Home Seller's Guide - From Sale to Settlement

From Sale to Settlement

The final pieces are falling into place. Then, one day, you receive an offer for your home. Now you're ready to negotiate with a buyer, sign a contract, wait for your buyer to secure a mortgage loan, make preparations to move and, at settlement or closing, finally collect payment and hand over the keys. Throughout the process, your agent is at hand to help position each piece until, at last, you have the complete picture: sold, settled and moved.

What's the best way to negotiate when a buyer makes an offer?

When you receive a signed offer through either your listing agent, seller's agent or a buyer's agent, depending on local practice, you'll discuss the terms and buyer's qualifications with your agent.

Every seller has the basic options when presented with an offer. You can either accept or reject what's offered, or you can make a written counter-offer as soon as possible. You will want to keep the home on the market. Until you sign, buyers can always withdraw an offer if they suffer an ailment called buyer's remorse. Be sure to reply immediately because buyers are in the mood to buy when they make an offer, but moods change.

Either your agent, a seller's agent or a buyer's agent will have the information you need to determine whether the buyer is qualified to buy your home. Remember the first contract received often turns out to be the best. Experience shows the first 30 days on the market are critical because a backlog of buyers often exists. These buyers have been looking and waiting for a home just like yours. Overpricing misses out on this buyer backlog, and so does turning down good offers in the early days in the hopes of doing better later.

Negotiating the sale price and terms sometimes means walking a tightrope between the highest price the buyer is willing to pay and the lowest price you can accept. Arriving at an agreement may take patience, psychology, flexibility - and intuition. Keep the dialogue going until you agree on price and terms. Remember, sometimes a low offer can be turned into just what your are looking for.

Rely on your agent, who is in a unique position to help negotiations along, since your agent knows your situation. Your agent is professionally trained to find a meeting of the minds where everybody wins. After all, everyone has the same goal: you want to sell, the buyer wants to buy and your agent wants to close the transaction.

Your signed acceptance of a written offer becomes your sales contract. Except for removing any contingencies, this document is the binding basis for the sale. Contingencies are typically used to smooth acceptance of a contract without delaying the buying decision. Most contracts are contingent upon financing. This is for your protection as well as the buyer's, because you don't want to be tied to a buyer who can't deliver.

What's in a sales contract?

The sales contract is a very important document. The terms defined in writing will be used throughout the transaction.

Depending on the situation, terms and conditions will vary. Most important is making sure you know who pays what and what the costs of those items are. Here are some typically points contained in a contract:

• A description of the property, including separate personal property that is to be conveyed to the buyer.
• The amount of earnest money (also deposit), who holds it and what happens to it in case of the default. Earnest money is a partial down payment that shows the buyer's good faith in buying. Normally, earnest money deposits are returned to the buyer if the contingencies are not met.
• The sale price of your home.
• The amount of the buyer's down payment. This amount, plus the mortgage loan, equals the purchase price.
• The amount of mortgage loan the buyer intends to obtain, the maximum interest rate the buyer will pay and a time limit to secure loan approval and/or specified seller financing.
• Discount points and who pays them.
• The date of settlement or closing.
• Possession date and any pre- or post- settlement or closing occupancy agreement if you wish to stay in the home after settlement or closing and pay rent, or the buyer needs to occupy before settlement or closing.
• Contingency that will determine the fulfillment of the contract, such as: prompt inspection to determine the condition of your home; required improvements such as painting, roofing, termite inspection; legal review of the contract by either or both buyer's or seller's layers(s).
• Your signature and signature of the buyer.

What personal property will a buyer expect to go with the home?

When your home is sold there is a distinction between real property and personal property. Generally, the home, land, trees, shrubbery, fences, TV antenna and any fixture inside or outside that would cause visible damaged if removed is considered real property. Anything else is personal property.

Unless you say in the contract otherwise, real property stays and personal property goes with you. That's why some real property is often written into the contract to be clear it is not part of the sale. You'll want to try to conform to local practices regarding which personal property - such as a refrigerator - conveys with the sale.

You're free to remove whatever freestanding personal possessions you want to take with you, such as the washer, dryer, firewood, swimming pool chemicals, window air conditioner, etc., if the items do not alter the condition of the home. Clearly, you won't take with you the wall-to-wall carpet or built-in cabinets and appliances - unless your buyer agrees and this is spelled out in your sales contract. If you do agree, you must repair any holes or damage.

When you place your home on the market, decide what's to stay and include these items in the sale price. Some home sellers leave behind awning, draperies, blinds, shades and rods bought to fit specific widow. Sometimes buyers ask for personal property like garden tools, or, if you are moving to an apartment, you may offer to leave the tools.

Whatever you wish to take with you, either remove before showing your home or specify in the written contract that it does not go with the home. Some items like chandeliers are normally considered real property. You can agree to take it, but if your sale hinges on the conveyance of the chandelier, let the chandelier go.

How long will I wait between sales contract and settlement?

During this time your agent will probably be busier than ever. Your agent will facilitate the process all the way through settlement or closing by keeping in touch with all parties, ironing out problems, expediting the loan process, arranging inspections, running papers across town, coordination appointment dates. You can help speed up the process by signing the contact promptly and making any repairs required as soon as possible.

Your sales contract can specify how long you're willing to wait, but it must be realistically based on the time lenders are taking in your area to process loans.

Depending on the type of financing your buyer is applying for, a typical waiting period can be any time between 30 and 90 days, but sometimes more or less. Some lenders can even give same-day approval with electronic mortgage underwriting, which relies on credit-scoring statistical models. The difference in waiting time largely depends on whether it is convention, government-backed FHA/VA or owner-financed. But the biggest factor is the borrower's preparation. Clean credit and a complete application are the best ways to get a loan approved quickly.

Conventional. Typically this financing is obtained in the shortest time, depending on appraisal caseload, amount of time for credit check and other lender requirements.

FHA/VA. Appraisals, credit check, verifications of employment and deposits are always done first. After the property meets specifications and all documents are received by the private lender, then the loan is usually sent to FHA or DVA for approval. Some lenders have direct endorsement and VA-automatic where applications do not need to be sent to FHA or DVA. If approved, survey and termite check are ordered. Total time may be up to 90 days in peak periods,

After the mortgage loan has been approved, your agent will help arrange with you and your buyers a date, time and place for settlement or closing date is set.

What do I have to do to get ready for settlement?

Customs vary widely. Your best bet is to consult with your agent and attorney about who is expected to bring what items to settlement or closing. Most items will be sent ahead by your agent or arranged by the settlement or closing attorney or escrow agent. You many need to bring only your checkbook and house keys.

Items needed at settlement or closing:

• All the keys for the home. Don't forget garage door opener, garage and shed keys, padlock combinations and code for security systems!
• Warranties on mechanical equipment. Sometimes these are left at the home.
• Instructions and manuals on maintenance and operation of equipment.
• A copy of the sales contract.
• Proof that contingencies have been met.
• Documents to implement the transfer of title.
• Homeowner's insurance policy.
• Prorations for continuing expenses, such as utilities, taxes, insurance, interest on an assumed loan.
• Latest receipts of payments on water and utility bills, and current meter reading.
• Your lender's certification of your mortgage balance and the date to which interest is paid.

What do settlement or closing costs include?

Your settlement or closing costs depend on your area and the outcome of your negotiation with your buyer. Typically, these costs may include:

• Loan discount points based on the amount of the buyer's mortgage loan.
• Interest on your mortgage loan for the portion of the amount up to the settlement or closing date.
• Termite inspection fee.
• Fees, such as preparation of release, recordation of release, notary, trustee fees, if needed, and grantor's tax, as local laws and customs dictate.
• Brokerage fee
• If applicable fees:
  • A prepayment penalty on your mortgage
  • Repairs required by the lender if not paid by buyer.
  • Settlement or closing fees for attorney services such as paying off the loan and document preparation.

What reimbursements can I expect to receive at settlement or closing?

Reimbursement somewhat offsets the costs of settlement or closing, and you're due all the following applicable refunds:

• Insurance premiums you've already paid.
• Interest on the mortgage you've already paid for the portion of the month after settlement or closing.
• Property taxes you've already paid.
• Utility deposits held by gas, water, electric and phone companies.
• Remainder of any service contract you've already paid.
• Balance of any escrow funds held by your mortgage lender.

What happens at settlement or closing?

Although settlement or closing details vary from area to area, three basic steps are always taken. You, as the seller, prove you have marketable title, the buyer pays for the property and you give the buyer a deed or bill of sale. Settlement or closing usually takes place in less than an hour.

Specifically, you sign the settlement or closing papers and the deed. Your buyer signs the settlement or closing papers and mortgage note.

All payments by you and your buyer are detailed on standard federal settlement or closing forms. You pay for your settlement or closing costs and your buyer pays whatever is owed on the down payment plus the buyer's closing costs.

You receive, either now or shortly after settlement or closing, any money kept in escrow for taxes and insurance and unused prepaid items, such as insurance. Disbursement of funds may be at settlement or closing or within 7-10 working days, depending on local custom.

When all papers are signed and checks have changed hands, you hand the buyer your keys. Your home is sold and the transaction officially settled when the papers are recorded.

What are some tricks of the trade to cut moving costs?

The least expensive way to move is to do it yourself. However, not all of us have the time, strength and energy, so our fist step is to choose the right professional mover.

Moving companies provide a variety of services and range of fees. Shop for the best service, rates and charges. Determine the degree of liability the mover assumes for your furnishings what claims protection you will have and the mover's record of reliable service.

Get estimates based on the approximate weight or volume of your belongings and the distance to be traveled. Many companies offer binding estimates, which guarantee a give price, barring additions to the estimated load. This takes the guesswork out of the picture, but a non-binding estimate is apt to be lower than a binding one and might be more feasible - especially if you are able to check the weight yourself at a weighing station. Don't stop with just rates - ask about additional charges and methods used to compute time.

Some cost-wise tactics:

• Leave the oldies, heavies and out-growns behind: the 12-year-old washer and dryer, the workbench, the sandbox. Purge your records and book collection. To make your moving simpler and your home show better have a yard sale of outgrown clothes, garage treasures and other disposables. Give unwanted items to friends or donate to charity.
• Do you own packing but do it professionally. Use specially designed container bought from your mover.
• Insure you belongings sufficiently for the move. Mover's insurance is minimal. Check to see if the standard coverage per pound times the weight of your shipment is sufficient to pay the replacement cost of your goods. You may need to purchase additional coverage from your mover.
• To be on the safe side, take your valuables - jewelry, legal documents, family photos, et. - with you or send them by registered or insured mail. Keeping a list of all items you want to take with you personally may be helpful.
• Save on your taxes. Keep a detailed moving-expenses book with receipts of your costs, including transportation, lodging, meals, etc. If you're moving because of a job change, such expenses may be deductible. Check with your IRS office or tax preparer.

From your experience, what are some tips to make moving go as smoothly as possible?

Moving is never easy, no matter how hard you try. Here are some basics, however, to at least minimize any problems:

• Recognize the inevitable stress of moving and take steps to reduce it by:
• • Paying close attention to the feelings and ideas of every member of the family
  • Helping children face moving by making a game of as many steps as you can: packing; exploring the new place, especially any schools, parks, playgrounds, pools; having a good-bye party where friends are invited to come visit the new place; and planning another party soon after the move. Ask kids to help pack their things, and mark boxes.
  • Getting as well acquainted as you can with your new surroundings before you start packing; in general, starting you new life before you give up the old one.
• Start well before moving day to re-address newspaper, magazine and other subscriptions. Notify utility companies at both ends of changeover dates. Get all necessary reports and transfer papers from banks, schools, churches and doctors. Cancel deliveries. Alert friends to your moving schedule and the best times to drop by for farewells.
• Whether you're hiring a mover or moving yourself, do the sorting and packing in easy stages. Pack boxes firmly for snug stacking in the truck or van. Stuff pillows and blankets into bureau drawers. Number or color code boxes and make an inventory of contents, perhaps making room location on outside of boxes.
• Make floor plan of the new home and decide where everything will go. Don't guess; take measurement. Indicated which box number or color code goes to which room, and use this inventory to check off at the new home.
• Pack all items you will take with you personally. Mark them "For Car". Put them into car or out of the way before movers come.
• Pack a care package and mark "Unload First". Moving in will be a long day, so take basics such as dried soups, coffee, tea, crackers, peanut butter, canned goods, light bulbs, paper towels, toilet paper, garbage bags, sauce pan, paper plates, cups and utensils, can opener, etc. Priorities will be children's room's, TV or radio, and a basic kitchen to unpack.
• On moving day, lay down plastic sheets to minimize dirt in the home. Lead movers around the home to make sure they understand your instruction. Do a final check for forgotten items check movers' Bill of Lading against your inventory.
• At the end of moving day, or arrival day, since everything is packed, go out and have a nice dinner. You've earned it!

Congratulations!

Now that your home is sold, your check's in your pocket and moving day's over, you can smile, remembering how you and your agent turned a confusing array of puzzling parts into a full-fledged composition. When you sell your next home you'll probably put the pieces in place in nothing flat.