I always sit down with prospective buyers and spend a good amount of time going over every aspect of a purchase transaction with them. Even though I speak rapidly, it takes at least an hour to cover everything. Reading this post won’t take an hour, but it will give you invaluable information about the home buying process.
Before you make an offer
If you have never purchased a home, the process may seem intimidating, with many steps to consider and legal and financial requirements to address. I always sit down with buyers, whether first time or not, to take them step-by-step through the entire process from making an offer to closing on a home. Once you understand the process, it’s not frightening at all. And remember—I will be with you every step of the way, guiding you and answering every question you have. In many cases I will be one or two steps ahead of you, working with your attorney, inspector and lender to make sure everything’s on track. So let’s go through the entire process now; it may take a while, but it will be worth every minute of the time you invest.
Let’s say that I’ve shown you a number of homes that match your criteria, and you’ve found one that’s perfect for you. You want to make an offer and get the ball rolling.
The first thing I’ll do is check “comps,” the comparable prices of homes in the area. I’ll give you the prices of active listings as well as of homes sold in the last year, along with a breakdown of how different models and different features affected prices. I will also call the listing agent to make sure the home is still available for sale, ask if there are any other offers on it, and get a feel for how quickly the sellers want to close and what they’re looking for in an offer. After relaying all that information to you, I will help you decide what would be a fair price for the home and what offer you should make on it.
Negotiating with sellers can be a tricky process, since emotions are involved on both sides and each side wants to get the best possible deal. My suggestion is to make an offer that is fair, is not insulting, and leaves both sides room for negotiation. Sometimes a buyer will decide on a fair price for the home and want to make an offer that is twice as low in order to “meet in the middle.” This almost always has a negative effect on the sellers. They will be disappointed and may think that the buyer is not serious or does not have enough money to buy the home. I tell buyers to make an offer below their final price, but fairly close to it. The sellers may be more excited and willing to negotiate, creating a positive atmosphere. You can always stop at your final number during negotiations—but you will retain the good will you have created instead of starting the transaction on a bad note.
Making an offer
To make an offer on a home you will need three things: the offer document itself, a pre-approval from a lender and a check for the initial deposit. Let’s look at these separately.
The offer document, which I will prepare, will have the word “Contract” in the title. Don’t get panicked about that—it is NOT a contract yet; it is a document that will become a contract only once everyone agrees to everything in it. Since we’re talking about contracts, let me make this point very clear: You are making an offer to buy a home, but you will not be under contract to do so until after attorney review (more on that in a bit). Anything can happen between now and then. By law, either party, you or the sellers, can walk away at any point between now and the end of attorney review for any reason. Laws prohibit the sellers from discriminating against you, but if there is no discrimination involved, the sellers are under no obligation to sell their home to anyone in particular or anyone at all.
This can work for you as well as against you. Hopefully you’ve made a wise decision in choosing this home, but if you get “cold feet” or do not feel comfortable with the transaction, you can back out of it at any point before you are actually under contract. So if you love the home but are not quite 100% committed to it, don’t feel that by signing an offer you’ve crossed the point of no return.
On the flip side, by accepting your offer, the sellers are not yet committed to selling the home to you either. Hopefully the sellers are as excited about the terms of the offer as you are about the home, and everything will move forward. But things may happen; you and the sellers may not agree to some of the terms, or another buyer may come along and make a higher offer for the home. The sellers are within their rights to accept the other offer instead of yours.
I will prepare the offer based on what we discuss and agree to. Most of the wording in the contract is legal “boilerplate,” but the meat of the offer comes down to three things: how much are you offering for the home, how much of your own money are you putting down, and when do you want to close on the transaction. These items will be important to various degrees as the transaction moves forward. I’ll touch on these points later as well.
The second piece of the offer, the pre-approval, is critical, and no seller will even look at an offer without one. This is a letter from a lender stating that he or she has spoken with you, reviewed your financial situation, perhaps checked your credit scores, and determined that you are able to carry a loan up to a certain amount based on the purchase price of a home and the amount you are putting down. Note that this is NOT an approval for a mortgage—it is simply a very informed opinion that based on facts presented by you to the lender, you should be able to be approved for a mortgage.
If you are already working with a lender, you can ask him to issue a pre-approval letter. If not, I will recommend a lender to you who can take care of that fairly quickly. Be assured that I have no connections with any lenders and do not stand to profit from any recommendation. Furthermore, you may have one lender give you a pre-approval letter, then shop around and decide to use another lender for the actual mortgage.
Even though the pre-approval is not 100% conclusive, it is enough to allow the sellers to know that you are able to afford the home. More importantly, it allows you to know what you can or cannot afford. For example, the lender may pre-approve you for a purchase up to $400,000. You know that you’re safe looking at townhouses priced in the mid-$300,000 range, but you can forget the ones that go for $450,000.
The third element of an offer is the initial deposit. By tradition and unwritten convention the amount is $1,000. This is NOT an application fee or a fee for my services. You will never pay me or RE/MAX one penny for any advice or services we offer you. This check represents the first $1,000 of the payment you will eventually make on the home, and is given as a “good faith” gesture to prove that you are serious about making the offer. The check will be made out to your attorney, and by law it has to be deposited in the law firm’s trust account within five business days. If the transaction falls apart, you can get the money back as a check from your attorney once the necessary “kill” letter is signed by both your and the seller’s attorneys.
There is a fourth element to the offer that I include—a letter from me to the homeowners that introduces you and hopefully makes them feel good about working with you. In the past I’ve actually had the experience of having a homeowner accept an offer based on the letter I had written. You never know what will influence sellers, and every little bit helps.
There is other paperwork that you will have to review and sign as you begin the offer process. Much of it is either required by law or by our office to inform you of your rights and options as a buyer. You will get copies of everything you’ve read and signed for your files.
Closing costs and seller’s concession
A question you are sure to ask me is, What are the closing costs associated with buying a home? This question will be answered by your attorney and certainly by your lender, who is required by law to give you a fair estimate of the costs. I can give you a rough estimate, enough to let you plan your budget. If you allow yourself between $8,000 and $10,000 for closing costs, you should be in good shape. If you are purchasing a condo, those figures may be even lower.
Even that amount may sound high to you—what goes into closing costs anyway? There are certain expenses that you have to pay in the course of a transaction. Your attorney may charge between $900 and $1,100 for his or her services. A home inspection costs about $450. There are fees for the title search, appraisal and other miscellaneous expenses. But the biggest pieces of the closing costs pie are your “pre-paids”—home expense amounts you will pay in advance: the first mortgage payment, the next quarter’s taxes, homeowner association fees if any, water and sewer fees, etc.
What if you need a little help paying your closing costs? You can have the sellers assist you with that in the form of a “seller’s concession.” The sellers will not actually be paying for your expenses, but here’s how it works: Let’s say that you and the sellers have agreed on a purchase price of $300,000 for the home. With their approval, you can have the contract state that you are buying the home for $305,000 with a $5,000 sellers’ concession. Your lender will approve a total purchase price for that amount, essentially agreeing to lend you an additional $5,000. At closing, the sellers will get the $300,000 they agreed to accept, and $5,000 will be given by your lender to your attorney to cover some or all of the closing costs.
There are several things to consider before making such an offer. First, the sellers have to agree to the concession. Second, the home will now have to appraise for an amount high enough to cover the additional $5,000 (more on the appraisal later). And last, you will essentially be borrowing $5,000 amortized over 30 years, which is quite an expensive loan for that small amount. Please consider all your options carefully when making an offer. If the end result is you getting to live in the home of your dreams, such small sacrifices may be worth it. But the decision should be carefully thought out.
Negotiating with the sellers
Once you have reviewed and signed the offer to purchase the home, it will be presented by me to the sellers’ real estate agent, typically via fax or email. You’ll find that virtually everything in a real estate transaction will be done and transmitted in an electronic format. From this point, one of two scenarios may happen.
Your offer may be the only one the sellers have received. Depending on the time and day of the week, they will review it with their agent and decide on a response to you. If an offer is made on a weekend, the sellers may want to wait until Monday morning to see if any other offers have been made as a result of weekend showings or perhaps an open house. There is no set rule as to how long negotiations take. I’ve had some completed in an hour and others take several days. If the sellers happen to be out of town or out of the country, you can expect delays.
Negotiations are a bit like a dance, a ritual where each side politely tries to get as much for themselves as possible. Typically you will make an offer, and the sellers will respond with a counter-offer somewhat less than the listed price of the home. Just as your initial offer is not your final number, their counter-offer is not necessarily their final number either. Real estate agents are keenly aware of this process, and I will do absolutely everything I can to politely but firmly make a case as to why the price of the home should be lower. The other agent is a professional as well, and will represent the sellers in telling me why their counter-offer is a fair price. You may now be asked to increase the amount of your initial offer. Bear in mind that I cannot make decisions on your behalf; every offer and counter-offer you make will be your decision, with my input.
The negotiations will continue until an agreement is reached or it becomes clear that you and the sellers will never agree on a price for the home. Once an agreement is reached, the transaction will be in the state of “offer and acceptance.” All previous negotiations were verbal; now the new accepted terms will be recorded on the original contract, or perhaps a fresh one will be printed. I will give, fax or email the new contract to you for your signature, then forward it to the sellers’ agent for the sellers’ signatures.
The above scenario is the simple one. What happens if there are multiple offers on the home? In that case, the sellers will usually not negotiate separately with each buyer. Typically the sellers’ agent will contact all the buyers’ agents and inform us that there are multiple offers on the property. We will then be requested to ask you for your “highest and best” offer, essentially your final offer on the home.
If this happens, there is no more negotiating on your part. You will have one last chance to come in with a different offer on the home if you wish. Notice the “highest and best” description—that actually means quite a bit. The “highest” part is obvious: If you had offered $385,000 for a townhouse before, you can increase the offer to $390,000 or whatever you are willing to pay for the home. The “best” part refers to the other two points of the offer I mentioned previously, your down payment and the closing date.
Your original offer indicated your down payment, the amount of your own money that you are offering to pay in addition to the mortgaged amount. This amount is broken up into three parts on the offer: your initial deposit of $1,000, a second deposit due after attorney review, and the balance due at closing. The second deposit is given to your attorney or the sellers’ attorney once you are under contract. The amount is not fixed, but is generally 5% of the purchase amount if you are putting down more than 5% of your own money.
Let’s say that you are putting down $20,000 to buy a home, and your initial offer indicated a $1,000 initial deposit and a $5,000 second deposit, with the balance of $14,000 brought to closing. You now may want to improve your offer by changing the second deposit to $10,000. Why does this matter? you ask. Money is money; won’t the sellers get everything in the end?
The amount of the second deposit is sometimes as important as the amount of the offer itself. It represents your commitment to the deal, how much you really want this home. In addition, there is another very practical concern for the sellers. By the terms of the contract, the initial and second deposits may be kept by the sellers if the buyer breaks the contract without a good reason. Suppose that a buyer is already under contract to purchase a home, then finds another one that is nicer and priced $10,000 below market value. A buyer who only put down $6,000 total as a deposit may decide to lose the money in exchange for getting the nicer home; a buyer who already has $11,000 invested is likely to stay with the initial contract. In considering which offer to accept, sellers will often choose a buyer who is putting down more money earlier.
The third point of your offer that I mentioned is the closing date. This one is easy to understand. The sellers are looking for a buyer who is willing to close exactly when the sellers are ready to move out. The sellers may be looking for a closing as soon as possible, or they may want to wait until the end of the school year. If your initial offer included a date that does not match the sellers’ ideal closing window, you may want to change that date to match their needs.
Once your “highest and best” offer is presented to the sellers, there is not much more we can do. The sellers will decide which of the several offers to accept. They are not obligated to accept the highest offer; in fact, they may decide that every offer is too low. Often the sellers will choose a buyer based on the ability to close at a certain time or a comfort level with the buyer’s financial situation.
Let’s say that you are lucky—your offer has been chosen by the sellers, and the amended and signed contract has been sent to them. You are still not under contract, and there still is a possibility that something may happen to affect this transaction. We have to get through attorney review to get to our goal of being under contract.
By the terms of the contract, once both parties receive a fully executed (signed) copy of the offer, the attorney review period begins. I will immediately forward a full set of documents to your attorney. If you already have an attorney, I will simply need his or her contact information and take it from there. If you do not have an attorney, I will give you several names to contact, usually even before we have the fully executed copies of the contract itself. Don’t be intimidated by the thought of speaking with attorneys—they have done countless real estate transactions and will know exactly what questions to ask you and what advice to give you. Just follow their lead, trust them and never be afraid to ask them even the simplest questions. If you do decide to use an attorney whom you know or who has been recommended to you by a friend or family member, my advice is to be sure that the attorney specializes in real estate contracts. All attorneys can handle a real estate transaction, but if your choose one who is primarily a trial lawyer for example, he or she may not be able to give you the time and attention you need.
You will notice that the contract mentions a three-day attorney review period. This means that if no one does anything for three business days after both parties have received a signed offer, the parties automatically are under contract and have to abide by exactly what is written in the offer. In reality, what will happen is that you will receive a faxed or emailed letter from either your attorney or the sellers’ attorney fairly quickly, and the first sentence of the letter will state that the attorney is disapproving the contract. Don’t be shocked by this statement—the second sentence will state that the attorney will approve the contract if several changes are made.
The reason for this letter is two-fold. The attorneys will now exchange letters indicating what changes they want made to the contract. But by disapproving the original contract, they also stop the clock on the three-day attorney review period. The review period will now be extended or contracted to however much time both parties need to get their concerns addressed. I’ve seen attorney reviews concluded in one day, and I’ve seen one drag out for weeks.
Your attorney will never make a change to the contract without your knowledge and permission. He or she will advise you, but will still represent your needs and wishes. This is a very important time for you: use it to ask your attorney every single question you have about the contract, the transaction, or whatever else you feel you need to know about purchasing the home. You should come out of the attorney review period feeling confident about your decision and fully informed as to what will happen next.
Now is a good time for me to make a formal disclaimer: I am not an attorney, a building contractor or a lender. I am licensed in New Jersey to assist clients in the purchase, sale and leasing of real estate property. As much as I will be giving you my professional and sometimes personal advice on this transaction, I cannot give you legal, financial or construction related advice. So in our many conversations, there may be times when I say to you, “Please ask your attorney/lender/home inspector about that.” It’s not that I don’t know the answer or refuse to get one for you; it’s that you are best served getting advice from the correct professional.
During the attorney review process, I will suggest some questions you should ask your attorney. Most of the time transactions go along fairly smoothly with only small bumps here and there, but you have to be prepared to react if something happens once you’re under contract that may affect your decision about purchasing the home. That’s the sort of conversation you should have with your attorney during the review so there are no surprises later.
You should also be looking ahead during attorney review and getting a couple of tasks accomplished. First, start getting quotes for a mortgage. I will give you the names of at least two lenders you can contact, but I cannot recommend one over another, since I am not licensed to sell mortgages or give advice on them. You can speak with as many lenders as you wish, but do NOT pay anyone an application fee while you are still in attorney review. The reason for this is simple—you are not under contract yet, and the sellers may back out for any reason whatsoever, including accepting a higher offer on the home. Mortgage application fees may be non-refundable, so you should make sure that you are under contract before paying one.
The second thing you should be doing during attorney review is reaching out to home inspectors. If you do not know one, I will recommend several licensed inspectors to you. New Jersey law requires that home inspectors be licensed, so if you will be using someone you know, be sure that the company is licensed to do home inspections in New Jersey. You will want to have the home inspected as soon as possible after attorney review is completed in order to give yourself time to react to what the inspector will find before closing. Virtually all inspectors work seven days a week, so you should “pencil in” an appointment with one for a time that is convenient for you after attorney review is concluded. I will stay in touch with your inspector after you choose one, so don’t be concerned about rescheduling an appointment if the attorney review is not completed in time.
Once you, the sellers and both attorneys have agreed on the final form of the purchase contract, the last attorney review letter will be signed by either you and the sellers, or often by both attorneys on behalf of their clients. Those two signatures will signal that a huge sigh of relief is in order—you are under contract! Simply put, you are now legally obligated to purchase the home, and the sellers are obligated to sell it to you, and to you only. The sellers may continue to receive backup offers if they wish, but they cannot accept them while you are under contract.
The transaction will now enter a very active stage. Much will happen, some of it requiring your action, other things done behind the scenes. The two most important “contingencies” in the contract are your ability to get a mortgage and the successful conclusion of a home inspection. These are called “contingencies” because even though you are under contract to purchase the home, the contract can still be legally broken if you do not get a mortgage or if the home inspection reveals a major problem. Other things such as a title search and the appraisal can affect the transaction, and I’ll touch on those in a bit.
Getting a mortgage
As soon as attorney review is over, you will contact the lender you’ve chosen to work with and start the process of applying for a mortgage. There is no magic to it, just stay in touch with your mortgage representative and provide all the information he or she asks for. Your attorney may be speaking with the lender, and the mortgage rep may ask me for information as well. Much of this is routine exchange of information, and I will keep you informed of every move made. A title company will be involved as well, and their job will be to make sure that the title to the property is clear—there are no liens against the home, and if there are, the seller is able to pay them from the proceeds of the sale.
You will hear your attorney, mortgage rep and me mention an appraisal of the home you are purchasing. There is nothing required from you for this process, but you should understand what an appraisal is and what it means to you. First of all, the appraiser works for the lender, not for you. The lender wants to be sure that the home is worth at least what you’re paying for it—that it “appraises” for a certain value. The reason for this is straightforward: If for some reason you are not able to pay your mortgage and default on the loan, the lender wants to be sure that the home will bring enough money at a foreclosure sale to pay off your loan.
The appraiser will visit the home at some point and do his or her evaluation of the property. I will accompany the appraiser to open the door and provide comps for the home, but otherwise my interaction with him or her is restricted by law. You do not need to be at the appraisal; it is frequently rather quick if the home is a condo or a townhouse, and the appraiser will not speak with you anyway. Within a few days to a week your lender and attorney will get the results of the appraisal.
Do not confuse the appraised value of a home with the original listed price or the contract price. The two amounts may be in the same ballpark, but they are not the same. An appraisal does not indicate the value of a home—a home may be appraised for $450,000, but due to market conditions the “going rate” for similar homes in the neighborhood may be somewhat lower. Conversely, in a booming housing market a buyer may be willing to pay more for a home than its appraised value.
Hopefully the house you are buying will appraise at or above the purchase price. What happens if it doesn’t? The lender will not agree to give you a mortgage on a home that doesn’t appraise. Several things can happen at that point, and there is no rule or requirement that any one of the options is followed.
First, the sellers can agree to accept a lower amount for the home. If the purchase price is $350,000 and the home appraises for only $345,000, the sellers can agree to the lower amount.
Second, you can purchase the home at the contract price if you can prove to the lender that you have additional cash that is not needed for the down payment and closing costs.
Third, if you included a seller’s concession in your offer, you can reduce that amount to meet the lender’s needs. For example, if you offered $300,000 for the home with a $5,000 seller’s concession and the home appraises for only $302,000, you can reduce the concession to $2,000.
Fourth, you can walk away from the transaction without penalty. The mortgage contingency basically states that if you cannot get a mortgage through no fault of yours, the contract is void and your deposit money will be returned to you.
Your attorney and I will discuss all your options with you and help you decide the best course of action. This situation is not all that common, and for practical reasons the first option is usually the best solution. After all, if you cannot purchase the home for the original amount, no one else can either. Unless the sellers need a specific sale amount to pay off their own mortgage and costs, they may simply accept the lower sale price.
As the process of getting a mortgage is getting under way, you will confirm the appointment with your home inspector. The home inspection is a very important process of purchasing a home, and it often causes the most stress between buyers and sellers. I will be at the home inspection, and you should absolutely plan on being there as well. The purpose of your presence at the inspection is twofold—you will see for yourself everything the inspector points out as needing correction, and you will learn much about your future home from a professional.
A complete home inspection covers three elements, although not all three are required for every home. The first is the structural inspection of the home itself to make sure that all systems function properly and there are no major structural or safety issues. The second is a wood-destroying insect inspection to make sure that there are no signs of damage from termites or carpenter ants. The third is a radon test to make sure that the level of radon in the home is below a certain threshold.
Radon is a radioactive, invisible and odorless gas that is naturally produced by the decay of certain elements in the earth. Because it is natural, there is no way to map where it may or may not appear. Radon is present throughout New Jersey, but a home with a high presence of radon may stand right next to one where the levels are normal. That’s why every home should be tested for radon gas. You can search for the effects of radon on the Internet and speak with your home inspector about it as well.
A wood destroying insect inspection is not necessary if you are purchasing a condo on the third floor of a building, for example. Similarly, if you are buying a second or third floor condo, a radon test is not required. There is a myth that a radon test is not required if the home does not have a basement, but that is false: radon seeps through the ground into the lowest level of a home, and it can collect in the first floor of a building as easily as in a basement.
The inspector will arrive with a whole array of special tools and a ladder if one is needed. He will typically start the inspection outside, walking around the home and noting his observations. Please stay with the inspector and watch what he is doing. He will explain everything about the home to you, and you can ask him questions about how things work and how important are the faults he uncovers. The inspector works for you—don’t be afraid to speak with him.
One thing that I always tell every buyer before an inspection is this: You are not buying a new car, you are buying a used car. If the engine leaks and the fan belt is loose, the seller can be expected to replace the gaskets and tighten the belt. If the interior upholstery is stained and the carpet in the trunk is torn, the seller is not obligated to clean the interior and replace the carpet. If you want a car with a clean interior and perfect carpet, please buy a new car. Same with a home—you are inspecting it for structural damage, not for cosmetic defects. The sellers do not have to paint walls or clean carpets before you move in.
After the home inspection, the inspector will forward the results to your attorney, to you and usually to me as well, generally within a day or so. The list of noted discrepancies may be pleasantly short, or it may be longer. At this point you will have to decide which items noted by the inspector you wish to have addressed by the sellers.
This is by far the trickiest and least mapped part of the entire purchase transaction. There are no rules as to what you have to present to the sellers, and no rules as to what the sellers must do with the list you present to them. This is why it is imperative that you discuss this part of the transaction with your attorney during the attorney review. Once you get to this point, your options may be limited.
I urge you to discuss the inspector’s findings with me first, then with your attorney. Although I am neither an attorney nor an inspector and cannot tell you what to do about specific findings, I will certainly advise you about the nuances of a real estate transaction and how best to work with sellers after an inspection. Let’s say that the inspector finds six things wrong. One or two of them may be relatively minor—a missing sink stopper or a loose light fixture that needs new screws. Other items may be more substantial. I may advise you to consider what you ask the sellers to repair. Sometimes sellers get so upset about what they consider “nitpicky” requests that they refuse to address bigger issues.
Which brings up the all-important question: What do the sellers have to repair? The answer is not set in stone and is not always addressed fully in the contract. I’ve seen situations where the sellers addressed every item on a long list, and at the other extreme I’ve had two transactions where the sellers refused to address even a single item. This is when you will need your attorney’s advice on how to proceed. The choice is ultimately yours, as each buyer’s decision may be different in any situation.
If the sellers agree to address an issue, they may do so in one of two ways. They may repair the fault themselves or have a professional make a necessary repair, or they may offer you money in lieu of fixing the problem. An example would be broken window seals. Rather than take the time and effort to hire and wait for a contractor to make the repairs, the sellers may get an estimate for the repairs and offer to give you the money at closing. This is very common and often the most expedient way to move a transaction along.
I mentioned radon earlier, the invisible and odorless gas. How will the inspector test for that and how can a high level of radon be remediated? Before he leaves the home, the inspector will leave an open test canister somewhere in the lowest level of the home. Within three to five days he will return to pick it up and send the canister to a testing lab. The test results are usually available within a week, and will be forwarded to you, your attorney and to me.
Radon is measured in picocuries per liter, pCi/L for short. If the test registers a level of 4 pCi/L or higher, the sellers must remediate the gas at their expense. This is a fairly straightforward solution—a company specializing in remediation will install PVC piping if needed and a fan to continuously draw air out of the home. Once in place, such a system will keep the home free of elevated levels of radon indefinitely.
Once the home inspection issues have been resolved, you can turn your attention back to your mortgage. You will be waiting for a “commitment letter” from your lender, a document that states that based on the underwriters’ examination of the facts presented to them by you, the appraiser and the title company, the lender is agreeing to give you a mortgage. This is usually the final step—once the inspection and mortgage contingencies have been met, there is nothing stopping you from purchasing the home of your dreams.
Throughout this entire process you will be hearing from me on an almost daily basis. I will be communicating with you, your attorney, the listing agent, your inspector and your lender as necessary. You will never be alone, and you can always call me if you have any questions or need advice. After the two main contingencies have been met, things will quiet down as everyone waits for the closing. About two weeks before the scheduled closing date, I will email you a list of utility companies to contact to schedule the change of services to your name after closing. I will also remind you to get a home insurance policy before the closing date.
The attorneys will confirm the actual closing date and time. The closing will usually take place in your attorney’s office, although once in a while it may be in the title company’s office or the RE/MAX conference room. The week before closing may be hectic with a flurry of last minute requests from your lender and documents sent back and forth, but this is normal.
If you are getting a mortgage on the home, there is a critical step that you should be aware of. By law, your lender must give you a Closing Document, or “CD,” at least three business days before the closing. This document explains, to the penny, what your closing costs will be. You are given three days to review the CD, ask your lender or attorney to explain anything that is not clear to you, and correct any mistakes you spot on it.
The CD will usually be emailed to you, and you must sign for it electronically when you get it. If you do not sign for the CD allowing you to examine it for three business days prior to the closing, you cannot close on that date! This is a law, and your closing will be delayed as a result, possibly impacting any mortgage rate lock you have and certainly your physical moving plans. Trust me, I will be monitoring this carefully to make sure it does not happen.
There will be one last step to perform before closing: the walk-through. There are two, one about a week before the closing and the second one immediately before it. The purpose of the first walk-through is to see if all the agreed-to repairs have been made. This allows time before closing to have the sellers make corrections and adjustments as needed. As you can imagine, leaving this for the last day may result in unwanted surprises.
I will schedule the final walk-through with you and the listing agent, and we will meet at the home, usually a few hours before closing. We will walk through the entire home and do an inspection. We will not be looking for things wrong with the home; that was done earlier. What we will check is to make sure that you will be taking possession of the home exactly as you had agreed to purchase it. For example, if the home comes with fancy chandeliers, you will want to make sure that they are present and have not been replaced with cheaper light fixtures. We will also check to make sure that there is no damage that happened since the home inspection—broken windows or holes in walls caused by movers, etc. If there are discrepancies, they will be addressed at closing. Typically the attorneys will discuss a financial settlement and offer you money to cover the cost and proceed with the closing.
I will meet you at your attorney’s office or the title company’s office for the closing, which is usually a happy affair. Often a title agent is present as well and will take charge of explaining all the documents you will be signing. It is not unusual for the attorney to joke with buyers throughout the long process of signing dozens of forms. Sometimes the sellers come to the closing as well, but they do not have to, and more frequently now I do not see sellers at closings.
After all the forms have been signed and your last minute questions have been asked of the attorney and answered, you will be formally presented with the keys to the home and wished the best of luck by your attorney and the title agent. You will now be the proud owners of a new home, and your next step will be to go out and celebrate.
I’ve tried to cover as much of the home buying process here as possible, and these are certainly the major points. There are many details that your attorney and I will discuss with you as the actual process unfolds. The main thing to remember is that this is not rocket science. Your task will be to make decisions, and my task will be to assist you in every way that I can to make sure those decisions are informed and you are never alone. I will do everything in my power to make sure that every step of the way—from initially looking at homes to sitting at the closing table—you receive my most professional and personal advice and service.
After the transaction is over, be assured that I will not simply go away. Please feel free to contact me regarding anything and everything about your new home: which contractors to use for remodeling, the best way to get to New York City or the Jersey shore, the location of nearby malls and restaurants, etc. If I’ve done a good job and made this transaction professional, easy and pleasant, I want to be your Realtor for life, someone you can turn to anytime for any reason whatsoever.
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