The exact process of a real estate transaction can vary across the U.S. There's no singular list of typical steps for the progression from contract to closing. In fact, some closing steps even vary among different North Carolina counties.
Most parts of the closing process are common statewide, however, especially laws regarding disclosures and contingencies. Learn more about the closing process in North Carolina.
- Contingencies are requirements that need to be met for a home purchase to close.
- North Carolina requires most sellers to furnish a residential property disclosure to buyers.
- In North Carolina, attorneys handle title searches, title insurance, and closing.
The Offer to Purchase Contract
Most residential sales contracts are presented to sellers by real estate agents who use standard forms provided by the North Carolina Association of Realtors. These forms were developed by attorneys and they comply with state laws.
Some homebuyers sometimes ask their attorneys to draft offers for them, and this is acceptable.
Home inspections usually take place after all parties accept the contract. The buyer typically pays the cost of inspections.
Contingencies for basic home inspections and pest inspections are part of the main body of the contract. Dates are inserted to indicate when buyers will complete inspections and when requests for repairs, if any, will be sent to the seller.
Contract contingencies for some types of inspections, such as those for septic systems and radon levels, can be added by including a special addendum to the offer.
Virtually every contract includes at least one or two contingencies, and sometimes several more. Contingencies are conditions that must be fulfilled for the home sale to close. A deal probably will not close should the buyer, seller, or the property fail or neglect to perform in one of these designated areas. Either party can back out without a financial penalty.
In addition to inspection contingencies, other standard contingencies include financing provisions, such as the seller getting a mortgage. They can cover a description of items to remain in the home or be removed and clarification of homeowners association dues.
Contingencies are removed or lifted as each one is met by the required deadlines. Inspection contingencies are typically covered by a due diligence period in North Carolina during which the buyer and seller can negotiate a solution if the property fails one or more inspections.
Many other contingencies, such as appraisal requirements, buyer possession before closing, and seller-financing, are typically included in a special addendum to the offer.
Residential Property Disclosure
North Carolina law requires that most sellers furnish a residential property disclosure to buyers describing the condition of all systems in the home. Disclosures should cover certain material facts and major defects. In other words, if there are significant issues with the home, they should be detailed in the disclosure.
Buyers in some regions, especially rural areas, usually pay for surveys, but they sometimes ask the seller to share the cost.
Most local lenders don't require surveys.
Other Steps in the Closing Process
Attorneys do title searches, acquire title insurance for buyers, and handle the closing transaction. They work together with real estate agents and lenders to coordinate the closing, ensuring everything is handled on time.
Attorneys also typically prepare deeds for sellers.
Buyers and sellers can hire their attorneys of choice. Each should work with different attorneys so they have someone representing their own best interests if a problem should arise requiring negotiation.
Typical Homebuyer Expenses
Some expenses of closing are commonly paid for by the homebuyer, including:
- Home inspections
- A share of yearly property taxes, property association dues, and other similar fees prorated to the closing date
- Attorney fees for a title search
- Fees for title insurance policies, hazard insurance for a year, down payment and lender fees, flood zone certification fees
- The fees to record the new deed
- Funds to open lender escrow accounts for property taxes and insurance that will be paid by the lender the following year
Typical Seller Expenses
Expenses typically paid by the seller include:
- Attorney fees for deed preparation
- Tax stamps, which are an excise tax based on sales price
- A prorated share of property taxes, property association dues, other similar fees
- Real estate commission if agents or brokers are involved
- Fees associated with loan payoff or transferring funds into a checking account
- Any costs the seller agrees to pay for or share with the buyer
A Typical Step-by-Step Path to Closing
- The buyer makes an offer.
- Real estate agents facilitate any negotiations.
- The seller accepts the offer or issues a counter to the buyer, which may then be accepted.
- The buyer's earnest money, also known as the good faith deposit, is placed in the listing broker's escrow account.
- The lender orders an appraisal.
- Inspections are ordered after an acceptable appraisal is received.
- Any repair requests are negotiated with the seller, but sellers don't have to comply.
- A termite inspection is ordered and must be completed within 30 days of closing.
- Surveys are ordered after a successful appraisal and inspections. Buyers don't want to invest too much into the property until they're sure it will close.
- The buyer applies for hazard insurance and the information goes to the lender and the closing attorney.
- Buyers arrange for the utilities to be switched over to their names as the closing date nears.
- Closing takes place at the office of the buyer's attorney. The seller's attorney has forwarded signed deeds to the buyer's attorney. Closing is normally handled or overseen by an escrow/settlement agent, who is generally an attorney or a representative of the title company.
- The buyer gives their attorney certified funds to pay for closing and signs the loan papers and other required documents.
- The buyer's attorney records the new deed at the courthouse.
- The escrow/settlement agent will disburse the funds to pay off any existing mortgage or other liens and cover all closing costs. The agent will then provide the balance of the funds to the seller.