House Hunting Part 10 – Home Stretch
The anticipation of receiving the keys and walking into the new abode is a powerful feeling. The diligent house hunter found a home, placed an offer that became a contract and did all the necessary requirements for obtaining a loan…now what? The Seller scrambles to arrange movers and have the house ready to hand over and to start their new life. The Buyer also plans for the move however; they remain anxious and ready to inhabit the new abode. During this phase many important things occur. The Title company verifies the survey and if needed orders a new one. They research the title to ensure no liens or other obstacles exist, they prepare the insurance commitment for the title policy and verify the property taxes. The bank schedules an appraisal and the house-hunting guide prepares for the final walk through. Meanwhile the Buyer plans the utility turn on date. For some, time flies fast at this stage for others it drags on.
The survey shows all boundaries and improvements on a piece of property. It solidifies the limits of the borderline the house hunter purchases. In some circumstances, the Seller will have a copy of an acceptable survey. This can happen with newer homes. However, if any changes to the building footprint or some permanent structure to the property occur such as a pool or additional walkway a new survey is required. The survey becomes part of the contract, and when a survey does not exist, the Buyer or the Seller can negotiate to pay for the new one; the title company hires surveyors.
The title company during this time researches the title abstract. The title abstract shows the history and the ownership of the property, they search for any liens or claims filed on the property so the Buyer has a clean marketable title. Title companies also issue title insurance policies to both the lender and the owner. Title insurance protects the Buyer from any unforeseen claims, hidden risks, or fraud against the property. The insurance policy provides protection from financial loss as well as payment of legal costs necessary to clear such claims. Title companies also examine property taxes to determine how much the Seller owes; the Buyer pays a prorate amount as shown on the HUD document given to both parties prior to closing.
During this time up until closing, if the house hunter is applying for a loan, the bank will conduct an appraisal. The appraisal confirms the collateral for the loan. For instance if the Buyer is purchasing a home for $150,000 and placed 10% down, $15,000 then the appraisal amount must be over or equal to $135,000. If the appraisal comes in below that price either the Buyer or the Seller must make up the difference. In the above example, if the listing appraised at $130,000 the Seller must lower his price by $5,000 or the Buyer must come up with the extra cash. Larger down payments and skillful negotiations lessen the chance of a low appraisal. Appraisals can make FHA and VA loans difficult because of low down payment requirements. A FHA loan only requires a 3.5% down payment while VA loans are as little as 0% down. Appraisals are also different depending on the type of loan. FHA and VA demand the house to be in a livable condition and could require certain repairs. Structural issues and wood rot is big for FHA loans while air-conditioning and heating equipment must function as intended with VA loans. The house hunter must pay attention to home inspections and confer with his/her loan officer the requirements for the mortgage. If the Seller is notified about the repairs to satisfy the loan, the Seller may be more willing to fix the items.
As closing approaches, it is wise to conduct one final walk through, this is a courtesy provided by most Realtors. The final walk through gives the Buyer a peace of mind about the purchase and ensures nothing happened to the home prior to closing. Most closings occur four weeks or more after the executed contract, anything can happen within that period. Unforeseen circumstances such as a fire or broken water pipe can occur or Seller’s mischief, and if something needs correcting, there is time to figure the best course of action before the abode is closed. Once the house belongs to the Buyer addressing those repairs becomes much more difficult and the Buyer may need to hire a lawyer or go into mediation.
At this point, the house hunter has nearly crossed the finish line. This is a good time to schedule all of the utilities such as electric, water, gas, telephone etc. Plan to have these items turned on the day of closing so when you get the keys and go into the new abode you do not need a flash light. Also, be sure to purchase homeowner’s insurance, most lending terms require homeowner’s insurance and if the Buyer does not purchase it, the bank will and this route is very expensive. See ya down the road. http://www.djlyons-realtor.com