Be Prepared for closing on the purchase of a home!
published on January 10, 2009
Between working with a REALTOR®, a mortgage broker or lender, and a title company, a buyer of a home might think that they would be informed of everything necessary to prepare for the closing date on the purchase of a home. Unfortunately, this is not always the case due to the lack of communication, people getting busy, and people just forgetting to inform the Buyer. Here are a few basic items for a buyer to consider when preparing to close on the purchase of a home.
1) Settlement Statement: A buyer should push to obtain a US Department of Housing and Urban Development "Settlement Statement" as early as possible – as many days before the closing date as possible. The Settlement Statement is the document that details all of the costs associated with a purchase including the purchase price, all fees and costs associated with the sale for both the buyer and seller, and the cash necessary for a buyer and/or seller to bring to closing. It is absolutely critical for buyers to review this document in detail as early as possible because lenders and title companies often make mistakes on the inital Settlement Statement due to miscommunication or a lack of information about changes that occur to the terms of the deal in the final days before the sale. Lenders often wait until the final days before the sale to get the paperwork to a mortgage broker and/or title company that would enable the title company to prepare the Settlement Statement. As such, it is important the buyer to push your mortgage broker or lender to get the paperwork done as early as possible.
2) Title Commitment: the title company will issue a title commitment to the buyer in advance of the closing date. Title companies are typically able to get this document issued earlier than the Settlement Statement, but a buyer should be sure to ask the title company when they will receive this document as soon as the house goes under contract just to be on top of things.
3) Cash at closing: If a buyer is required to bring "cash to closing", the amount of cash will be specified on the Settlement Statement. Be sure that you DO NOT BRING CASH, bring a cashiers check to closing or schedule to have the money wired. Buyers are often not informed they need to bring a cashiers check and they end up having to go to a bank after closing to bring back a cashiers check, which can delay funding.
4) Keys: Make sure that the seller brings all keys and other accessories such as garage door openers for the buyer to pick up at or after closing. The purchase is not complete until the deal is "funded" or the cash is actually transferred by the lender to the seller’s bank, so the seller may require that the buyer pick up the keys and other items once the deal is funded. Since the deal is funded after the buyer finishes signing all the closing documents, the buyer may have to pick up the keys and other accessories at a later time. However, other arrangements can be made with the seller depending on their comfort level to release these items before the deal funds.
5) Availability of Funds: If a buyer sells a home and uses the funds to purchase a home, the buyer needs to be sure to work out the details with their bank in advance of the closing of the purchase. If the buyer deposits a large sum of money into a bank account following the sale of their previous residence, the bank may place a 7 day hold on the cash with tiered access to the cash over the 7 day period. If this is the case, the buyer may not have the ability to get a cashiers check for the amount needed at the closing of the purchase. Buyers should be sure that their large bank deposit does not get held up at the bank and in turn get in the way of the closing of a purchase. Just speak to the bank manager when making a large deposit to discuss the situation – most managers have the ability to unfreeze the hold on the funds if the bank customer meets certain requirements.
6) Deposit: If the buyer leased the property for a short time before the purchase and if the buyer paid a deposit to the home owner, be sure that the seller brings the deposit refund to the title company for the buyer to pick up at or after closing.
7) Codes: Make sure the seller provides the buyer with all access codes at or after closing such as the alarm system, internal safes or pad locks, garage door openers, etc.
8) Home Warranty: If seller agreed to fund a home warranty for the buyer up to a certain amount, the title company will need the buyer to specify the home warranty company and the specfic home warranty package that they buyer has chosen BEFORE closing. The closing does not fund until this is done, so the seller will certainly want it done by closing and so will the title company. If the cost of the home warranty package is more than what the seller has agreed to pay, the buyer will need to leave a check for the difference with the title company.
9) Cleaning: If the buyer expects the house the buyer is purchasing to be clean upon possession, it is important that the buyer request this of the seller in advance. The seller is not required to clean the house unless it is previously agreed upon in the contract, although it is courtious and an industry standard for a seller to do so. A buyer should be sure that the seller plans to have the home cleaned just before closing if the buyer expects it to be cleaned.
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