- The Washington Times - Thursday, June 16, 2005

Hot markets can seem to oversimplify the real estate market. It looks as though houses sell as quickly as they become available. The signs change each hour or day: “For Sale,” “Under Contract,” “Sold.” What’s so hard about that?

It appears that all you have to do is place a sign in the yard, and voila, it sells. You enjoy multiple contracts and high prices, and then run to the bank, laughing insanely.

If it were only so easy. A smooth transaction guided by a professional Realtor is a lot like having an experienced projectionist at the movie theater — you notice him only when something goes wrong.

Drawing a contract in a hot market isn’t as easy as it might sound — at least, not a good contract. That’s what Realtors battle with a lot today: Is this a good offer from a reputable buyer who can actually perform on the contract he has presented?

After the sale, it has to get to settlement. It requires a lot of paperwork and expertise to ensure that each step gets completed, so no one gets sued.

Here are a few items that crop up between “sold”and “settled”:

• Ratify the contract. First, you have to get everyone to sign off on every little item and remove all contingencies as soon as possible. Once all contingencies are removed — financial, inspections, sale of buyer’s old home — your first step toward escrow has occurred.

This step is pretty extensive because of all the required forms: agency disclosure, lead paint disclosure, property disclaimer/disclosure, Real Estate Settlement Procedures Act disclosure, all the dozens of possible addenda.

• Apply for the mortgage. I mention this here only because it’s assumed in most markets that you’re already preapproved — but now you have to turn that lender letter into an actual loan.

m File the documents. The settlement company is going to conduct a title search and make sure everyone gets paid. Your agent couriers all the materials to the settlement agent, who starts a case file and begins checking off who’s going to be at the settlement table and compiling a list of names, addresses and invoices to pay everyone.

• Order all inspections. Inspections for termites, home structure, radon, lead — all may be required, depending on what’s happening in your area. These have to be ordered quickly so that repairs can be completed or addenda can be written to agree who’s going to take care of anything that crops up.

• Get insurance. Set up your insurance with the new property — both hazard and title. The hazard insurance is your homeowner’s insurance policy and must be in place the day you settle. The title insurance is also purchased at the table.

Buyers, be sure to find out how long the policy from your seller has been in place. You may be able to receive a discount if you can transfer the policy instead of purchasing your own.

• Order and supervise repairs. If defects, termites, radon or lead is present, the problems have to be dealt with. Some issues must be corrected according to the contract, others must be fixed because of federal law. Still other problems may not have to be fixed at all if the house is being sold “as is,” or perhaps the buyer agrees not to have it fixed.

You may be in a seller’s market, but that doesn’t mean you’ve relieved yourself from any repair jobs.

• Draft post-contract agreements. There can be pre- or post-settlement occupancy agreements, agreements to take possession of the property before settlement to start contract work on the place, or various other arrangements between buyer and seller.

• Perform the contract. Here’s the hard part. Once the contract is ratified, each step has to be completed: coinciding settlements, seller purchasing a home of choice, drafting a gift letter for the buyer, gaining a third-party approval of the contract, drafting and pulling in all necessary powers of attorney, getting homeowners’ association documents to the purchaser in a timely manner and allowing the prescribed time for the buyer to inspect them.

Scores of items are required by your contract. You or your agent had better be ready to coordinate them appropriately.

M. Anthony Carr has written about real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions or comments to his Web log (https://commonsenserealestate.blogspot.com).


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