Stage 1. Opening a bank account in the USA
An account with an American bank is required only if the property is purchased on credit. If payment will be made by own funds, there is no need to open it.
Stage 2. Preparation of the purchase proposal
As soon as you select the property you like, the realtor will prepare a proposal (purchase) on your behalf. It is a model contract drawn up by state real estate associations. It will indicate all the conditions on which you offer the seller to conclude a transaction.
In the case of a loan, a bank confirmation of loan approval is attached to this proposal. If the buyer plans to pay with his own funds, he is required to provide confirmation of the availability of funds in the bank account.
Stage 3. Signing the contract of sale and making a deposit
If the seller accepts your offer, then a contract (Contract to Purchase Real Estate) is signed, accompanied by a realtor, indicating all the terms of the transaction – the amount of the sale, deposit, terms of sale, the timing of the inspection and evaluation of the object, as well as an indication of the specific date of the transaction.
The obligatory participant in the transaction is a specialized agency, the so-called title company (Title Company), and an escrow (Escrow Company) or a buyer’s lawyer registering the transaction (Closing Attorney). They carry out legal control of the entire transaction, verification and certification of documents.
Some points of the contract should pay special attention:
- Home inspection clause
- The contract should contain a mandatory inspection clause, which indicates a certain period of time (usually within 10 days) for its conduct by a third party. The purpose of the inspection is to ensure that there are no hidden problems with real estate. The seller must provide the buyer and the inspector with free access to the facility for these purposes. Buyer agrees to pay for inspection. In most cases, the duration of the procedure is 10 days.
- Force majeure circumstances on a mortgage (Loan Contingency Clause)
- This clause usually indicates that if the buyer has applied for a mortgage loan, but received a refusal, he has the right to refuse the transaction. Often, at the same time, he is allowed to regain the deposit without further obligations to acquire the object.
- Additional costs (Closing costs)
- It is written here who exactly pays for the preparation of the contract, insurance and storage of funds in the account of an independent company (escro). These conditions can vary significantly depending on the facility. Most often, all additional costs are borne by the buyer. But it also happens that some of them are borne by the seller. The contract should clearly indicate all types of expenses, and who will pay for them.
- As a guarantee of the fulfillment of obligations, the buyer makes a deposit to the account of an independent company (escro). Storage of the deposit is carried out by the title company or agency having the exclusive right to sell the object. Subsequently, it is taken into account in the final calculation.
- Usually the minimum deposit is 3.5% of the value of the object, but experts recommend offering a larger amount. The larger the deposit, the more likely it is that your offer will be chosen by the seller among others. A deposit is a confirmation of the seriousness of your purchase intentions.
In the event that the seller or buyer does not fulfill their obligations, the contract may be terminated. This can happen in the following situations:
- The buyer did not make a deposit on time.
- The buyer or seller cancels the transaction in the absence of force majeure.
- The seller does not perform the work prescribed in the contract on the object.
- The seller prevents access to the facility for inspection or final inspection.
- The seller does not vacate the premises on time.
Upon termination of the contract, the deposit is returned to the buyer.
Documents for concluding a contract of sale:
- A copy of the internal passport;
- Copy of a foreign passport;
- Valid US visa.
Stage 4. Real estate inspection and its additional assessment
Making a deal takes an average of 30 to 60 days. At this time, the property is inspected by a licensed specialist (Physical Inspection). Its task is to identify all the shortcomings and provide the buyer with a written report for the fee. Based on the inspection results, the buyer can refuse the transaction if the identified deficiencies are critical, or agree with the seller about a discount.
Inspection is not required, but recommended. The cost depends on the complexity of the object. So, for a small apartment or house with an area of about 140 square meters. m will have to pay $ 300-500.
The specialist will determine the structural defects of the building, check the condition of the plumbing, communications, electrical wiring. Experts advise an inspection for termites and other wood-boring insects, as well as for the presence of gas (radon), lead-containing paint and the presence of various types of mold.
Also at this stage, an independent expert evaluates the market value of the property for a fee from the buyer. This is necessary if you are taking a mortgage in the USA. The bank will refuse a loan if the estimated value of the property is lower than the selling price.
A mortgage loan is being processed at the same time if you attract bank financing.
Stage 5. Legal due diligence
After signing the contract of sale, the legal registration of real estate ownership (Title Search) is checked. The essence of the procedure is to identify whether the sale of this property is possible, for example, whether the current owners have outstanding mortgage obligations, whether there are any other collateral, etc. This is the buyer’s lawyer or escro.
The cost of verification is included in the total cost of closing the transaction. At the same time, a compulsory real estate insurance contract is drawn up. This procedure is undertaken by the title company, it then gives the buyer an insurance policy for the title to real estate (Title insurance).
Step 6. Registration of a new owner
At the time of receipt of full payment to the title company or to the account of the lawyer responsible for closing the transaction, the buyer receives a document of ownership of the property – the so-called did (deed).
However, in many states, ownership is transferred to the buyer only after the deed has registered with the county court or special registration chamber. In this case, the title company submits this document to the clerk of the district court, after which he returns the registered dido to the buyer.
Registration of ownership takes six to 10 weeks.
Stage 7. Payment of the transaction
The buyer transfers the principal amount at the closing of the transaction, that is, when it is granted ownership of the property. Then all additional costs, including taxes, are paid.
Funds can be transferred by bank transfer to the account of the lawyer conducting the transaction, or to a special account of an independent company (escro). In some Russian banks to carry out this operation, you will need to present a contract to buy a house.