Real Estate Closing FAQ's
Purchasing a new home has often been thought of as a happy occasion; a time of new hopes and of new beginnings. The closing table, on the other hand, has received a somewhat less cheerful ovation. Perhaps the most prominent reason for the feelings of anxiety at closing is the fact that most purchasers simply do not know what to expect when the sit down at the closing table. While no two closings are exactly alike, the elements are the same. The information below will help to answer some of the questions you may have, especially if this process is unfamiliar to you.
WHAT IS A CLOSING?
When a buyer and seller agree on the terms of a sale of real property, a contract is signed. This contract is "open" and will "close" when the buyer pays the seller and legal ownership is transferred. Since much of the work involved to reach that goal is performed well ahead of the closing date, attorneys and real estate agents frequently also refer to the entire transaction as a closing.
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WHEN SHOULD I FIND AN ATTORNEY? WHAT DO THE DO? WHAT DO THEY CHARGE?
You should find an attorney as soon as possible. Attorneys make sure that a contract reflects the intention of the buyer and seller and that the property will be transferred so that the buyer becomes the owner and the seller is paid the sale price. Find out if your attorney charges a flat fee for representation in a closing. By engaging his/her services at the outset, you will have legal guidance throughout the entire transaction that may prevent future problems.
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DO I NEED A HOME INSPECTION? WHAT DOES THE INSPECTOR DO? SHOULD I BE THERE?
A home inspection performed by an experienced inspector will alert you to potential problems in the structure, construction, and mechanical systems of your house. While this is no guarantee of the prevention of future problems, it is an important first step to making sure you are getting what you intend. Your presence at the inspection will give you direct experience of this overview. If problems are discovered, you may be able to renegotiate your contract or cancel it. Other inspections that may be done are for radon and lead-based paint, and those required for septic systems, wells and sump pumps.
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WHAT GETS SOLD ALONG WITH THE HOUSE?
Generally, the contract includes anything attached to the physical structure; anything removable typically does not stay. So curtain rods stay, while draperies do not. This can be negotiated as part of an offer and the agreement put into the contract.
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WHEN DO I APPLY FOR A MORTGAGE?
A buyer should apply for a mortgage pre-approval even before finding a house. Once you have a contract to purchase a property, your mortgage application can be completed and you can receive a quick response from your lender.
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WHAT COMES NEXT AFTER THE MORTGAGE COMMITMENT?
If you have a verbal commitment, wait for the written one. Once you have that, sign it and the accompanying disclosures, and return them to your lender so your loan will continue to be processed. Carefully read it to see if there are any conditions that must be satisfied before closing is authorized to be scheduled. If you are not sure, check with your attorney and make sure that he/she receives a copy as well.
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WHAT ABOUT HOMEOWNERS INSURANCE?
You will need Homeowners (Hazard) Insurance in order to schedule your closing with your lender's attorney. You can start checking into this as soon as you have applied for your mortgage. Decide what coverage and company you want, and let your insurer or agent know as soon as you have received your commitment. Once a closing has been scheduled, let your insurance agent know that date. If you are not getting a mortgage to buy your house, you still need Homeowners Insurance to protect yourself in case of fire or other loss. If you are selling, be sure to keep your insurance in effect until the closing has taken place.
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WHY IS EVERYONE ALWAYS WAITING FOR THE SEARCH & SURVEY?
The search (also called an Abstract of Title) is a written record of all the recorded documents in the County Clerk's Office that relate to the land that your house is on. Your attorney will examine it to determine who has the legal ability to transfer the property to you. The survey is a small map of the land, showing the location of all structures. Together these two things are called the "title documents," and their examination is essential to make sure that you will be the owner of the piece of land that you intend to purchase. They are also necessary to prepare title insurance for both the new lender and owner. The seller's attorney will use these items to find out what documents the seller will need to sign and what other curative documents will be needed for closing to take place.
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WHEN DO I MOVE?
Ordinarily the buyer takes possession of the property at closing. Sometimes, however, the needs of the parties would be better satisfied with pre-closing or post-closing occupancy. As long as both the buyer and seller are willing to accommodate the needs of the other, an agreement can be created that protects everyone involved. If you think this will be important for you, let your realtor know so that it can be included in your contract. Be sure to check with your attorney before scheduling your move.
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WHEN DOES THE FINAL INSPECTION TAKE PLACE?
The seller must keep the property in the same condition it was in when the contract was signed. Absent fraud, New York is a "buyer beware" state, and after closing, any repairs or replacements become the new owner's responsibility. It is important to check the property one last time to make sure that it complies with the contract. Your realtor will accompany you on this inspection.
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DO I HAVE TO BE AT THE CLOSING?
Ordinarily, if you are purchasing with a mortgage, you will need to be present to sign all of the closing documents. If this is inconvenient, you may give another individual your Power of Attorney so that he/she can sign on your behalf. Some lenders will not accept this, so make sure that you find a lender who will. Sellers and cash purchasers do not need to be present.
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WHERE AND WHEN WILL MY CLOSING TAKE PLACE?
Your closing location is decided by your lender's attorney. Some choose the County Clerk's Office for their convenience. Again, if location is crucial to you, check with your lender before completing your application. In New York State, the closing date in a contract is not a material element and can be seen only as a target date. Your attorney will let you know the exact date as soon as it has been scheduled.
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WHO PAYS THE CLOSING COSTS?
Allocation of closing costs is determined by the contract, which varies by location. Frequently the seller pays the costs related to the transfer of the property, and the buyer pays those costs associated with his/her mortgage. You should ask your attorney to give you an estimate when you have your first conversation. Remember, though, this will only be an estimate.
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HOW MUCH MONEY DO I NEED, DO I GET, AT CLOSING?
Generally, a buyer will need the balance of the purchase price, plus his/her share of prorated real property taxes, as well as the lender's closing costs. These will be calculated by the lender's attorney very close to closing. The exact figures will typically not be available until days before your closing. In order to be ready, you funds should be available locally since you will need to obtain a cashier's check or bank draft in a short amount of time. Your attorney will give you this information, as well as tell you how these checks need to be broken down and to whom they should be made payable. The closing proceeds will be used to pay off any existing mortgages, and the seller will receive the proceeds of sale, less any seller's closing costs.
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