Local Practices

The Offer

An offer to purchase is written by the Buyer’s Agent and then presented to the Seller’s Agent. The offer includes, but is not limited to price, financing and inspection contingencies, closing date and other terms specific to the needs of the prospective Buyer; it is accompanied by an earnest money deposit which is refunded to the Buyer if the offer is not accepted. In addition most offers are accompanied by a pre-approval letter from a Rhode Island lender.

When the offer is accepted, either the Buyer’s or Seller’s Agent quickly prepares a Purchase and Sales Agreement (P&S), which is frequently reviewed by attorneys for both the Buyer and the Seller. That contract is generally signed by both parties within 48 hours of the acceptance of the offer.

The Deposit

The signed P&S is accompanied by a deposit which by custom is 5% of the purchase price, but that amount is negotiable. The deposit may be a combination of personal and bank checks. In most cases, it is held in an escrow account by the Listing Broker until closing of the sale.

The Closing

The closing is handled by an attorney. Some banks reserve the right to name the closing attorney of their choice. Some buyers and sellers have their own attorneys present as well. Responsibilities of the closing attorney include handling the mortgage insurance, if applicable, and handling and computing the closing statement, including all adjustments.

Financing contingencies

Financing contingencies are often used. The purchaser makes a good faith loan application, within 5 days of signing the P&S and if a financing commitment cannot be obtained within a specified time, 3 or so weeks is average, the contract is declared void and the deposit is returned to the Buyer.

The Mortgage

The two main sources of mortgages are traditional banks and mortgage companies. Using a Rhode Island lender is highly recommended.

Inspections

The Purchase Agreement is very often contingent upon the satisfactory completion of some of the following inspections: termite and wood boring insect, radon, lead, septic, structural and mechanical.

Sale of Other Property

Occasionally an offer to purchase is contingent upon the sale of another property. When this contingency is accepted, it is usually with the understanding that the subject property is to remain on the market, and that if another acceptable offer is made on the property, the first purchasers will have 48 hours in which to remove this contingency.

Personal Property

It is customary to reference in the Purchase Agreement any personal property that the purchasers expect to be included in the sale.

Taxes and Rentals

Taxes and rental income and security deposits are prorated to date of closing, as are water and sewer expenses.

Title

The buyer’s attorney, often the same attorney used by the lender, searches the title. Buyer’s are obligated to buy title insurance to protect the bank’s portion of the purchase price and have the choice to buy additional title insurance to protect their own equity.

Survey

In RI, properties are not surveyed as part of all sales.

Time to Closing

20-60 days is the average time agreed upon from offer to closing.

A Walk Through

A walk through of the property, once the property is emptied of all belongings, is conducted just before the closing. This is the opportunity for the Buyer to make sure the property is in the same condition as when the offer was made and that the home is “broom clean”.