The search is over. The showings and open houses are done. The contract is signed and financing has been approved. You've started packing for the move. The next step is closing the sale, but what does that mean and what can you expect at the closing?
At Lamprey Real Estate Associates, we know how stressful buyer or selling a home can be. It is our job to see that the transaction goes as smoothly as possible. We work with you throughout the process. Our job is not over until the sale is closed and the tile is transferred. Our REALTORS® and staff work closely with all the parties participating in the closing – buyers, sellers, lender, Title Company, attorney's to ensure a timely and successful closing.
The lender must disclose a good faith estimate of all settlement costs, including the net amount you will need to bring to the closing, usually a cashier's check. The closing coordinator (usually a title company or attorney) conducting the closing will prepare the closing settlement statement (HUD 1) that will outline all the expenses that you will be responsible for. Included will be the following:
- Down payment – Your earnest money deposit will bell be applied and the remainder required by the lender. As a rule of thumb for a conventional loan you will need to have a total of 20% of the sale price of the property.
- Loan application fees – This includes items like loan origination fees, points (loan discount fees you pay to get a lower rate), credit report, etc.
- Appraisal fee – If financing is involved, an appraisal is done of the property to determine if the value of the property will cover the amount of mortgage.
- Title search fee and title insurance policy premium
- Private mortgage insurance premium – Can be required if the mortgage is greater than 80% of the appraised value
- Insurance escrow and/or property tax escrow – If these items are going to be paid as part of your mortgage payment, lenders may keep funds for taxes and Insurance in escrow accounts, and then pay the insurance and taxes when due. Generally, two months of payments in advance are escrowed at closing.
- ½ of the State Tax Stamps – Buyer is responsible for half of the $15.00 per $1000 of sale price to be paid at the time the deed is recorded. For example, if the sale price is $200,000, they buyer is responsible for 200 x$7.50 or $1500.00
- Deed and mortgage recording fees – charges for recoding documents at the County Registry of Deeds.
- Prorated taxes – Generally prorated as of the closing date. Buyer pays the Seller for taxes already paid.
- Prorated share of utilities, heating fuels, association or condo fees – For example the amount of propane or oil in tanks is estimated and priced a market rate as of date of closing.
- Mortgage pay-off – Any outstanding mortgages or home equity loans are paid off at closing.
- Deed preparation – Generally done by seller’s attorney or an attorney designated by the title company.
- Prorated taxes – Generally prorated as of the closing date. Seller pays for taxes covering the time period prior to sale, if not already paid.
- Prorated share of utilities, heating fuels, association or condo fees, etc. If owed in arrears of the closing date,
- Commission – Paid to the listing real estate company
- ½ of State Tax Stamps – Seller is responsible for half of the $15.00 per thousand (see example in Buyer expenses)
- Recording fees – Discharge of mortgage, trust certificates, etc. recorded at the County Registry of Deeds
A Note Regarding Proration for Buyers & Sellers
Expenses such as taxes, condo fees or water bills are usually paid on either a monthly, quarterly or yearly basis. The time periods will not align with the closing date. Proration is a way for the buyer to repay the Seller for bills that may have been paid in advance, or for the Sellers to pay the Buyers for bills incurred while the Sellers owned the property, but which are not yet paid.
For Example, the association fees for a waterfront community are paid annually at the beginning of the year. The closing occurs on May 1st. The Seller is responsible for the first 4 months of the year. The Buyer owes for the remaining 8 months. The annual cost would be prorated by the number of days in each time period. If the Seller paid the full annual bill at the beginning of the year, the Buyer would reimburse the Seller a prorated amount for the 8 months at closing.
FAQ Closing Details
Q Who is responsible for coordinating the closing and preparing the documents?
A If the buyer is obtaining financing, the lender generally has a title company coordinate the closing and document preparation. If there is no lender involved, on attorney or title company hired by the buyer usually will handle the closing. The seller is responsible for preparing the new deed for the buyers.
Q Who attends the closing?
A The buyers and the sellers (and their attorneys if desired), the closing coordinator and REALTORS®. If the buyer or seller cannot attend, the closing documents can be signed in advance, and/or have a power of attorney attend.
Q Where is the closing held?
A The closing can take place agreed upon between the buyer and seller. Date and location can be negotiated. Time is usually coordinated with the closing company or attorney.
Q Do I need an attorney?
A As RELATORS®, we advise and support you throughout the process. Although we're knowledgeable about the laws and regulations governing real estate transactions we are not layers and cannot give you legal advice. You should consult an attorney with any legal questions and ask for advice regarding contracts, deeds condo or association documents and other legal documents. As a seller, you will be responsible for deed preparation and that will require the services of an attorney.