The Closing Process
Many times if you’re a new home buyer, you’re a little unfamiliar with the Real Estate process. It can be very confusing, and without the help of a Real Estate agent, then you wouldn’t know what to do.
After you’ve taken a look around and found your home, you’re ready to take your next step! When you decide on a home that you’d like, it doesn’t always mean that you pick and get a loan and it’s done. There’s quite a few other steps that go along with it. “Closing” consists of all the necessary steps in sealing the home and making it yours.
First Step: The offer to Purchase
Once you’ve found the perfect home, you need to make an offer to whomever is selling. After you’ve decided, it’s wise to move fast and send your offer in as quick as possible. There’s no way to guarantee that your offer is going to be accepted by the seller, however, it’s a good idea to offer anywhere from 8-10% less than the asking price. This sometimes won’t work, but that’s why you gave yourself some lee-way. You can negotiate with the seller to come to your final offer, but make sure that you don’t offer more than you know you can afford.
Second Step: The Deposit
This can also be called: earnest money. This shows the seller that you’re serious about buying the home. A good way to decide how much is proper — around 1% of the home’s purchase price is included in the offer. This money should be held by the real estate agent, or the seller’s lawyer in a trust until the deal closes (or doesn’t). If your offer gets accepted, and then you decide not to close, you may lose your deposit. If the sale goes through, this money is usually applied to your down payment.
Third Step: Contingencies
Contingencies are certain requirements that are made known through a contract that need to be performed before the buyer can close. A very common contingency is the buyer’s securing of financing, and home inspections. Keep in mind that different contingencies require different time periods, so check and see when you need to complete them.
Fourth Step: Home Inspections
It’s a good idea to get a thorough examination of the home that you want to buy. Not only for the seller, but for the buyer and the bank. Professionals can help you know what’s wrong with the home and know what you’re getting into.
Fifth Step: The Contract
This happens after the offer is accepted by the seller, it is a legal and binding obligation on the part of the buyer. If the contingencies are met, the property is then yours.
Sixth Step: Settlement Sheet
A Settlement Sheet can also be called a “Settlement Statement” or “Closing Statement.” It’s a document that the Department of Housing and the Urban Development requires to account for all financial aspects surrounding the sale and purchase of a home.
Seventh Step: Closing Documentation
Some paperwork is required to be completed before you close a home. This includes a title search to make sure that the title is clear. You also need to have title insurance to protect the buyer and the lender.
Eighth Step: Closing Costs
There are quite a few costs when closing a home. Some include: loan origination fee, appraisal fee, lender’s inspection fee, cost of title insurance, credit report cost, mortgage/broker fee, taxes and more. Your lender, however, is required to give you prior notice of fees that you need to pay with your loan.
Ninth Step: Final Arrangements
This can be a no-brainer for some, but you must make final arrangements for moving. Before the deal is closed, you must make some practical arrangements such as utility services, mortgage payments, etc.
Tenth Step: Settlement
Settlement means the payment of the balance of the purchase price the buyer owes on the property, and a transfer of the title.
There you have it! Whether you’re selling a home, or buying a home, you’ll want to read about the closing process before actually completing it. It can be difficult, but a great way to find out more about it is to hire an agent.