A Smooth Closing
The moving van has just pulled away, leaving you with piles of dust bunnies and years’ worth of grime that you didn’t know was there. You are tired, and the last thing you feel like doing is scrubbing your house for the new owners. But leaving your home impeccably clean is one of the most important things you can do to ensure a smooth closing.
Your buyers will do their “walk-through” before the closing to make sure that all the systems of the home are in working order and that the agreed-upon repairs were made. They will feel good about the whole process if they walk into a spotless house. This will be their last opportunity to experience an attack of buyers’ remorse, and your efforts can minimize any second thoughts they may be having or any crankiness about issues that must be resolved at the closing. If you are not inclined to do the cleaning yourself, hiring a professional cleaner will be worth the investment.
A Successful Closing
The closing table is where buyer and seller can celebrate the final stage of a successful home sales transaction. On this occasion, you sign the closing papers, trade keys, and wish one another well. It is to everyone’s advantage to prepare for the closing such that all the details are worked out in advance.
How can you help ensure that your closing is a relaxed, cooperative event? First, enlist your real estate agent’s help to ensure that all issues are resolved ahead of time. Repairs should be completed, agreements kept, the house broom-clean and ready for the new owners to move in.
The atmosphere doesn’t need to become adversarial, and minor upsets should not threaten the entire transaction. If you anticipate a problem, no matter how minor it may seem, be sure to communicate the situation to your real estate agent in advance, so that it can be resolved before the final closing date.
As Closing Approaches
Your house is under contract and scheduled to close in a few weeks. What can you do to make the transfer of ownership as easy as possible for you and your buyers?
Keep in close contact with your real estate agent so that you will know if there are any changes in the closing schedule. On the day the property changes hands, your house should be empty, clean and ready for the buyer. Contact all of the utility companies to let them know that you are moving and give the service company the buyer’s name (the buyer must follow up with calls to confirm). Don’t turn off the gas or electricity because the buyers need to confirm that the appliances are in working order. Let your insurance company know ahead of time that you are selling the house and arrange for your coverage to be transferred to your new home. The most important thing is to start the process well in advance in order to avoid any last-minute complications.
You have probably figured out how much you will need for the down payment on your new home, but don’t forget about the closing costs associated with the purchase of any property. These additional costs can add up to a significant amount.
Closing costs will vary, depending upon the costs of financing your home loan and the time of the month that you close. Your real estate agent will be able to give you an estimate of all these costs, including the points on your loan, private mortgage insurance (if required), the title search, title insurance, attorneys’ fees, and any transfer taxes or recording fees changed by local government agencies. There may also be property taxes, homeowners’ association fees and insurance that must be prepaid.
The final closing date is an important item in the negotiation of the purchase agreement on a home. This is the day when the buyers get their ownership papers and the sellers get their money. It is important to remember that most standard contracts don’t pinpoint a specific date, and closings can be delayed due to factors beyond the buyer’s control.
The closing will usually be set as soon as the title search and lender’s paperwork can be completed. However, any number of factors can interfere with the closing schedule. For example, questions can arise about liens against the property that were paid, but not properly recorded. Items in the buyers credit history may have to be cleared up. These situations rarely cause the transaction to fall apart, but they can wreak havoc with your moving schedule. Your real estate agent will keep you up to date on the progress of your closing in order to avoid delays and minimize any inconvenience.
When you buy a house you are asked to sign an amazing number of documents, especially if you are obtaining a mortgage loan. It is prudent to read all of the papers before signing them, but it may not be practical to do this at the actual closing. There is a way you can read everything first without holding up the closing.
The title company should have the papers ready for your review several days before the closing, but sometimes the lender delivers the paperwork at the last minute. If you insist on reading the fine print on every page, you will probably draw some serious groans from the others at the table. One practical solution is to request copies of all of the standard forms a week before the closing, so that you can read them at your leisure. At the closing you need only to make sure that the information is filled in correctly.
Most people experience a degree of stress at the closing of a real estate sales transaction. Both parties are probably feeling nervous and vulnerable as they sign the papers, and may even be fighting off an attack of buyer’s or seller’s remorse.
Even though you may be inclined to just sign the papers, it is a good idea to check the paperwork and ask any questions that come to mind. If you are signing a mortgage or deed of trust, be sure to review the document carefully. Check the spelling of your name, the property address and all of the inserted items for accuracy. Since much of the paperwork is prepared on short notice, mistakes are occasionally made. They are usually easier to fix while you are still at the title office, so don’t be shy about asking questions before you sign on the dotted line.
The closing table is the ideal place to sign papers, trade keys, and drink a toast to the new homeowners. Sometimes that setting is filled with tension and pressure as each side tries to work out important details of the transaction at the last minute.
How can you help make your closing a relaxed and happy one? First, try to get the details worked out ahead of time. There may be a few unresolved issues, such as repairs that were not completed, a disappearing dining room chandelier or a pre- or post-closing occupancy agreement. The atmosphere should remain positive in order that minor upsets will not threaten the entire transaction. If you anticipate a problem, no matter how minor it may seem, be sure to communicate the situation to your real estate agent in advance, so that it can be addressed before it has a chance to escalate.
The lender is allowed to accumulate a borrower’s payments up to a two-month advance cushion at the end of a year. But if a surplus develops beyond this amount, the borrower is now entitled to an immediate refund unless the surplus is less than $50. These rules apply to new loans.
Estimated Closing Costs
There is a federal law which requires mortgage lenders to give prospective buyers an itemized, “good-faith” estimate of their closing costs. Sometimes buyers arrive at the closing with this document in hand and proceed to question each item on the final closing statement that does not match the estimate exactly.
These “good-faith” estimates are just that–estimates. The lender’s charges will be fairly accurate, but the charges for attorneys, termite inspections, title insurance, and other items that appear on the closing sheet may vary from the estimate. Some pro-rated items, such as taxes or homeowner’s association fees, will also be different if you don’t close on the date that was used to calculate the estimate. The purpose of the disclosure law is to give you a ball park figure of your closing costs. But the estimate you are given won’t be to the penny–probably not even to the dollar!
It is a week before you are supposed to close on your new home, and you are feeling completely organized about the move. You have arranged for the movers and the transfer of the telephone, electric, water, and gas accounts. Now you plan to take a few days off. Good!
Remember that closing dates are not set in stone. Lenders, appraisers, title attorneys, credit check services, and anyone else who is involved in the transactions can cause a delay in the closing. If you keep this in mind while you are making your arrangements, you can minimize the possible cost and inconveniences due to a delay.
As the closing approaches, your real estate agent will stay on top of the situation and keep in touch with everyone involved in the transaction to prevent any unnecessary delays.
Handle Needed Repairs Early
There is a standard chain of events that occurs when an offer comes in on a home. After a meeting of the minds, the buyer often brings in a home inspector who may find a few items that need to be repaired. The real estate agent gives the homeowner a list of the requested repairs. What comes next?
In most transactions, the seller will take care of the repairs. Many sellers wait until the week before the closing to call someone to do the work, because they want to be sure that they are going to make it to the closing table before they spend money on repair work.
If you are responsible for making repairs to a home you are selling, make sure you have the work done well in advance of the closing date by licensed professionals who will stand behind their work. If the work is done at the last minute and is incomplete or unsatisfactory, it could cause complications at the closing. You should provide the buyers with all the receipts and the names of the persons to contact in case there is a problem with the repairs.
The closing on the sale of your home is Friday morning at 11:00, and that afternoon at 3:00 you are to complete the transaction on the house you are buying. Your sellers are completing the purchase of their new house on Monday. As sellers, each of you is obligated to leave your house vacant and clean at the time of the closing. You will each take possession of the home you are buying after the closing.
If you are faced with a game of musical moving vans, you may want to negotiate with your buyers or sellers to remain in your old house for a few extra days or move your belongings into the new home a little early. You should draw up a written agreement which details your arrangement, such as the amount of rent, the move-in or move-out date, and any agreements regarding utilities, insurance, or a damage escrow. If you need to make special arrangements for your move, let your real estate agent know and work out the details as early as possible in advance of the closing.
Preparing for the Walk-Through
The movers have just pulled away from your house, leaving it totally empty–except for years’ worth of dust that was previously concealed by your home furnishings. If you don’t have the time or energy to clean your house for the new owners, you should consider paying a professional to do the job.
Before going to the closing table, your buyers will have a last chance to walk through the house and check the appliances, mechanical systems and overall condition to make sure everything is consistent with the sales contract. Even though they really want the house, at this point “buyers’ remorse” may be prompting them to look for a reason to call the transaction off. Because an otherwise minor problem or defect can sometimes trigger last-minute cold feet, your best insurance is to make the house look great. Everything should be working properly, and all the agreed-upon repairs should have been made before the buyers arrive to look at the house. You can promote a more relaxed, positive atmosphere for the closing if you take special care in preparing for the walk-through inspection.
The “Good Faith” Estimate
When you buy a home, you will pay “closing costs” in addition to the down payment. These costs include the “points” you pay on your mortgage loan, title and hazard insurance, the title search, legal fees, and other charges imposed by the lender. These charges vary by state and county, but they usually represent a considerable amount of money.
Your real estate agent can tell you about the closing costs in your area. Ask your agent for some general figures when you begin your search for a new home, and use this information as a guideline. When you apply for your loan, the lender is required to provide you with a “good faith” estimate of the closing costs. The lender’s good faith estimate is usually close to the actual amount, since the sales contract will have the price and terms of your new home spelled out. As the closing approaches, your real estate agent will give you a final figure for the check that you will bring to the closing table.
The Pre-Closing Inspection
Home buyers will have an opportunity to walk through the house they purchased just before the closing to make sure it is in the same condition as when the contract was ratified. They will check the appliances and make sure that the agreed-upon repairs were completed.
Buyers usually see their new home empty for the first time just after the movers have left. Suddenly they see the dark rectangles and nail holes where pictures used to hang, and all the “dust bunnies” that were concealed by furniture. The contract calls for the house to be “broom clean” and free of trash and debris. However, real estate agents encourage sellers to leave their homes impeccably clean for the pre-closing walk-through inspection, and many homes are turned over in spotless condition.
Sometimes the seller’s hectic moving schedule, fatigue, or unequal housekeeping standards require the buyers to clean the house thoroughly before they feel that they can move in. If you are afraid that a messy house could trigger problems at the closing, be sure to make your house shine for this important inspection.
The Seller May Pay
You have finally saved enough for a down payment on your first home, with a little left over to buy the furniture you will need. Then you hear about additional closing costs you weren’t anticipating, and this seem like a real setback.
One way to cover such a shortage is to make the sellers an offer that calls for them to credit you for some of the closing costs. As a rule, the sellers may pay a maximum of 3 percent of the sales price if the buyer is putting five percent down. If the buyer is making a down payment of 10 percent or more, the seller can contribute up to 6 percent of the sales price to cover the buyer’s closing costs. Some items, such as prepaid taxes and the first month’s mortgage payment, must be paid by the buyers. Sellers may also contribute to paying the appraisal, points, title insurance, settlement attorney fees, state or local transfer taxes and similar items.
Keep in mind that if the credit is included in the price of the house, the appraiser will have to justify the amount, based on sales prices of similar homes in the neighborhood.
The Seller’s Net Sheet
When you consider what price you should accept for your home, there are two important factors that will influence your decision. The first factor is the basic sales price. The second, and more important, is the amount you will actually receive from the proceeds at the closing.
Your real estate agent will prepare a seller’s “net sheet” showing what your expenses will be. This will aid you in determining who pays what and when. It can help you to focus on the details of the sale.
A seller’s expenses will include brokerage fees, real estate settlement fees, title insurance fees and special assessments. In some cases the buyer may ask you to pay some of the loan fees. Local real estate taxes will be pro-rated for you and the buyer, and you may be asked to place funds in escrow for payment of your final water bill. Subtract your mortgage balance any home improvement loans and other liens against the property that will be paid at the closing to come up with your final figures.
Your real estate agent can go over all of these factors with you when you list your home for sale and again as offers come in.