The closing process of buying a home consists of many steps that will seal your deal. Here are a few of the final steps involved:
The Offer to Purchase
There is no way to guarantee that the offer you make will be accepted by the seller. But once you find the home of your dreams, it’s wise to act fast. A good rule of thumb when making your initial offer is to offer eight to 10 percent below the asking price so that you have some room to negotiate. While negotiating, make sure you have your highest price that you can afford in mind so that you don’t top it.
The Deposit
Earnest money, or a deposit, is a demonstration of good faith and commitment by the buyer to the seller. It is usually 1 percent of the home’s purchase price and is included in an offer to purchase. The deposit is usually held in trust by the real estate agent or the seller’s lawyer until the deal closes. Keep in mind that you may lose your deposit and be sued for damages if you decide not to close on a deal once your offer has been accepted. If the seller decides not to accept your offer, your deposit will be returned to you. And if the sale proceeds, your deposit is usually applied to your down payment on the house.
Contingencies
Before the buyer is required to close, there are certain requirements specified in a contract that need to be met. These typically include: the buyer’s securing of financing and an acceptable house inspection. A financing contingencies run for 30 days and an inspection contingency covers a 10 to 14 day period from the acceptance of the contract. When the market is in favor of a seller, buyers may be asked to fulfill their contingency requirements in a shorter time frame.
Home Inspection
A professional conducts a thorough examination of a property to assess its structural and mechanical condition. The idea is that a trained professional will be able to catch potential problems that a buyer may not be able to.
The Contract
The contract follows the acceptance of an offer by the seller and is a legal and binding obligation on the part of the buyer. It outlines the details of the transaction including: a description of the property, the selling price, the date of closing, the possession date and any applicable contingencies.
Settlement Sheet
Also known as a “closing statement” or a “settlement statement,” this document is required by the Department of Housing and Urban Development to account for all financial aspects surrounding the sale and purchase of a home. Items on the statement include real estate commissions and initial escrow amounts. The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement.
Closing Documentation
Before you can close on a house, you must complete some paperwork. This includes a title to search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner’s insurance.
Closing Costs
Closing costs will vary from buyer to buyer, by may include: a loan origination fee, an appraisal fee, the cost of a credit report, a lender’s inspection fee, the cost of title insurance, a mortgage broker fee, taxes and a fee for document preparation.
Final Arrangements
Before the deal is closed and you take possession of the home, you must make arrangements regarding utility service and first mortgage payment.
Settlement
This describes the payment of the balance of the purchase price the buyer owes on the property and the transfer of the title and it takes place on the possession date specified in the agreement.
Information from Yahoo Real Estate How-To Guides: Buying & Selling
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