What’s involved in the co-ownership closing process?
Your co-buy group is preapproved for mortgages, you’ve agreed on the perfect home, and your offer is accepted. Now what?
Getting your offer accepted is one of the most exciting moments in the co-buying process. It’s also when things turn much more serious. There’s lots to keep track of, multiple parties involved, and dates to coordinate.
Let’s take a closer look at the post-offer approval process when you co-buy real estate, so you know exactly what to expect. This process typically takes about 4-6 weeks, though it could take longer given there are so many moving parts.
Here’s a rundown of what you can expect after your offer is accepted:
1. The contract is ratified
The terms have been agreed up by all parties but it’s not yet fully executed, signed, and delivered.
2. Transfer initial deposit
After your offer is accepted, you’ll need to transfer an initial deposit. This is typically 3% of the home purchase price.
3. Contingency removal date
This is the date defined in the offer when the co-buy group will remove all contingencies and commit to a firm intent to close escrow
4. Choose a lender
Your mortgage lender will play a huge role in closing on your home, so make sure you choose one with a proven track record
5. Home appraisal
A home appraisal determines the fair market value of the home, ensuring your group is paying a fair price for the property. Appraisals can take anywhere from a few days to a week depending on the complexity of the property.
6. Lock-in interest rate
Mortgage rates are constantly moving. In 2022, this step is especially important, as mortgage rates will continue to rise. A mortgage rate lock freezes your interest rate until the loan closes.
7. Insuring your home
Homeowners insurance isn’t a luxury; it’s a necessity. Now is the time to shop around for a policy, as proof will be required on closing day.
8. Shopping for flood insurance
If you wait until a hurricane or major storm, it’ll be too late. Homeowners' insurance policies don’t cover floods or storm surges, which is why you’ll want to shop around for flood insurance early in the process.
9. The lender sends co-buy group closing documents
At least three days before closing, the mortgage lender sends their loan documents to your group of friends for review. It’ll include loan terms, monthly payments, fees, and closing costs.
10. Co-buyers sign closing documents
After carefully reviewing all documents, the group will sign the closing documents. The mortgage lender then sends these loan documents to the title company.
11. Estimated Settlement Statement
The title company then sends the Estimated Settlement Statement, which lists all of the costs and credits associated with the property purchase for review to the buyer and the buyer’s realtor.
12. Final buyer walkthrough
The buyers will have a final opportunity to inspect the house before the official closing. It’ll allow you to go room by room and ensure the seller has made any repairs they promised, if applicable, and that there are no new issues.
13. Buyers sign loan documents and title paperwork
All co-buyers will need to sign the loan documents and title paperwork in the presence of a notary signing agent. An appointment is required for this. A notary signing agent is integral to the process to ensure the proceedings are free from fraud and duress.
14. Paying the balance of the down payment
The buyers will bring a cashier’s check or wire funds to the title company for the remainder of the down payment.
15. The seller ends utilities
The current occupant, the seller, will remove their name from all utilities and request a final meter reading.
16. Co-buyers set up utilities
Now it’s time for you and your friends to request local utilities in your name for the property, effective on the closing date.
17. Change address
Unless the home is a second property or vacation home, it’s time for you and your friends to register your new address with the US Postal Service. The process is quick and can be completed online.
18. Escrow closing
An escrow closing is the culmination of a real estate transaction. It signifies the legal transfer of the title from the seller to the buyers. The length of the escrow is determined by the terms of the agreement and can range from a few days to several months. We often see 30 days.
19. MLS status changes to sold
The listing is considered sold and the property is no longer on the market.
20. Keys in hand
Now, your realtor will get keys to the property. Your group will receive one key. You’ll likely want to change the locks and then get a few extra copies of the key made at a hardware store.
21. Recorded deed
Your group will receive an electronic copy of the recorded deed from the title company, and 25-45 days from close, the County will send the recorded Grand Deed to you via mail.
Getting through the co-buying process is a journey—but it’s a journey well worth taking. While the first time through the co-buy journey may be a bit scary, you’ll realize it wasn’t quite so bad after all.
Now it’s time to kick back with some glasses of bubbly. Congratulations! 🥂
Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market. While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.