What Every Seller Needs to Know About Closing

Final Walk-Through.

What Every Seller Needs to Know About Closing

HouseLogic
Walk-throughs, closing costs, and other items to check off your list before the big finish!

Closing time. The end of the road. The last hurrah — and hurrahs are in order.
If you’re here, then you’ve found a buyer, negotiated home repairs, and are ready to move out -- and on. But before you can make this sale official (and get paid!), you still have a few items to cross off your list.
Here, we’ve laid out everything you need to know to have a successful settlement.

Closing Is the Final Step

Closing, or “settlement,” is when both parties sign the final ownership and insurance paperwork, and the buyer becomes the legal owner of the home.
Typically, closing day takes place about four to six weeks after you signed a purchase and sale agreement. During this window, the buyer’s purchasing funds are held in escrow until all contingencies, like the home inspection contingency and appraisal contingency, are met.
Your agent will be able to answer questions and offer support through closing. Here’s what to expect from the process, start to finish.

Before You Close, You’ll Have a Final Walk-Through

Most sales contracts give the buyer one last chance to do a walk-through of the home within 24 hours of settlement. This is their chance to check that the property is in good condition, and to make sure the agreed-upon repairs were completed.
In most cases, no problems arise at this stage of the transaction. (If something is amiss, your agent can walk you through it.) The final walk-through mostly gives buyers peace of mind knowing that you, the seller, have adhered to the conditions of the sales contract and home inspection-related repairs.
Related Topic: Sell a Home: Step-by-Step

Follow These Steps to Prepare for the Final Walk-Through

To help ensure that the walk-through goes smoothly, take these six steps ahead of time to prepare:
Step #1: Clean house. Your home should be spotless for the final walk-through. Assuming the buyer is taking ownership on closing day, you should be fully moved out at this point. But moving can be messy. After purging, packing, and moving, you may want to do one more deep cleaning.
Step #2: Leave owner’s manuals and warranties. Make the buyer’s life easier by providing all manuals and warranties you have for home appliances. Print physical copies and put these documents in one place for the new owner. If you have receipts from contractors for repairs, leave them with the manuals.
Step #3: Provide a vendor list. Give the buyer contact information for home contractors or maintenance companies that you’ve used in the past. These vendors are familiar with your home, and the new owner will appreciate having a list of servicers they can trust will take good care of their new home.
Step #4: Check for forgotten items. Do one more check throughout the home to make sure you’re not leaving anything behind. One exception: You may want to leave unused or leftover paint cans in the colors currently in use within the home — but confirm with the buyer first.
Step #5: Turn off water shut-off valves. The last thing you want before closing is a flood. With the buyer’s permission, turn off your house’s main shutoff valve 24 hours before closing.
Step #6: Lock up. Until settlement is complete, you’re legally responsible for the home — meaning you’d be liable if there’s a break-in before closing. So, the day before settlement make sure to close window coverings and lock the entry doors. If a house looks un-lived in, it’s a welcome sign to burglars. It’s a good idea to leave a porch light on, or to set an interior light to turn on and off with a timer.
If the final walk-through reveals an issue with the house, don’t panic. The standard protocol is for the buyer’s agent to immediately alert the listing agent that there’s a problem. Then, both parties work together to solve it. Typically, either the closing gets delayed or there's additional negotiation, such as monetary deduction of the sales price. In other words: There are options, and your agent can help you through this.

Up Next: The “Closing Disclosure”

Let’s assume the final walk-through is smooth sailing. (Woo-hoo!) What happens next?
You’ll get info about your closing costs from the title company.
Meanwhile, the buyer’s mortgage lender must provide the buyer with a Closing Disclosure, or CD, three business days before settlement. This is a formal statement of the buyer’s final loan terms and closing costs. As the loan borrower, the buyer is entitled to a three-day review period to see if there are any significant discrepancies between their CD and Loan Estimate (LE) — a document buyers receive when they apply for a loan. The LE outlines the approximate fees the buyer would need to pay.
In most cases, there are no major differences between the CD and LE. However, if certain closing costs differ by 10% or more between the estimate and the disclosure, the buyer’s loan has to go back to the mortgage lender so that cost differences can be reviewed. If that happens, closing is usually delayed until the issue is resolved.

Expect to See These People at the Closing

The closing typically takes place at the title company, attorney’s office, or the buyer’s or seller’s agent’s real estate office. (Unless you live in a state that allows for electronic closings -- eClosings -- with remote notaries. In that case, the involved parties can opt to sign documents digitally.)
The list of legally mandated attendees will depend on your state, but usually you’ll be joined by:

• Your agent
• The buyer
• The buyer's agent
• A title company representative
• The loan officer
• Any real estate attorneys involved with the transaction

Remember to Budget for Closing Costs

Closing costs can vary widely by location, but you’ll generally pay closing costs of 5% to 10% of the home’s sales price. So, on a $300,000 home, you can expect to pay anywhere from $15,000 to $30,000 in closing costs. In most cases, these costs are deducted from your proceeds at closing.
Closing costs for sellers typically include:

• The commission for the listing agent and buyer’s agent
• Transfer taxes or recording fees
• Loan payoff costs
• Unpaid homeowner association dues
• Homeowner association dues included up to the settlement date
• Prorated property taxes
• Escrow, title, or attorney fees

Be Sure to Bring These Things to Closing

At the closing you should have:

• A government-issued photo ID
• A copy of the ratified sales contract
• House keys, garage remotes, mailbox keys, gate keys, and any pool keys
• A cashier’s check, or proof of wire transfer, if your closing costs are not being deducted from the sales price. (Yes, it’s OK to use a cashier’s check — especially if you don't want to deal with the hassle of a wire transfer, which can take time to clear. With a cashier's check, you're guaranteed the money you need for settlement will be there at closing.)

Don’t Forget to Dot These I’s and Cross These T’s

Before you rush off to pick out paint samples for your new place, remember to do these two steps that are often overlooked by sellers:
Transfer utilities. Don’t want to pay for the new owner’s utility bills? Coordinate with the buyer so that utilities — including not only gas and electric but also water and cable — are transferred to the buyer on closing day.
Change your address. You obviously want your mail to be sent to your new home. Setting up a forwarding address will also ensure that you can be reached if there are any post-closing matters. You can file a change of address with the U.S. Postal Service here.

Finally: Celebrate!

At last, your home is officially sold. Congratulations! Give yourself a pat on the back — and then start settling into your new phase of life.

Before You Choose a Mortgage Lender, Read These Tips

Single family house.

Before You Choose a Mortgage Lender, Read These Tips

Someone out there wants to help save you time, stress, and money. Here’s how you find them.

Everyone in the market for a house has different wants — pre-war charm, a lush backyard, a welcoming front door in Pantone Ultra Violet, perhaps — but at the end of the day, they all share a need in common: money. Lots of it.

That’s where your mortgage lender comes in.

The right lender can save you time, anxiety, and loads of cash. And the right loan officer — the professional who represents the lender — can be a powerful ally when you close on a mortgage. As with any potentially life-altering partnership, it’s important to choose wisely.

Only You Know Which Lender Is Your Type

There are three types of mortgage lenders — retail banks, credit unions, and mortgage banks — as well as mortgage brokers, who compare loan products via a coterie of potential lenders to help you, the client, find the right one. Before you start narrowing down the candidates, you have to know what you’re looking for, and where to find it. Let’s talk about your options.


Retail Banks


What they are: These are your Chases and Banks of America, plus your local banks. They do their own underwriting (in a nutshell, investigating your finances), so retail banks, especially the smaller ones, can sometimes offer lower fees and less-stringent credit requirements. If you like to have your accounts all in one place, you may want to use your own bank or credit union.
Who you’ll work with: You’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan.

Credit Unions

What they are: They’re not-for-profit and customer-owned, so they’re not beholden to shareholders like a bank. Because of that and their not-for-profit tax status, they typically offer more personal service and lower fees. The flip side is less convenience: They have fewer branches and ATMs.
And to apply for a loan, you must be a member of the credit union’s community, which could be faith-, employment-, interest-, or union-based, among other things. That said, it’s typically not difficult to become a member; the National Credit Union Administration’s Credit Union Locator is a tool for finding credit unions near you.
Who you’ll work with: As with a bank, you’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan.

Mortgage Banks

What they are: These banks, such as AimLoan and PennyMac, only offer home loans. Many {{ start_tip 75 }}online lenders,{{ end_tip }} like Rocket Mortgage by Quicken Loans, operate as mortgage banks.
Who you’ll work with: A mortgage bank will assign you a loan officer, who will receive a commission or bonus from the lender’s gross fees for writing your loan. An online lender is going to offer less hand-holding.

Mortgage Brokers

What they are: Mortgage brokers are essentially personal home loan shoppers — they act as liaisons between home buyers and mortgage lenders to help people find the lowest rates and the best mortgage terms. They’re able to get home buyers the best mortgage rates because they leverage their existing relationships with lenders — something individual home buyers can’t do. By doing the heavy lifting for the borrower, the idea is that they make loan shopping more convenient — and perhaps a bit faster.
Who you’ll work with: A mortgage broker can be an individual agent or a group of agents, who act as independent contractors. In exchange for their services, mortgage brokers typically charge a 1% to 2% fee of the loan amount, which is either paid by the borrower or the lender at closing.
Now that you’re armed with the basics, you’ll want to give yourself time to weigh the options about which lender, exactly, to work with.

It Pays to Shop Around Before You Commit

Over the life of the loan, seemingly subtle differences could add up to tens of thousands of dollars. That money belongs to future you and all your dream vacations, renovations, and remodeling #goals.
So before you choose your specific lender ...

• Thoroughly research any retail bank, credit union, mortgage bank, mortgage broker, or online option you’re considering. Make sure you’re clear on what they can offer you. About one in five (21%) home buyers said they regret their choice of mortgage lender, according to a recent J.D. Power survey. You’re doing your homework so that won’t be you.

• Interview lenders. You’re aiming for a shortlist of three. (You’ll see why it’s three in a minute.) If you’re thinking about selecting an online lender, make sure you take into account these tips and tricks.

• Don’t be shy about seeking advice. Survey your family, friends, and coworkers — especially the ones who are nerdy about money.

• Ask your real estate agent for a second opinion. They have experience with reputable lenders, particularly in your city or town.


Now, let’s say you’ve narrowed your list of potential lenders to at least three candidates. The next step? Finding out whether they will give you a loan.

You Should Seek Out a Lender’s (Pre-)Approval, Too

There’s a world of difference between being pre-qualified for a loan and being pre-approved. Pre-approval means you’ve got skin in the game. It means you’re a boss. And it’s proof that you can buy.
Besides being the grown-up thing to do, pre-approval puts you in a better position when you make an offer. Everyone takes you more seriously. Pre-approval provides evidence to your real estate agent and the seller (or seller’s agent) that a trusted financial institution is willing to finance the purchase.

In most housing markets, sellers are going to expect your to be pre-approved when you make your offer. And when you’re pre-approved, you’re more likely to have your offer accepted — or at least, you won’t lose out on a bid because you have to go back to the bank to get approved for a loan.

As for pre-qualification, it’s an approximation and not necessary unless you have no clue about your creditworthiness and just want a snapshot.

By contrast, with a pre-approval, a lender typically goes deeper and tells you more specifically how big a loan you can get. Caution here: Just because the lender says you can take out a loan for an amount, doesn't mean you should. Consider your lifestyle and monthly budget to decide on the responsible loan amount for you.
To get pre-approved, you must also authorize a lender to {{ start_tip 73 }}pull your credit.{{ end_tip }}

• Borrowers with credit scores of 760 or higher can typically qualify for the lowest interest rates. 

• Borrowers with credit scores below 650 may need to apply for a non-conventional mortgage, such as a Federal Housing Administration (FHA) loan — a government-backed loan that requires a minimum credit score of 580 but lets borrowers make as low as a 3.5% down payment.
• Borrowers with credit scores below 580 can still qualify for FHA loans, but they’ll have to make at least a 10% down payment. The lower the score, the tighter the requirements become.


When you’re pre-approved, you’ll receive a Loan Estimate. This three-page document is about to be your new best friend.

It Makes Good Sense to Get Pre-Approved by at Least Three Lenders

A Loan Estimate spells out a future loan’s terms, including:

• The interest rate

• The length of the loan

• Estimated costs of taxes and insurance 

• How interest rates and payments might change over time 

• Other important financials 


By comparing loan estimates, you can effectively size up your loan options and decide which lender is best for you — and your future. (If you need help navigating the details, the Consumer Financial Protection Bureau offers a sample Loan Estimate with helpful tips and definitions.)
Getting pre-approval early in the process also gives you an edge over other buyers. Here’s why:

• The amount you’re approved for can help you determine your price range, and thus save time and frustration when shopping. 

• It sends a signal to your agent and sellers that you’re serious about buying a home.

• It’ll help you move quickly to make an offer when you see a home you like.


And it’s an excuse to celebrate! You now have everything you need to move ahead with that one special lender — and, at the same time, connect with an officer or broker who can help you select the home loan product that’s best for you.
So have a cocktail. Do a dance. Lay back and relax in one of those fancy sheet masks. You’re a (huge) step closer to getting a new house.