What To Do Between Contract and Closing
When I meet with purchasers and sellers for the first time, it is generally when they are to sign the contract of sale. With little exception, at this meeting, buyers and sellers are telling me they feel overwhelmed and confused by the process of buying and selling. Hopefully, our involvement alleviates your stress. But, why wait until we meet? All transactions follow the same path (and take the same detours) and it is helpful if you know what that path is in advance.
Rest assured, that by the time you come to sign your contract, you’ve already completed the hardest part of the whole process: you’ve made the decision to buy or sell, found a buyer or seller and have agreed upon a price.
If You Are Buying
On your first contact with us, we will inquire as to whether you’ve had a home inspection. If not, we will take all the preliminary information of your transaction and we will ask you to call us back after you are satisfied with the inspector’s report. If you are not satisfied, go back to the realtor and either renegotiate the price, request the seller to make repairs, or re-think your decision to purchase this house.
We will then request the seller’s attorney to forward a contract. When we receive and review it, we will forward a preliminary list of requested changes to the contract, to the seller’s attorney, and call you for an appointment to sign. You will be requested to come with to the appointment with two personal checks (one for the downpayment and one for a termite inspection if not already performed by the inspector). If previously performed, please bring the termite report with you.
You should start to shop around for a mortgage. Rates and fees vary greatly. We are happy to give you the benefit of our experience with lenders we’ve met in the past. Just ask us.
At the contract signing, all of the terms of the contract will be explained to you. Feel free to come with a list of questions. Email them to us in advance, if you like (firstname.lastname@example.org). We will attempt to isolate which changes to the contract are “deal-breakers”, and which are not and resolve the changes needed with the attorney for the seller, while you’re in the office. If that’s not possible, we will hold your contracts until we have satisfactorily negotiated the changes we need.
Once the terms of the contract are agreed to, we will forward the contract and the downpayment check to the seller’s attorney, and order your title search and termite inspection. Once the seller signs the contract, and fully executed copies are returned to my office, one will be mailed to you with a memo advising the date by which you need to obtain a mortgage commitment. Your lender will need a copy of the contract to complete your application. At this time, you should have chosen your lender and submitted all of the documents requested of you by the lender.
If your lender does not issue a commitment by the date the contract indicates, let us know and we will request an extension of time from the seller. Of course, if your application for a loan is denied, we will need the declination letter faxed to my office so we can show it to the seller’s attorney and get the downpayment returned.
The mortgage commitment may contain conditions that need to be satisfied before the closing. You should promptly review them and provide whatever additional items the lender needs. You will also need to sign and return the commitment to the lender. A copy needs to be faxed to this office, as well. If you have previously locked in an interest rate, remember that your lock in time is running. Don’t be the cause of a delay in closing before the rate lock expires. Please be sure to let us know if you decide to change your loan amount before the closing, or if you will be taking more than one mortgage (like a home equity line of credit).
You should also begin to arrange for homeowner’s insurance. You can shop around and then give the insurer all of the required information and have them stand by until we are ready to set your closing. Prior to setting your closing, the lender will require you to fax them proof that your homeowner’s insurance is in place (your commitment will tell you the amount of coverage and how the lender is to be named on the policy). You’ll need a declaration page with a paid receipt for one year. The original should be brought to the closing.
Once the title search is ready, it is forwarded to my office and to the seller’s attorney. It also must be reviewed by the lender’s attorney. Sometimes the commitment identifies the lender’s attorney, and sometimes we need to inquire with the lender as to who the attorney is. Any problems that come to light in the title search (for example: judgments, liens and mortgages against the seller, missing certificates of occupancy, and so on) need to be resolved by the seller. A new survey may need to be ordered if a previous survey can’t be located. This sometimes causes a delay since we request that the title company try to locate a survey before we order a new one, to save what may be a significant expense. In some jurisdictions, at busy times, we may then wait three to four weeks for a survey to be performed. A decision is made in each instance as to whether we have sufficient time before a closing to wait for an existing survey to be located.
In the purchase of a co-operative apartment, an application must be submitted to the co-op board, and the purchase is contingent on the board’s approval. This can take some time, and also imposes additional fees and obligations on the purchaser and seller.
Once the title is clear and reviewed by the lender’s attorney, and clearance is obtained from the lender to close (i.e. that all conditions of the commitment have been satisfied), a closing is scheduled. Bear in mind that the closing date and time must be set subject to the availability of both purchaser and seller, both attorneys, and the lender’s attorney. (In co-ops, the seller’s payoff bank, as well as a co-op representative must also attend). We will consult with you as to your availability prior to scheduling the closing. Flexibility is a key component to setting closings. This is particularly true if we are trying to coordinate a simultaneous purchase and sale, when twice the number of people must be available and post-closing possession restrictions must also be considered. While we try to accommodate everyone’s needs, it is helpful to remember:
Flexibility is very important.
The “on or about” closing date set forth in the contracts, are target dates, and not actual dates for the closing.
Please do not schedule vacations within a sixty day window around the “on or about date” for closing.
It is your responsibility to keep your mortgage commitment in place until a closing is held.
Do not lock in an interest rate without consulting with my office.
If you are purchasing new construction, update with the builder periodically for their adjusted time frames for closing. Usually 15 days notice or so is all we will get for a closing on new construction and any delay by the purchaser may result in daily penalties.
Same day closings of sales and purchasers are not always a good idea due to unanticipated delays in the first closing (like the availability of mortgage funds).
Once the closing is set, you will receive a letter of instructions from my office via email, fax, or mail. Several days prior to the closing, we will call you and let you know the certified funds you will need. We generally overestimate these funds since the exact bank and title charges may not be available to us in advance. Don’t worry, any overpayment will be immediately refunded to you at closing.
Prior to the closing, you will perform a walk-through inspection of the home. You should ask the realtor to accompany you if possible. If possession will not be delivered at the closing, you will perform another inspection after closing, at the time that possession is delivered. You should notify us if there are any problems before the closing, so that we may attempt to resolve them in advance. Problems uncovered after the closing, or after possession is delivered, are generally not the responsibility of the seller, so inspect carefully. Be mindful though, that the premises need to be in the same condition as at the time the contract was signed, subject to normal wear and tear between that time and the closing.
If You Are Selling
As a seller, once we receive the down payment check, and contract, signed by the purchasers, we will contact you for an appointment to sign the contract. The transaction is not a firm one until the contract has been countersigned by the seller and a fully executed copy delivered back to the purchaser’s attorney.
We will need to know what your plans are for moving. The availability of your new home is an issue we need to address in order to determine an appropriate closing date and whether or not you will need to remain in your home after the closing. It is best not to give a final date to a mover until after your closing is set and confirmed. . We will need to know if you have a mortgage on your property, so that we can obtain a payoff letter to bring to the closing. If the mortgage has been paid off, we will need a satisfaction of mortgage. We will work together with you to locate these items. If the title report shows judgments against the seller, we will need to arrange for their payoff as well. Remember that equity lines or lines of credit are mortgages, and they must be closed in advance of a closing (the bank must end your ability to draw more money: just call and ask them to “close the line”), and a payoff letter obtained as well.
Any problems that arise in the title report must be cleared. For example, boundary line disputes (e.g., fences off the property line) may require an affidavit from the adjoining landowner that he doesn’t claim ownership to disputed strips of land. Liens against prior owners can be resolved by producing the title insurance policy purchased when you bought the home.
It is generally the seller’s obligation to deliver valid certificates of occupancy for the premises and all improvements. If certificates need to be obtained, the process of doing so should be started before the house is marketed for sale. Let us know if this is an issue in your transaction, so that we can plan accordingly.
Sales of condominiums require a waiver of right of first refusal from the condominium board.
We will assist in obtaining this but will need contact information for the board or management company. We will also inquire as to what payment arrangement you have made with the realtor, so that we can adequately arrange for payment of the commission at the closing. The time to question the terms of the commission agreement is before you sign it. Feel free to consult my office if you do not understand its terms.
Once a closing is set, my office will forward to you a letter of instructions. We will also advise the purchaser as to how we will need the proceeds of the sale paid (i.e. to the realtor, to pay off mortgages, etc.).
If you are unable to attend the closing, we can arrange for you to pre-sign the documents which transfer title. This arrangement has additional special conditions, and should be brought to our attention sufficiently in advance of the closing.
It is the seller’s obligation to deliver a home with a smoke detector and carbon monoxide detector in place. You will usually have to sign an affidavit stating that this is the case.
Sellers should be careful about making mortgage, maintenance and common area charge payments shortly before a closing. If payments cannot be verified (payments posted, checks cleared), they may have to be paid again or escrowed for at a closing. If you are unsure if you should make a payment, check with us.
Sellers of homes with oil heat should ask their oil companies to determine how much oil is in the tank just before the closing and bring proof to the closing. This will enable us to recoup the value of the oil from the purchaser. Sellers of homes with municipal water need to obtain final water meter readings in advance of the closing to close their accounts. This takes quite a while in NYC, for example, and should be arranged for sufficiently in advance of a closing. It won’t matter that we close sometime later than the final reading, we can apportion the subsequent water charges with the purchaser.
Hopefully, this article will lessen some of the anxiety commonly experienced between the contract and closing. Please feel free to continue to email and call us with your questions.