20 Oct What Happens Between Accepting an Offer and Closing in Pennsylvania
Once you and the buyer sign the agreement of sale, the time before settlement is spent clearing the conditions in that agreement. The buyer’s deposit goes into escrow, the buyer’s inspections and loan move forward, the title is searched, and any municipal or association paperwork gets ordered. At settlement, you sign the deed, the settlement company collects the transfer tax, your mortgage is paid off, and you receive what’s left.
Here is each step, what it depends on, and what can hold it up.
What does the agreement of sale set?
The agreement of sale is the schedule for everything that follows. Under Pennsylvania’s rules for real estate brokers, an agreement of sale has to include, among other things, the sale price and the dates for payment and settlement.
If the sale depends on the buyer getting a mortgage, the agreement also has to state the type of loan, the loan amount, the maximum interest rate, the minimum term, the deadline for the buyer to get the loan, and what help the broker will give the buyer in getting it.
Read your agreement for the other terms that shape the timeline, such as how long the buyer has for inspections, how the transfer tax is split, what stays with the house, and when the buyer gets possession. Keep a copy where you can find it, and mark the deadlines on a calendar.
What happens to the buyer’s deposit?
Your agreement says who holds it. When a broker holds it, the broker must deposit it into an escrow account by the end of the next business day after it’s received at the broker’s office. If the deposit came as a check with the offer and both sides agreed in writing, the broker can hold the check until you accept, then must deposit it within one business day of your acceptance.
The money stays in escrow until settlement, or until the agreement ends without a dispute. If you and the buyer disagree about who should get it, the broker must keep holding it until the dispute is resolved. If the dispute looks unlikely to end without legal action, the broker can ask the county court to decide, after giving both sides 30 days’ notice.
What do the buyer’s inspections involve?
If your agreement gives the buyer the right to inspect, the inspection period starts on the schedule the agreement sets. The buyer may hire a home inspector and other specialists. What the buyer can do with the results, and how long you have to respond, are set by your agreement.
Unless your sale is exempt, you had to give the buyer a signed and dated Seller’s Property Disclosure Statement before the agreement was signed. If something on it stops being accurate before settlement, you have to tell the buyer. We explain the form, and the separate lead-based paint rules for houses built before 1978, in The Pennsylvania Seller’s Property Disclosure Statement, Explained.
What does the buyer’s lender need?
If the buyer is financing, the lender will review the buyer’s application and the property. That review can include an appraisal of the house. The agreement sets a deadline for the buyer to get the loan. Check it for what happens if that deadline passes.
Near the end, if the buyer’s loan is a consumer mortgage, federal rules require the lender to make sure the buyer receives the Closing Disclosure at least three business days before the loan closes. The Closing Disclosure is a five-page form with the final loan terms and closing costs. For this rule, every day counts as a business day except Sundays and federal public holidays.
Some late changes start a new three-business-day wait: the annual percentage rate (the loan’s yearly cost, including certain fees) changing by more than the rule allows, a change to a different loan product (for example, from a fixed rate to an adjustable rate), or a prepayment penalty (a fee for paying the loan off early) being added. Other changes need a corrected Closing Disclosure at or before closing, without a new wait. That’s one reason a settlement date can move even when everything on your side is ready.
What happens with the title?
The settlement company handling your sale searches the property’s records for anything that has to be cleared before the buyer can take title, such as mortgages, home equity lines, liens and judgments. It also asks your lender for a payoff figure, so your mortgage can be paid off at settlement.
If you have a home equity line of credit, or you know of a lien or judgment against the property, tell the settlement company early. Clearing those can take time.
Does your municipality need to inspect?
Some municipalities require a use and occupancy inspection or certificate before a property changes hands. Bridgeport Borough, for example, requires a Use & Occupancy Permit for any resale of a property, whether residential, commercial or institutional. Ask your municipality what it requires before you list, or at the latest as soon as you have a signed agreement.
Pennsylvania’s Municipal Code and Ordinance Compliance Act sets which certificate a municipality that requires one must issue after the inspection:
- A use and occupancy certificate, if the inspection finds no violations.
- A temporary use and occupancy certificate, if it finds violations but none that make the property unfit to live in. The buyer can move in while correcting them.
- A temporary access certificate, if it finds at least one violation that makes the property unfit to live in. The buyer can go in to make repairs but can’t move in yet.
The buyer then has 12 months from the date of purchase to correct the violations. At the new owner’s request, the municipality may allow more time, but it can’t shorten the 12 months. A municipality can’t require money in escrow, a bond or similar security as a condition of issuing a certificate.
Who pays for the repairs is a matter for you and the buyer to settle in your agreement. Knowing what the inspection found, and when, gives you time to decide.
What if your home is in a condominium or planned community?
Unless your sale or your association falls under one of the law’s exceptions, you have to give the buyer the association’s resale certificate and a copy of its declaration, bylaws and rules. The association has ten days after your request to provide the certificate. The buyer can cancel the agreement until five days after receiving the certificate, or until settlement if that comes first. Order it as soon as you decide to sell, so it doesn’t hold up settlement.
What happens at settlement?
At settlement, you sign the deed and the settlement documents. The settlement company then:
- Collects the realty transfer tax, each side’s share as your agreement splits it, and pays it when the deed is recorded. We cover the split in Who Pays the Transfer Tax When You Sell a House in Pennsylvania.
- Pays off your mortgage, any home equity line and any liens.
- Applies the prorations (items such as property taxes split by date), credits and charges on your settlement statement.
- Pays you the balance.
The buyer gets the keys when your agreement says possession transfers. Ask the settlement company for your settlement statement before settlement day, and check it line by line against your agreements. For what each line can include, see What It Costs to Sell a House in the Philadelphia Suburbs.
What can delay settlement?
- Financing. An appraisal question, a missed loan deadline, or a change that restarts the three-business-day Closing Disclosure wait.
- Title. An old mortgage that wasn’t released, a judgment, or a lien that has to be paid or cleared.
- The municipality. A use and occupancy inspection that wasn’t scheduled early enough.
- The association. A resale certificate ordered late.
- Agreed repairs. Work you agreed to do that isn’t finished, or isn’t documented.
These are easier to prevent than to fix. Start the municipal and association requests early, and answer the settlement company’s questions quickly.
Frequently asked questions
Can the buyer back out after the agreement of sale is signed?
Only as your agreement or the law allows, for example under a contingency that hasn’t been satisfied, or under the resale certificate rule for a condominium or planned community. The terms are in your agreement of sale; ask a real estate attorney if you’re unsure what yours allow.
Who holds the buyer’s deposit?
Whoever your agreement names. When a broker holds it, the money stays in the broker’s escrow account until settlement or until the agreement ends without a dispute. If there’s a dispute, the broker keeps holding it until the dispute is resolved.
What is a Closing Disclosure?
It’s a five-page form from the buyer’s lender showing the final loan terms and closing costs. For a consumer mortgage, the lender has to make sure the buyer receives it at least three business days before the loan closes.
How long does it take to get from an accepted offer to settlement?
Your agreement sets the settlement date, and each step above has to fit before that date. If a step runs late, you and the buyer can agree to move it.
Thinking about selling?
The time between accepting an offer and settlement is easier to manage when the deadlines are on a calendar and the paperwork is ordered early. If you’re thinking about selling in Philadelphia or the Philadelphia suburbs, we’ll walk you through each step and build a net sheet for your house, an estimate of what you’d take home after costs. Any value range we give you is a broker price opinion, and a broker price opinion is not an appraisal. Contact Plus Realtors and tell us where your home is.