Better Homes and Gardens Real Estate Life

Category: Closing

  • Discover the Perfect Time for Buying a Vacation Home

    If you’re lucky enough to have reached the time in your life when you can seriously contemplate buying a vacation home, there’s much to be excited about. According to the National Association of Realtors, one in eight homeowners are thinking of buying a second home. While summer may be the time of year you start to think longingly about sun, sea and sand, it may not be the best time to buy a cottage.

    Here are some things to consider when you’re buying a vacation home.

    Peak of season is seldom a good idea

    Avoiding peak seasons makes sense in supply and demand terms. Peak season, whether you have your eye on a Vail ski chalet or a Cape Cod sea shanty, is when the area in which you’re looking is at its finest. Since vacation homes can be sentimental investments, many who’ve inherited them rent them out as additional sources of income so they can hang onto a property. They may be sharing it with siblings or have had to buy them out. They also may be part-time vacation home investment owners who got in early on a new resort but need to ensure 100 percent occupancy during peak season to make their investment pay off.

    Aim for the final weeks of the high season to make your offer or hold off until just after peak season ends. If you’re looking for a summer vacation home, the time between Labor Day and Thanksgiving is the perfect window of opportunity. You’ll still take possession early enough in the year to be able to get a glimpse of what future summers can hold, and you’ll also have a chance to do any needed repairs before winter sets in. Then you can spend the winter planning what you need to do to make the place your own the following summer.

    If you’re looking at a winter vacation home, spring is the best time to make an offer. While diehards may still be renting or occupying their vacation homes, hoping to get one or two more days of spring skiing or boarding in, most will have placed their properties on the market. Just be careful not to leave your offer for too late in the year if the area you’re interested in is remote. Some owners board up their properties for the off season, making it harder to get viewings. Also, don’t forget the power of spring mud. Properties accessible through three seasons may become harder to access during spring thawing and flooding.

    Be sure the time is right

    Before buying a vacation home, you need to think long and hard about a whole host of considerations. First and foremost is whether you will be able to use it enough to make it worthwhile for you financially. Even if you buy a vacation home and plan to rent it out to defray expenses, that means your time there will be limited. While you may love a cottage on a lake in fall, not everyone else does. If you can’t afford to spend the 4th of July at your own cottage, this may not be the time to buy.

    Second, have you considered all the duplicate expenses involved? Whether you want your vacation home to mirror your principal residence in all ways, you can’t escape the fact that you’re going to need two of everything now. Unless, that is, you want to treat every weekend you spend at your vacation home like a camping trip (which may well be the case). You’re not going to want to haul lawn mowers and leaf blowers to the cottage every summer weekend. That goes double for appliances, linens and furniture. You’ll also have a second set of bills for property taxes, insurance, yard maintenance, internet and cleaning costs. In addition, there may be HOA fees, too.

    Third, what are your vacation goals? If you want to visit every continent and are running out of time to tackle Asia and Africa, does a vacation property make sense? If you find you’re drawn to experiential vacations like hiking the Appalachian Trail, swimming with the dolphins or building someone else a home with Habitat for Humanity, a vacation home may be an anchor you don’t need.

    On the other hand, if you know you can afford to invest in a second property and have a long-term plan to use it as a home base while you globetrot in retirement, or if you want your family to have the freedom of the great outdoors while they’re growing up, it might just be time to seize the day.

  • Step 9. Closing on A Home

    Finally, the home stretch of the buying process: Closing! All inspections have been completed and the appraisal has been processed. This means the next steps for the buyers, sellers, agents and lenders is to work with the title company to become clear to close on the property. Closing is the formal process where a seller transfers ownership of the property to the buyers. After this final process, the buyer owns the home outright.

    On average, this process takes 30-45 days, but 60 day closings are not uncommon. The timeframe of this process is dependent on when the buyer wishes to gain possession, when the seller is willing to vacate and if there were any issues during the inspection period.

    Get an Updated Loan Estimate

    During the initial loan attainment, the lender likely provided a loan estimate (LE), which included the mortgage amount, monthly payments, insurance fees, and any additional fees associated with the closing including title insurance and closing fees. Be sure to attain an updated LE halfway through the buying process and compare numbers. Usually, about a week before the closing, the title company will provide a Closing Disclosure (CD) that breaks down the updated fees for the buyer and seller. If there are any questions or discrepancies, now is the time to ask/amend. Remember that a CD:

    • Is Required to be Provided to the Buyer & Seller at Least 3 Days Prior to Closing
    • Includes All Loan Terms, Projected Monthly Payments, Closing Costs & Fees

    Not sure what all the details are on the CD? Use this interactive closing disclosure explainer.

    What Is Title Insurance?

    The term “title” refers to the collected ownership records of a piece of real estate, including the transfer of any property rights, and any loans using the property as collateral. A clear line of title makes you much less vulnerable to ownership claims from other parties and to outstanding debts of previous property owners. This is part of the closing fees and essential to ensure no other person has claim to the property.

    *Note: The title company can be a separate entity from the settlement company, but is often the same organization.

    Where Is the Closing & What Happens?

    A closing typically occurs at a settlement agent’s office, which can be at the title company’s office or executed by a mobile notary as well. Typically, three documents are signed:

    • Deed of Trust: A deed is the records with the local Clerk of Courts of the transaction and the mortgage lien on the property now owned by the buyer.
    • Promissory Note: A legal agreement that the buyer will pay the lender for the mortgage principal, plus the agreed upon interest, as well as where fund are to be sent.
    • Closing Disclosure (CD): The itemized list of all debts and credits to complete the closing that are associated with the contract.

    If documentation of homeowners insurance has not already been provided, it must be provided at closing. If the down payment and funds for closing have yet to be received, this must be provided at closing as well. This is typically 2-5% of the home’s value and can include recording fees, loan origination fees, notary fees title insurance and homeowners insurance.

    Who Attends a Closing?

    • Buyer or Buyer Rep
    • Agents
    • Seller or Seller Rep
    • Lender Rep
    • Closing Agent
    • Notary Public

    Not all are required to attend and the selling party can sign in a different location than the buying party. This is very typical when one of the parties lives in a different state or during a VA loan closing.

    Closing on a Home
    Closing on a Home

  • Important Factors in a Home Appraisal

    A home appraisal serves the important purpose of providing an accurate measure of a property’s value. This valuation is essential for a mortgage lender because it ensures the organization that it isn’t letting homebuyers borrow far more than what the house is actually worth. This measurement doesn’t just affect the lender, but it also protects the homebuyer from significantly overpaying for a home. As important as appraisals are, many homebuyers and sellers are confused about exactly who performs these appraisals, how they are created, and what standards are used. Find out what you need to know about a home appraisal.

    Who Conducts Home Appraisals?
    A home appraisal can’t be performed by a lender or any party that would stand to benefit from a certain appraisal outcome, such as an especially high or low appraisal. Instead, the process is carried out by an independent, professional appraiser.

    There are different requirements for home appraisers depending on which state they’re working in and, in some cases, depending on what type of property they’re appraising. In nearly all cases, however, appraisers will need to complete courses on home appraising, work in an apprenticeship and complete a certain number of on-the-job hours. Once these steps are complete, appraisers are required to pass state exams to become certified. Home appraisers also have the option of earning different levels of certifications, which allow them to appraise homes with different value levels and sizes.

    What Do Home Appraisals Include?
    Home appraisals are based on several factors, which may vary depending on a home’s age. For most homes, appraisers use comparable property types to help determine the home’s value. This means they consider the asking prices and purchasing prices of homes in the area that have recently been sold. Home appraisers may compare homes that have similar lot sizes, square footages and features as the home that is being evaluated.

    If a home is newer, the appraiser is more likely to use an approach that involves estimating the land value as well how much it would cost to completely replace the house.

    The appraiser also takes other details into account, including the integrity and quality of a home’s foundation, roofing, siding and overall structure. He or she will also check on the quality of the interior, including such aspects as the doors, windows, plumbing, flooring and whatever appliances will remain in the home.

    While many potential homebuyers and home sellers may be focused solely on the house, appraisers actually take the entire plot of land into consideration. They typically examine the size of the front and back yards and check for any permanent landscaping or lawn fixtures, and evaluate features like pools, decks, patios and hot tubs.

    Appraisers will also check for any significant home upgrades, especially improvements in the bathroom or kitchen. If you’re the seller, it can even be helpful to give your appraiser a list of all the updates you’ve made to the home while you’ve owned it. This can ensure that nothing gets missed and that the appraiser takes these details into account.

    Getting an accurate home appraisal is a vital aspect of having a successful home sale. Whether you’re the buyer or the seller, it helps to remain informed about exactly what aspects are being considered during the appraisal process.

  • Choosing a Homeowners Warranty

    When homebuyers are going through the home closing process, they’ll typically come across what is called a homeowner’s warranty. This warranty is a protection plan that covers a significant portion of the costs if certain appliances malfunction or stop working completely. Having a homeowner’s warranty can certainly be beneficial for new homebuyers, but it can also help home sellers add value to their homes. Find out what a homeowner’s warranty entails and how it can benefit multiple parties during a home closing.

    What is Covered in a Homeowner’s Warranty?

    Typically, a homeowner’s warranty will cover the repair or replacement of the major systems and appliances in your home. This often includes items like the water heater, garbage disposal, plumbing system, refrigerator, washer and dryer, air conditioning unit and other similar systems. If one of the covered systems or appliances breaks, the warranty covers repairs from a contracted local technician or a complete replacement of the item or system. In some cases, you may have to pay a small fee to carry out the repair or replacement, but the fee is typically much less than the total cost would otherwise be.

    Your individual homeowner’s warranty may vary slightly from other warranties, so it’s always important to read through your warranty plan carefully and ask about any extra services you’d like to have included.

    Homebuyers should also understand that warranties are not substitutes for home insurance. Furthermore, not all warranties cover repairs or replacements for appliances that simply haven’t been properly maintained over the years. That’s why it’s also a good idea to get a thorough home inspection from a trusted professional.

    How Can Homebuyers Benefit?

    After paying all the costs associated with the home closing process, nobody wants to be caught off guard by a malfunctioning heating system that will cost several thousand dollars to repair. Having a homeowner’s warranty gives new homeowners the peace of mind of knowing that they can quickly and inexpensively have those issues resolved.

    This type of warranty can be especially beneficial for first-time homeowners who aren’t particularly handy or who have limited knowledge about what types of major malfunctions can occur in a home.

    How Can Home Sellers Benefit?

    If home sellers are working within a buyer’s market or if they are looking for ways to make their home more marketable, offering a home warranty with the house can be a great added incentive to encourage wavering homebuyers.

    While this offer will add value for homebuyers, fortunately, it isn’t too costly for home sellers. Home warranties typically costs between $200 and $500, making them a relatively small investment for those who are looking to sell their homes.

    Whether you’re a homebuyer looking for peace of mind after closing or a home seller interested in presenting a more attractive overall package to potential buyers, a homeowner’s warranty can make a great addition to your home closing process.

  • Common Home Offer Contingencies

    Once you reach the point of making an offer on the home, there are a number of very important factors to consider, including whether or not to make the offer contingent on one or more conditions. In fact, contingency clauses are very common when making an offer on a home. While a buyer may include almost anything in a contingency clause, there are some contingencies that are more frequently included than others. Here are a few common contingencies you may want to consider when making your offer to purchase a home:

    Financing Contingency

    A home buyer will often include a financing contingency in an offer to ensure that the he or she is able to secure a mortgage before the closing day in order to cover the cost of the purchase. Although a buyer may have been pre-qualified for a mortgage loan, something could still come up that prevents the financing from actually going through when the time comes to finalize the loan. Unless a buyer is paying cash for the purchase, he or she is depending on financing and, therefore, will not want to be legally obligated to purchase a home if he/she does not have the means to do so. While a financing contingency clearly protects the buyer, the seller can also include provisions in the contingency clause that protect his or her rights as well. For example, the seller might require the financing to be secured within a specific time period or may even reserve the right to secure the financing on behalf of the buyer in order to ensure that the purchase goes through.

    Inspection/Appraisal Contingency

    These are actually two separate contingency clauses; however, they are both commonly included by a buyer when making a home offer. An inspection contingency conditions the purchase on a satisfactory inspection of the property by a certified inspector. An appraisal contingency conditions the purchase on an appraisal that is high enough to secure the financing needed to complete the purchase. From a seller’s standpoint, an inspection contingency means that any potential defects or problems in the home that were previously unknown will be noted before the home sale is complete. Because the majority of buyers will not accept a home with serious defects, it is best for the seller to know about them and have the opportunity to repair or fix the problem early on. Typically, an inspection contingency gives the buyer the option to accept the home as is, require the seller to repair a problem, or be released from the contract if the inspector finds a problem or defect. On the other hand, an appraisal contingency lets both the seller and the buyer know if the home is priced significantly higher than the market will support. A lender will only loan a borrower a percentage of the home’s value in the current market. If the parties have agreed to a sales price that is higher than what the home appraises for then the buyer can back out of the deal and the seller now knows that the price likely needs to be reduced because prospective buyers will be unable to obtain financing at the current list price.

    Title Contingency

    Producing a clear title is one of the most common contingencies a buyer includes when making an offer on a home. “Title” refers to legal ownership of the property. Numerous problems can arise when a title search on a property is completed – problems that will result in a seller not being able to produce a clear title. An unpaid judgment against the seller, for instance, can result in a lien against the property. An easement recorded by the city or county could also prevent clear title. As a buyer, you want to be sure that you know exactly what you’re in for when buying a home. There are cases where the seller is unaware of these obstacles to clear title, which is why a title contingency is beneficial to both parties.

    Although a buyer is usually the party who includes the contingency clause when making an offer on a home, some of the more common contingency clauses actually protect both the buyer and the seller from unanticipated obstacles that could interfere with the sale of the property. For more detailed information about making a home offer, you can reach out to a Better Homes and Gardens real estate agent in your neighborhood!

  • When Can You Move In After Closing?

    From the very first time that you see your future home and throughout the negotiating process, you are most likely daydreaming about the day you can move into it. You may be counting the seconds until closing day, planning the ways you will decorate it and how your family will settle into your new home. Be aware though, not everyone is lucky enough to receive the keys to their new home immediately after the closing.

    When is the Actual Move In Date? The offer will specify not only your closing date but also your occupancy date. When you write an offer on a home, the real estate agent will ask you to request a closing date as well as an occupancy date. The occupancy date will be the day that you move into your home. In some cases, the sellers may need more time in the home after closing while they finalize the purchase of their future home.

    The contract terms will determine when you can move in after closing. In some cases, it will be immediately after the closing appointment.  You will receive the keys and head straight to your new home. In other situations, the seller may request 30, 45 or even 60 days of occupancy after the closing of the home.

    Keep the following in mind as you approach your closing:

    • Compromise is important when determining your moving date. Buyers generally might be expected to give the sellers 7 to 10 days to vacate the home after the closing date. Sellers may want more time in the home, but they can compromise by securing a place to stay for the short-term while they finalize their own situation.
    • Your occupancy date cannot be changed once it is set. It is essential that the moving date is established in the contract terms. Once both parties have signed the purchase agreement, the moving date is finalized. A buyer or seller cannot come to the closing appointment and expect to change the date of occupancy in the home.
    • A lease back occurs if the sellers seek to occupy the home for a specific period after the closing. When this situation occurs, the sellers often will have to pay the buyers rent. The buyers are ultimately responsible for the finances of the home, which is why rent is expected from the sellers.

    The closing date is the most important part of the real estate transaction. This is the appointment where the sale of the home is finalized. After the closing is complete, the buyers are now the new owners of the home. Whether you receive the keys to your new home at the end of the appointment, or in a few more weeks, you will be excited and elated when the closing is complete.

  • Your buyer asked you to pay closing costs. Now what?

    Say that you received an offer on your home, but your buyer is asking you to cover all the closing costs. What are your options in this type of situation? You generally have three choices: accept, reject, or respond with a counter offer. If you’re confident that you are in an accelerating market and that your home is in fact marketable, you could simply reject the offer and wait for a better one to come along. However, if you want to work with the buyer to reach a common goal, then you will need to write up a counter offer.

    Whether it’s accepting an offer or negotiating a home sale, your decision should not be reactive. In other words, you should think through your options thoroughly.

    Deciding to Accept or Decline an Offer

    For instance, before you decide to cover all the closing costs, you want to make sure that no other buyer will beat the offer. If you find that the offer is reasonable, then you can accept the terms with no changes. While closing costs can be considerable, they do not necessarily have to deter you from accepting an otherwise appealing offer. In other words, if the buyer is willing to accept your asking price that is substantially higher than what you paid for the home, covering the closing costs may still leave you with a nice profit and return on your investment. In such case, assuming there is no better offer, it might make sense to accept and sign the offer as is. Conversely, if you decide to decline the offer, then you want to make sure you have others lined up.

    Countering an Offer: Negotiating a Home Sale

    In terms of negotiating a home sale, there are a variety of factors to consider. For example, the condition of the market, your situation, and the property itself can all play a role in determining how much leverage you have. For example, if the buyer asks you to pay all the closing costs, then you have to ask yourself what kind of market you are in. If you’re in a buyer’s market with fierce competition, then you might have to concede to the terms of the buyer’s offer. However, if you are receiving multiple offers, then you could write a counter offer to pay some, but not all, of the closing costs. You could also agree to cover the costs with stipulations of your own.

    In any case, negotiating a home sale is by no means a simple task, so the expertise and insight that a real estate professional can provide is an invaluable resource. If you find that you are unsure of what to do after receiving an offer, it is helpful for you to consult with a seasoned real estate agent. For more information about negotiating a home sale, contact us today! One of our Better Homes and Gardens real estate agents will be more than happy to assist you with your home sale!

     

     

  • When to Set Your Closing Date

    The closing date is the end goal of any real estate transaction, but it is a day that needs to be  established at the start of purchasing a home. There tends to be confusion for homeowners regarding when to set the closing date. These tips will help you establish a deadline that is  beneficial for both you and the seller. You can also work with your real estate agent and real estate lawyer to help you choose the best date possible for all parties involved.

    Tips for Setting Your Closing Date

    • Provide at least 30 days from the time of the offer until the closing date. In general, most people set a closing date 30 to 45 days after the offer has been accepted. There are a few steps that need to occur between a final offer and the closing date. You must allow ample time for these steps.
    • Establish a date for the occupancy of your home as well. While the closing date is the day when ownership of the home is transferred from the sellers to the buyers, the actual moving day may occur at another time. Some home sellers can vacate the property prior to the closing, allowing the buyers to move in immediately after the closing is complete. However, others may need extended occupancy in the home — up to 60 or 90 days. In the case of extended occupancy, the previous owners must pay rent to the new owners of the home.
    • If you have a deadline that you must close by, you should set a closing date 10 to 14 days prior to that deadline. For example, if you need to be in your new residence by July 1st, you should set a closing date for no later than June 15.
    • The closing date may have to change throughout the process. Sometimes, the lender does not give final approval on the mortgage loan in time to close by the first date that was established. If this occurs, then the seller and buyer must agree to a new closing date. After the lender has given the buyer final approval, you can choose a firm closing date.
    • Set the closing date prior to the deadline for the lender’s loan commitment and make sure the closing is set in time to lock-in the established interest rate. If your closing date occurs too late, you may have to adjust the interest rate or seek approval on the loan again.

    Once you have a closing date set, circle the date on your calendar and be ready to celebrate. This date is when you are going to be a new homeowner. If you have cleared all hurdles to close and have achieved final approval on your loan, then let the countdown begin. It will not be long before you are settled in your new space, enjoying the home of your dreams.

  • Frequently Asked Questions About Closing

    The closing of a house is an important milestone for anyone, whether it is buying one’s first home or investing in a dream home for retirement. Here are a few of the frequently asked questions and answers about the closing of a home.

    What Happens Prior to the Closing of a Home?

    There are several steps that need to take place in any real estate transaction prior to a closing appointment. Only after the following steps are completed will the closing take place:

    • A purchase agreement needs to be finalized.
    • A home inspection needs to be approved.
    • An appraisal of your home needs to be completed.
    • The mortgage application is completed and approved.

    Which Party handles Title and Closing Costs?

    The responsibility for title and closing costs is negotiated as part of the real estate transaction. The responsibility will vary based on the individual sale. In most cases, the buyers and sellers will split the costs associated with the title and closing costs.

    What Do I Need to Bring to the Closing?

    • Identification will be needed at the closing: A government-issued identification card such as a driver’s license or a passport. In some cases, two different forms of identification are required.
    • Additional paperwork may be required at the closing, such as proof of homeowners insurance, the results of a home inspection and other legal documents needed for the transaction.
    • Your spouse should accompany you if you are married. A form of identification from your spouse will be needed.
    • A cashier’s check should be brought to the closing in the total amount of the down payment and closing costs. Your mortgage lender will provide you the final amount prior to the closing, allowing you to prepare the check from the bank.

    What Can I Expect at the Closing?

    Expect the closing to last for about an hour. The length of time the appointment will take may vary based on the complexity of the transaction and the availability of funds. Both parties will be required to sign off on several different documents during the appointment.

    The closing agent will be available to explain the details of all the documents you are signing and answer any questions.

    What Documents Are Signed at the Closing?

    You will be signing many different documents on the day of your closing, including:

    • Title Transfer: This document transfers the ownership of the home from the previous owners to you.
    • Truth-in-Lending Statement: This document details the fine print of your mortgage loan, and your mortgage company by law is required to provide you with it at the closing.
    • Title Insurance: Title insurance protects you as well as your lender from any issues regarding the title of your home.
    • Mortgage Loan Documents: These documents will finalize the approval of your loan and will give you the necessary financing to purchase it.

  • Home Sellers Checklist for Closing on a Home

    Selling your home can be a long and complicated process. If you have entered into an agreement for the sale of your home, you are almost to the finish line! The last step in the process should be closing on a home. This is where title to the home is legally transferred from the seller to the buyer. Although there will be some variance from one state to the next with regard to who is present at a closing and how the closing proceeds, there are some commonalities as well. As a rule, home sellers, home buyers, as well as their respective agents, must be present at the closing. In addition, a closing agent who works for the title company or lender is usually present along with a representative from the lender and the title company. Either or both side may also bring an attorney on the day of closing. In order to ensure that you are prepared for the big day, home sellers may wish to use the following checklist as a guide.

    • Request a payoff statement for each lien or encumbrance that currently exists on the property. If you have a mortgage on the property, contact your lender for the payoff statement. Other liens or encumbrances may turn up when the title search is conducted. These must be addressed prior to, or at, the closing. Your Better Homes and Gardens® Real Estate agent can assist you if you are uncertain how to request the necessary information.
    • Make any repairs that were agreed upon pursuant to the sales agreement. This should be completed prior to the final walk through by the home sellers.
    • Attend the walk-through before the closing. Most states allow/require a final walk-through within 24 hours prior to the closing. Although this is intended to be for the benefit of the buyer, you can take this opportunity to pass on any quirks or insider information regarding the home to the buyers. You will also want to be present in case any issues arise at the last minute with regard to the condition of the home or any repairs that have been completed.
    • Contact utility companies ahead of time to arrange for shut-off of services. If you have received a final bill prior to closing, bring that with you to show that you have turned off or transferred the services. On the day of closing, you should go through the house and physically shut-off valves.
    • Assemble warranties and manuals to pass on to the buyers. If the sale includes appliances or anything else that comes with a manual or warranty you should put those together to give to the new owners.
    • Bring your copies of all important documents to the closing. Although copies may be provided for you at the closing, it is best to come prepared. While there may be additional documents required at your specific closing, some common documents that you should have with you include: sales contract, title search, appraisal, inspection report, and disclosures.
    Because each closing is as unique as the property being sold, be sure to consult with your Better Homes and Gardens Real Estate agent to be certain that you are fully prepared for your closing when the day finally arrives.