13 Steps to Closing a Real Estate Deal
Closing a property deal can be a long and stressful exercise. It involves lots of steps and procedural formalities. Closing occurs when you sign the papers that make the house yours. But before that fateful day arrives, a long list of things has to happen. This article provides important guidelines for a property buyer. It must follow the closing from the moment they accept your offer to the moment you get the keys to your new home.
Account Escrow is a held account by a third party on behalf of two parties involved in a transaction. Home sale involves many steps which takes the time that can span weeks. What is the the best way to mitigate the risk of either the seller or the buyer getting ripped off? Have a neutral party hold all money and documents related to the transaction. This holds until everything settles. Once all formalities are over, the money and documents will move from the custody of the escrow account to the seller and buyer. Thereby guaranteeing a secure transaction.
Do a Title Search and Get Title Insurance
A title search and title insurance provide peace of mind and a legal safeguard. When you buy a property, no one else can try to claim it as theirs later. Be it a spurned relative who left out of a will or a tax collecting agency which wasn’t paid its dues. A title search is an exam of public records to determine and confirm a property’s ownership. A search also find out what claims, if any, are on the property. If there are any claims, those may need resolved before the buyer gets the property. Title insurance is indemnity insurance. Insurance that protects the holder from loss sustained from defects in a title to a property. It protects both real estate owners and lenders against loss or damage occurring. Loss or damage from liens, encumbrances, or defects in the title or actual ownership of a property.
Hire an Attorney While Getting Legal Aid is Optional
It is always better to get a professional legal opinion on your closing documents. The complex jargon often mentioned in the property documents is difficult to understand. Even for the well-educated individuals. For an appropriate fee, opinion from a real estate attorney can offer many benefits. Benefits including hints of any potential problems in the paperwork. In some states, the law will need an attorney’s involvement to handle the closing.
Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is not necessary to close a deal, it can also help you close the deal quicker. In turn, being pre-approved can give you more bargaining power when negotiating. It signals to the seller that you have strong financial backing. Getting pre-approved for a mortgage allows you to know the limit for buying a property. It helps in saving time and effort while searching for the properties that fit into your budget.
Lock Your Interest Rate
Rates, including those offered on a mortgage, can be volatile and subject to change. A 0.25 percent rise in interest rate can increase your repayment amount, repayment tenure or both. It is advisable to lock the interest rate for the loan in advance. You do not want to be at the mercy of the market fluctuations. This can be a big risk if the rates rise before you complete your property sale. Pre-approved mortgage offers the facility to offer you a rate lock. This means that you can secure a favorable interest rate for the loan. Chargeable rates are subject to many factors. Factors like applicant’s credit score, geographic region, property and the type of loan applied for. Attempts to lock in at favorable rates can be beneficial.
Negotiate Procedural Costs
Such services take advantage of consumers’ ignorance by charging high fees. Junk fees. A series of charges that a lender imposes at the closing of a mortgage. It is often unexpected by the borrower and not explained by the lender, are a big cost. Items like administrative fees, application review fees, appraisal review fees, ancillary fees, processing fees and settlement fees. Even fees for legitimate closing services can inflate. Be willing to speak up and stand your ground. You can usually get junk fees and other charges eliminated or at least reduced.
Complete te Home Inspection
A home inspection is a physical examination of the condition of a real estate property. It is a necessary step. Not to only know about any problems with the property but also get a look and feel of the surroundings. You may find a serious problem with the home during the inspection. You’ll have an opportunity to back out of the deal or ask the seller to fix it or pay for you to have it fixed. As long as your sale offer included a home-inspection contingency.
Complete the Pest Inspection
A pest inspection is separate from the home inspection. A specialist makes sure that your home does not have any wood-destroying insects. Insects like termites or carpenter ants. The pest problem can be devastating for properties made of wooden material. Mortgage companies mandate that minor pest issues resolve before you close the deal. Even a small infestation can spread and become very destructive and expensive to fix. Wood-destroying pests you need to end. You’ll want to make sure the issue can resolve for a cost you find reasonable. Or for a cost, the seller is willing and able to pay before you complete the sale of the home. Some states will require pest inspections.
Renegotiate the Offer When Your Accepted Purchase Offer Completes
If inspections reveal any problems, you may want to renegotiate the home’s purchase. Reflect the cost of any repairs you will need to make. You could also keep the sale price the same but try to get the seller to pay for repairs. You may not have much scope to demand repairs or a price reduction. In case you’re purchasing the property “as is,” there is no harm in asking. You can also still back out without penalty if there is a major problem that the seller can’t or won’t fix it.
If your real estate agent helped you draw up a good buy offer, it should be contingent on several things.
Obtaining financing at a rate not to exceed a percent that you can afford the inspection. An inspection not revealing any major problems with the home
The seller disclosing any known problems with the home pest inspection. An inspection not revealing any major infestations or damage to the home.
The seller completing any agreed-upon repairs as a part of active approval. Such contingencies must be off in writing by certain dates. Which should also state in your purchase offer. In some purchase agreements, contingencies approve (also known as constructive approval). If you don’t protest them by their specified deadlines. So, it becomes important for buyers to understand the approval process. Abide by taking necessary actions by the mentioned dates.
Track Time-Bound Funding Requirements
You most likely deposited earnest money when you signed the purchase agreement. It is a deposit made to a seller indicating the buyer’s good faith, seriousness, and genuine interest. All this is in the property transaction. If the buyer backs out, the earnest money goes to the seller as compensation. If the seller backs out, the money goes back to the buyer. To complete your purchase, you’ll have to deposit more funds into escrow. The original earnest money deposit is generally applied towards the down payment. Arrange for the various payments required at different times, before the deal closes. Failure to offer the required money in time can lead to risks. Risks of the deal getting canceled, money going to the seller, and charges for services you availed.
One of the last steps before you sign your closing papers should be to walk through the property one last time. You want to make sure no damage occurs since your last home inspection. Also, the seller applies required fixes, no new-found problems, and nothing included is gone.
Understand the Papers
Paperwork forms the most critical steps of closing a property deal. Despite there being a heap of papers filled with legal terms and jargon, we recommend to read it yourself. You may not understand certain terms or portions. One can look up for an explanation on the Internet or consult a real estate attorney. You may feel pressured by the people who are waiting for you to sign your papers. People like the notary or the mortgage lender. Read each page as the fine print will have a major impact on your finances and your life for years to come. In particular, make sure the interest rate is correct. Make sure all other agreed terms, like no prepayment penalty, get a mention. Compare your closing costs to the good faith estimate given at the beginning of the process. Throw a fit about any fees that may appear off.
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