Closing Escrow
A Smooth Closing
The moving van has just pulled away, leaving you with years of dust bunnies and 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. 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 the systems are in working order and that the agreed-upon repairs were made. They will feel better 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 too tired to do the cleaning yourself, calling a professional cleaner will be worth the investment.
Closing Costs
You have probably figured out how much you will need at the closing for your down payment, but don't forget about the closing costs. These additional costs can add up to a significant amount.
Closing costs will vary, depending upon the financing costs and the time of the month that you close. Your Realtor 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.
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.
When you begin your search for a new home in the Overland Park area, your Realtor can give you information about the closing costs in your area. You can 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. This figure is usually very 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 Realtor will give you a final figure for the check that you will bring to closing table.
Closing Dates
The final closing date is usually 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 paper work can be completed, however, anything can upset the closing schedule. Questions can arise about liens that were paid, but not properly recorded. Something 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 Realtor will keep you up to date on the progress of your closing in order to avoid delays and minimize the inconvenience, if one occurs.
Closing Day
Buyers will have an opportunity to walk through the home they are buying 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.
They 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, as well as all the "dust bunnies". The contract calls for the house to be "broom clean" and free of trash and debris. Realtors encourage sellers to leave their homes impeccably clean for the walk-through, and many homes are turned over in spotless condition. Sometimes a hectic moving schedule, fatigue, or different housekeeping standards result in the buyers having to clean the house thoroughly before they 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.
Closing Paperwork
When you buy a house in the Overland Park area, you are asked to sign an amazing number of documents, especially if you are obtaining a mortgage. 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 everything, including all fine print, 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.
Closing Questions
Most people are not at their best when they are at the closing. They are feeling nervous and vulnerable as they sign the papers, and may even be fighting off an attack of buyer'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 you have. 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, occasionally mistakes are 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.
Closing Statements!
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 Realtor 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.
Closing Tips
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 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 Realtor in advance, so that it can be handled before it has a chance to escalate.
Escrow Rules
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 firmly clutched against their chests, and proceed to question each item on the form that does not match perfectly.
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 be a little bit different. 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!
House Repairs
Typically there is a 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 usually finds a few items that need to be repaired. The Realtor gives the homeowner a list of the requested repairs. What comes next?
The seller takes care of the repairs in most transactions. Many sellers wait until the week before the closing to call someone to do the work (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.
Moving Day!
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, and you will 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 Realtor know and work out the details as early as possible before 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 grime and dust. 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 go through the house to check the appliances, mechanical systems and overall condition to make sure it 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 whole thing off. It is the little things that can trigger last-minute cold feet, so your best insurance is to make sure that the house looks great, everything is working properly, and all the agreed-upon repairs have been made. Taking special care in preparation for the walk-through will help to promote a more relaxed atmosphere for the closing.
Real Estate Repairs
In most real estate transactions there are a few responsibilities that the sellers have to handle before the closing, such as repairs and termite extermination. The deadline for completing these obligations usually coincides with the actual closing. Many sellers barely make that deadline. Those who wait until the last minute to handle these matters may miss the deadline altogether or pay high rates in order to get a plumber, roofer or electrician on an emergency basis.
Your buyers will probably get a structural inspection done after the contract is ratified. Within 10 days of the contract's acceptance by all parties, the pest inspection should be scheduled. Even though sellers usually know well in advance what is needed, they sometimes put things off until the buyers have finalized the loan approval process. Since these repairs will have to be made anyway, it is a good idea to get them done promptly.
The Closing
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 Realtor will stay on top of the situation and keep in touch with everyone involved in the transaction to prevent any unnecessary delays.
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 which 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 must be paid by the buyers, such as prepaid taxes and the first month's mortgage payment.
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.
It can be a little confusing, but your Realtor will prepare a seller's "net sheet" showing what your expenses will be. This will aid you in determining who pays what and when and 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, special assessments, and 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 Realtor will help make sense of the confusion by going over all of these factors with you when you list your home for sale and again as offers come in.
The Settlement
The buyer and seller will sign the settlement sheet at the closing, detailing all of the charges that each party has incurred during the sale of the house. It is crucial to go over the sheet for accuracy and to make sure that you understand everything on it before you complete the transaction.
When a contract is negotiated, each side agrees how to divide the loan fees (or points), as well as the other closing charges, such as state or local taxes or escrow fees. Your Realtor can go over the settlement sheet and help you compare it with your purchase agreement. The seller's charges usually include the brokerage fee, the mortgage payoff, and any charges involved in clearing the title, as well as pro-rated property taxes, payments for termite treatment and escrow for repairs that could not be completed by closing. The buyer's costs include charges for the loan and title searches, insurance and any other legal fees. A good closing officer will go over the settlement sheet line by line, explaining each item and correcting any misplaced charges.
Tips for a Great Closing
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 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 Realtor in advance, so that it can be handled before it has a chance to escalate.
Walk-Through pt.2
It's the day that you close on the sale of your home, and the buyers are a little cranky. During the walk-through inspection, your dependable old dishwasher stopped midway through its cycle, and the powder room toilet flunked its flush. These situations may cause some anxiety for the buyers and sellers, but such problems are quite common and usually easy to resolve.
Most purchase agreements require that the major mechanical systems and the appliances being conveyed are in working order at the time of the closing. Defects are often discovered during the structural inspection, allowing the sellers have plenty of time to have the repairs made. Occasionally there are last-minute breakdowns or defects that are not spotted until the walk-through inspection. In that case, an agreement can be made with the sellers at the closing to escrow funds for the repair or replacement of the items in question.
