Stay Focused: Word of the Month "Commitment"
Erik: Welcome to Focus Real Estate's weekly video blog. Our topic for this week is the word of the month.
Randal: What is the word?
Randal: Oh, commitment.
Erik: Usually commitment is something that is written into every buyer's offer, especially if they're getting financing.
Erik: So they're getting a mortgage.
Randal: Bank of America, don't listen to this. I know you don't like this.
Speaker 3: Max, earmuffs.
Erik: So what's a commitment, Mr. Englemann?
Randal: Well, a commitment is basically the piece of paperwork that the bank gives you a couple of weeks before your closing ... That varies. ... to say that they have looked at you, looked at the house, done an appraisal, done all of their diligence for the property, and they are committed to closing the transaction on a certain time, or a certain date.
Erik: Essentially it's a promise.
Randal: It's a promise from the bank to close.
Erik: And it gives then you as a buyer security and also the seller security that that transaction is going to go through and close on the date and for the price that you said.
Randal: Now, this varies state by state. So, if you're outside of Massachusetts and you're watching this, you're like, what do you mean commitment? What does that have to do with anything? So, it does vary state by state, but in Massachusetts we're really fortunate. We know that the real estate transaction, it can be a little stressful moving through the process. We certainly try to take as much of that out of that as possible for you. Getting that commitment is one of those steps that lets everybody know that the bank has committed to moving forward in closing.
Erik: Exactly, and usually as Randal said, we write that in your initial offers that that commitment is usually a couple weeks prior to the closing.
Randal: Yeah, depending on the length of the transaction, but that's typically ...
Randal: ... how that goes.
Erik: So that gives you security that things are going to happen and close on time as planned.
Randal: Yeah, and why do people like a cash transaction? Because there's no commitment and there's no waiting. When you see a bank statement with a certain amount of money in it that says they're ready to close a transaction you have that commitment before you even-
Erik: And that is written into a buyer who's getting financing their mortgage contingency clause in their contract purchase in their Purchase & Sale.
Erik: So that if for some reason they can't get that commitment as they do their due diligence and try to, the buyers typically still have a back-out contingency with that clause.
Randal: If they don't get their mortgage-
Erik: So, once that commitment is issued, or that date for the commitment has passed usually there's that security that things are going to happen.
Randal: Yep. Absolutely. So that's our word of the month. Any questions about word of the month, commitment? Give us a shout. Make some comments below.
Erik: Hopefully you don't have commitment issues.
Speaker 4: [No 00:02:50]
Erik: So, if you do, give us a call.
Randal: Ouch. Oh, that's funny. Well, thanks for watching everybody. On that note, until next time, stay tuned and stay focused.
Erik: Stay tuned and stay focused.
Randal: ... and stay committed.
Erik: 52 weeks a year.
Randal: Is that how many there are in a year?
Randal: How many acres in a hectare?
Erik: We're getting sidetracked.