The closing table is where both the excitement and intimidation come together.
A lot had to be accomplished prior to you sitting at the closing table. Reaching this phase means:
- all inspections have been completed
- the application for a mortgage has been accepted
- and the title has come back clear of defects
Once the lengthy stacks of documents are signed and the sale is recorded, excitement wipes away all the intimidation. It’s time to take your keys and move into your dream home.
When buying a home, you want to look at the entire process from an eagle’s point of view: seeing the whole picture. In buying a home, this means you look at the entire process – from beginning to end. Whether you’re a first-time buyer or an experienced buyer, a home will represent the largest purchase of your lives.
It is important that you have an understanding of the process.
With knowledge comes power. And this power makes the home‐buying experience enjoyable and exciting.
Knowing your budget and price range helps make the process go smoothly. To get pre‐approval, buyers can either:
- Use a mortgage broker who uses various lending institutions to find the best rate and mortgage plan
- Use a bank with which you may already have an existing relationship. Banks typically offer only their own loan programs
Costs to buying a home will depend on your state requirements, but typical costs include:
- Lawyer’s fees. Leave room for them in a budget to prevent any unwelcome surprises. A lawyer will charge a base fee for their services and then add extras, called disbursement fees, onto the base fee.
- Disbursement fees can vary depending on the number of costs incurred and the type of property being purchased, such as a condominium or a home. Examples include Estoppel certificates for condominiums, the Real Property Report for homes, and others such as mortgage registration, couriers, and more.
- Moving expenses. Will you be moving everything yourself, renting a truck, or hiring a moving company? These costs can add up. And don’t forget to set up utilities such as cable, internet, electricity, heating, and water. Some utilities may require a deposit.
- Property taxes can be set up to be paid monthly or yearly, and the property owner will make pro‐rated payments each month. In many cases taxes and insurance will be included in your monthly mortgage payment.
- Repair costs. Put money aside if you are buying a “fixer‐upper” requiring work.
If you budget for these costs then you are less likely to be surprised at the closing table. Now that you know how much you can afford, it’s time to speak to a Realtor®.
Most homeowners plan to live in their home for a number of years. So understanding the long-term payment process is important. The old adage of real estate – “buy low, sell high” ‐ is a reasonable goal if you can minimize real estate fees, closing costs, and the purchase price.
When that dream home is finally found, it’s time for you to submit an offer. If possible, you should see if your Realtor® can find out why the property is being sold. This can be a slippery slope (due to the Privacy Act). Keep in mind the seller is under no obligation to disclose this information. However, if the seller shares this information, it can help you determine your initial offering price.
Once you find a house to make an initial offer on, take the time to look at the other homes in the area similar in size and quality.
- Your initial offer should be a strategic move.
- One way to do this is by determining your maximum purchase price and then work backwards.
- The negotiation process can be very emotional for both for you and the seller, which makes your Realtor® a helpful guide.
- When you receive a counter offer, you must determine if that counter offer fits your price expectations.
A key point: with reasonable interest rates, a price difference of $5,000 might only represent a $20 difference in the monthly payment—a minimal expense considering your goal will be to increase the value of the property over the long term.
When making an offer, you will require that certain conditions are met before the contract you submit becomes a firm deal. While your concerns should be satisfied, it is important that they not include too many conditions, as this could negatively affect negotiations.
The two most common conditions are home inspection and financing.
Home Inspection
When hiring a home inspector, you should make sure that they are knowledgeable. Ideally, the home inspector will be known to your Realtor®.
Their rate will vary depending on the size of the property and its amenities.
- a standard home inspection to identify potential structural or mechanical problems (standard fees range between $400 and $600)
- a negotiated flat fee dollar amount to inspect additional amenities; i.e. swimming pool, barn, etc.
Unless the property is brand new, you should expect that the home will need some work, and avoid trying to “nickel and dime” the seller. In all likelihood, the purchase price will already take the condition of the property into account.
A home inspector provides a general overview of the home’s condition.
They assess both its interior and exterior while checking the functionality of all its mechanical systems such as the:
- plumbing
- heating
- electrical
The inspector will complete a report for you to review and will make note of any problems they find.
If there are severe problems, then you should negotiate with the seller to hire a professional to fix them. If there are no severe problems, but only minor maintenance issues, then you should opt to correct them after the sale rather than bringing them into the negotiation process.
Financing
The home has been inspected, and it’s time to request financing. As mentioned earlier, getting pre‐approval is helpful in determining how much you can afford. Once everything has been approved, the bank may arrange to send an appraiser to the property. As the appraisal is completed and approved, the lender will notify you.
Special Consideration When Buying a Condo
Another condition you may need to meet if purchasing a condo is a review of the condominium documents. These documents include the by‐laws, budgets, financials, minutes, and reserve fund study reports. The documents are usually produced by a condo management company to ensure that the condo is in good shape and that no special assessments or budget increases are expected. This helps you become aware of any upcoming issues and make an informed decision.
Subject To Sale
If you must sell your home before agreeing to buy a new home, you will request a condition called “subject to sale.” This condition allows you to enter into an agreement with the seller while retaining the right to either buy the home as agreed or step aside if another offer is received and your home has not yet sold.
This is referred to as a “first right of refusal.” If another offer is received that doesn’t require the sale of your home, you typically have from eight to twenty‐four hours to make a decision. You can remove the condition and move forward with the sale without selling your home or walk away from the property.
This condition is rarely used.
Sellers do not like it because the pending offer tends to keep new potential buyers who don’t need to sell a home from viewing their property.
Possession Date
You must decide what date works for you and how that date will affect the cost of closing.
You want to take into consideration the frequency of your mortgage payments—whether they are bi‐ weekly, semi‐monthly, or monthly.
If you have a lot of personal belongings, you may consider trying to close on the home as much as two weeks early to allow extra time to move and minimize stress.
Keeping the Appliances
“Chattel” is known as movable articles of personal property other than buildings or land.
The purchase contract should clearly specify the chattel included or excluded in the sale.
Typically, basic appliances such as a refrigerator, stove, hood fan, dishwasher, etc. are included in the sale. Other items that may also be included are window coverings, garage door openers, and a vacuum system.
Usually, washers and dryers are not included in home sales, but are included in apartment condos and townhomes.
Once you have agreed with the seller on the price and conditions, the ball enters your side of the court—it is up to you to work toward fulfilling the contract conditions. The inspection condition will be met if the home inspection is clear or repairs are negotiated.
With a financing condition, you must provide your lender with the necessary information to obtain approval of your financing. This includes any other conditions requested in the purchase contract. Your Realtor® will help guide you in this process.
Taking Possession
Once all conditions have been satisfied, it’s finally time for you to take possession of your dream home.
- For you, this is the best time to begin coordinating with the settlement company or, if you do not have one, use one recommended by your Realtor®. An appointment with the settlement company is usually set up a few weeks before you take possession of the home.
- This is when you sign all the necessary documents; including the title transfer and mortgage.
- When everything is signed, you should inform your Realtor®, so they can schedule a walk‐through on the possession date to ensure that everything is done. This walk‐through will show you that the property has remained in the same condition as when it was first seen. Be prepared though – the home may appear stripped‐down without furnishings.
- Once the sellers’ lawyer or Realtor® notifies your Realtor® that all funds (and the mortgage) have been received, the keys are released, and you finally have your dream home.
If you recall, you learned the benefit of looking at home buying from an eagle’s point of view. Imagine going through this process without any knowledge of what to expect. Having the right people at your side will make buying a home a more enjoyable experience.
