Gets Accepted.” It explains some of the factors that can make an offer more appealing. Once an agreement is reached, any earnest money deposit will be handled according to the purchase agreement and local practice. Whether the funds are ultimately credited toward your purchase, returned, or potentially forfeited depends on the contract, contingencies, deadlines, and circumstances.
CONTINGENCIES
Mortgage
If you’re financing the purchase, the agreement may include a financing contingency outlining certain requirements and deadlines related to your loan. Providing a pre-approval letter with an offer can also help show the seller that you’ve already begun the mortgage process. “Do You Know How to Increase Your Purchase Power?” contains useful information about some of the factors lenders may consider. During this time, it’s also important to avoid unnecessary changes to your financial situation while your loan is being finalized. “Make Sure to Avoid These Before Closing On a Home” explains why. If you’re purchasing without financing, these mortgage-related provisions may not apply.
Home Inspection
A professional home inspection can give you valuable information about the condition of the property and may identify issues that deserve further attention. Depending on the terms of your purchase agreement and what the inspection reveals, you may have options involving repairs, additional evaluation, negotiation, or rights provided by an inspection contingency. The exact options available will depend on your contract and the circumstances.
Appraisal
If you’re obtaining a mortgage, the lender will typically require an appraisal to help determine the property’s value for lending purposes. For more information, you may wish to review “What You Need to Know About Appraisals When Buying a Home“. If the appraised value is below the purchase price, the options available will depend on your contract, financing, and any applicable appraisal provisions.
Title Search & Insurance
A title search is generally completed before closing to identify liens, ownership issues, or other matters that could affect the transfer of clear title. Title insurance may also be part of the transaction depending on local practices and requirements. For more information about choosing companies that may assist during this stage, review “After the Offer: How to Choose Required Services“.
Final Loan Approval and Clear to Close
Once the lender’s requirements have been satisfied, your loan can move toward final approval and a “Clear to Close.” For most mortgages subject to federal disclosure requirements, you’ll receive a Closing Disclosure at least three business days before consummation. This document outlines important loan terms, closing costs, and other transaction details, so review it carefully and ask questions about anything you don’t understand. Read “How Much More Money Will You Need to Close a Home?” for additional information about some of the expenses you may encounter.
CLOSING
Arrange Service Providers
If you’re financing the home, your lender will generally require proof of homeowners insurance before closing. You’ll also want to arrange for utilities and other necessary services to transfer or begin at the appropriate time. To better understand some of the services you may need, review “After the Offer: How to Choose Required Services“.
Final Walk-Through
Shortly before closing, you’ll typically have an opportunity to conduct a final walk-through of the property. This isn’t another home inspection. It’s a chance to confirm that the property is in the condition required by the contract and that any applicable agreed-upon items have been addressed.
Closing
At closing, you’ll complete the required documents and provide any funds due using the method specified by the closing or settlement provider. Exactly when documents are recorded, funds are distributed, and you receive possession or keys varies by location and the terms of your agreement.
There are a lot of moving parts between making an offer and officially owning your new home. Having an experienced real estate professional helping you keep track of deadlines, understand your options, and coordinate with the other parties involved can make the process much easier to navigate. My job is to help you understand what’s happening at each stage so you can move from offer to closing with greater confidence.
IMPORTANT NOTICE: Cybercriminals have become experts at hacking email accounts and sending convincing, sophisticated emails with fake wiring instructions. Never rely solely on wiring instructions sent by email. Always independently confirm wiring instructions using a trusted, verified phone number or another secure method provided by your closing professional. Never wire money until you have verified that the instructions are correct.