Contracts & Closings

       

CONTRACTS
The Contract stage of the sale transaction is analogous to laying foundation for building a house.  If the Contract is properly prepared, your closing will go smoothly and both the Buyer and Seller will be happy and feel good about the transaction they have concluded.  The Contract MUST contain all of the agreements between the Seller and the Buyer; furnish all of the terms and conditions to be included in any purchase money note and mortgage;explicitly delineate closing costs, prepaid expenses and clearly provide who will pay each of these; clearly define and/or limit the Seller’s warranties as to the condition of the property; clearly define and/or limit the Seller’s warranties as to the condition of the property including the roof, electrical, plumbing, heating and air conditioning systems; provide for the Purchaser’s right to have an independent inspection performed; include or omit a provision for prorating taxes, insurance interest and rents; provide for disposition of the escrow account; provide for a closing date; provide for a possession date; provide for the disposition of any existing loan; deal Seller’s release or non-release of liability on the existing loan; provide for termite letter if required by lender or
Purchaser; provide for disposition of surplus in escrow account; provide for “Guaranty Mortgage” if required by Seller; describe all items to be conveyed under the Contract; provide for transfer or cancellation of existing homeowners insurance; include all spouses’ names on Contract; provide for Seller’s right to continue marketing property if applicable; provide for contingency for sale of
Purchaser’s existing home; and etc.

In addition to the contract, many states require all sellers of residential real estate, of one to four dwelling units, to give to the purchaser prior to acceptance of a real estate purchase contract, a Residential Property Disclosure Statement, in the form provided for in said act regarding the condition of the property, including any material defects know to the owner.

The condition and requirement of each type sale and loan differ and you should utilize and complete real estate contracts WITH CAUTION AND AT YOUR
OWN RISK.  It is wise to utilize an experienced real estate closing attorney to assist you in preparing your Contract or at least reviewing it before signing it. 
All of your rights and liabilities are irrevocably established when the Contract is signed.  

CLOSING
Local custom dictates how real estate closings are handled. In many states closings are handled by a title company while others may have the custom of using a real estate attorney to handle the closing.

Below is a list of states which identifies those using title companies and those who use attorneys for real estate closings.

CHECK LIST FOR ITEMS THAT WILL BE PERFORMED  IN PREPARATION FOR CLOSING BY EITHER BUYER, SELLER OR CLOSING ATTORNEY

ON ALL SALES
Give closing attorney legible copy of signed contract with all revisions.

Give closing attorney the name and address of every mortgage company (including loan number) or individual who holds a mortgage on the property being sold.

If required by contract or if new loan involved, order termite inspection and have termite letter forwarded to closing attorney.

Arrange for or make sure borrower arranges for homeowners insurance policy.  Give closing attorney name of agent and the amount  of premium as soon as possible and have policy forwarded to closing attorney.

If the seller is paying off a FHA loan give the existing mortgage holder at least 30 days written notice of the seller’s intent to prepay.

Coordinate between the buyer and seller the transferring of the utilities.

Coordinate between the buyer and seller the date of possession and any provisions concerning rental of the house by the seller from the purchaser until the seller vacates the house.

Make sure buyers bring to closing the following items:
 A.  Cashier’s Check payable to the Closing Attorney for the funds needed to close.
 B.  Original and one copy of endorsement of new homeowner’s or hazard insurance policy naming all existing mortgage holders (including the seller if there is going to be a purchase money mortgage in     

Make sure the seller brings to closing the following items:
 A.  His copy of the insurance policy if it is being transferred to the buyer.
 B.   Keys to the house.
 C.   Warranties to all appliances.

Coordinate the closing date, time and place among the seller, buyer, closing attorney, mortgage company and any real estate agents involved.

ON LOAN ASSUMPTIONS
Determine if the existing mortgage is assumable and/or if it requires qualification by the purchaser, and if so, take the purchaser to the mortgage company to make application for the assumption.

Advise closing attorney whether or not the purchaser wants an owners title insurance policy.

Make sure the seller brings to closing the following items:
 A.  Amortization Schedule and payment cards for all mortgages being assumed.
 B.  A copy of the survey, original note, trust deed and any other documents regarding the property being conveyed.

ON ALL NEW LOANS
Give mortgage company legible copy of signed contract with all revisions.

Provide the mortgage company with the name of the closing attorney, termite company, hazard insurance company and surveyor that you desire to use.

Make sure the borrower receives a good faith estimate of the closing costs and prepays from the mortgage company and understands the approximate amount of funds that he will need to close.

Make sure the seller  understands the amount of discount points and other costs that he will have to pay and the approximate amount of money he will  net from the sale.

Make sure that origination fee and discount to be charged by the mortgage company do not exceed the contingency provisions in the contract.

Make sure the survey has bee ordered and have it forwarded to closing attorney.

Make sure the FHA or VA final inspection has been ordered and the property has passed final inspection.

Make sure all discrepancies and repairs required by FHA, VA or FNMA have been corrected.

Obtain city code letter if required and deliver it to closing attorney with amount of charge and who paid for it.

Make sure the buyer brings to closing all other documents required in the mortgage company’s commitment if they have not previously been submitted to the mortgage company or the closing attorney.

Advise the seller on “RE-FINANCES” and some secondary loans, that a 3-day recision period is required, and that proceeds cannot be disbursed until the expiration of this period.
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IF YOU HAVE ANY QUESTIONS REGARDING ANY ASPECT OF THE CLOSING, Call US 239-214-2333