THAT’S THE ONE!!

You may be wondering what will happen once you find your next home and make a successfull offer. There are several dates in your contract that you are obligated to meet. The first date to keep in mind is your contract’s execution date. This date is what all other time frames in your contract are based on. The execution of the contract happens when both parties to the contract came to agreement on all the terms of the contract and any counteroffers have been accepted by all. 

OPTION PERIOD:

A Texas Real Estate Commission (TREC) contracts allow for option periods. The buyer can offer an amount of money to purchase a period of time (usually 5-10 days) to complete a home inspection on the property. During the option period the buyer can terminate the contract FOR ANY REASON.  In our market most buyers use the threat of termination to perform all their inspections and then negotiate any critical repairs with the seller. The buyer has the right to inspect the property again prior to closing to confirm that those repairs have been completed. Some buyers hire their property inspector to go back and re-inspect the repairs that were done to ensure they were completed correctly.

PEST INSPECTION:

The lender will require a certificate from a qualified inspector stating that the home is free from termites and other wood destroying insects. The inspections are only good for a specific amount of time (typically 30 days). It's preferred that a buyer conduct a termite inspection during their option period. However if their closing date is over 30 days from their closing date the lender may require a second termite inspection just prior to closing.

If termites are found they will have to be treated before the lender will loan the money to purchase the house. Unless specifically stated in the contract – neither the seller nor the buyer is obligated to pay for the treatment of wood destroying insects.  

SCHEDULING CLOSING:

Soon after execution of your contract an appointment will be made at the title company for on or before your closing date as stated in your contract. If you will not be able to attend closing at that time, it is very important that you let us know so that we can try to reschedule. Your title company can book up fast especially at the end of the month and rescheduling at the last minute can complicate your closing. If you or your spouse CANNOT attend closing, there are some alternatives that we can attempt.

Power of Attorney

By using a specific power or attorney, one person can sign documents on behalf of another. A legal document called a “Specific Power of Attorney” must be drawn up ahead of time and the original must be delivered to the title company with a copy sent to the lender for review. It is required that the specific power of attorney state the property’s legal address as well as common address.

 NOTE: A “General Power of Attorney” is held by many families in the Fort Hood area and is used during times of deployment. It is NOT the same as a “Specific Power of Attorney” and WILL NOT SUFFICE  for closing. Some title companies will provide the correct form for a fee. A JAG Officer can often provide you with the required form or your attorney (and sometimes lender) can draw up one for you also. Please ensure that the proper legal description is on the Specific Power of Attorney because the title company will not accept it without the full legal address listed.

Mail Out Closing

When a seller or buyer lives in another town, state or country and can not physically be at closing, the title company can perform a mail-out or mail-away closing. The lender will send their document package to the title company. There, your closer will prepare your settlement statement and mail or email the document package to you. After receiving the documents, you will sign where instructed and have at least one form notarized by a notary public. After completing the paperwork fully, and obtaining any payment that may be required, you will overnight the package back to the title company where the transaction will be completed.

NOTE: Special accommodations must be made with the title company and the lender in order to coordinate this type of closing therefore it is NOT recommended as a last-minute alternative.

APPRAISAL:

After your option period has passed, the lender will order the appraisal or we will confirm the existing appraisal. There are three types of appraisals that match the three basic types of loans: FHA, VA and Conventional. An existing appraisal can only be used towards the type of loan it was ordered for unless it is transferred. A fee usually is paid to the appraiser to convert the appraisal to the new format. If your appraisal amount is less than the sales price or if there are lender required repairs listed on the appraisal, the buyer and seller will need to negotiate further.

Lender Required Repairs:

Because the lender will be holding the note on the property – they want to ensure that there are no repairs needed that would diminish the value of the property in the future. Rotted wood is a common repair that appraisers will require to be done before closing but they can also come up with some odd ones as well. Even things as simple as a light switch cover needing to be installed where one is missing – may be something that is required before the lender will give the buyer the money to purchase your home. Per the contract – neither party is obligated to complete these such repairs. If any are noted on the appraisal this can be another area for negotiation.

Appraisal not at value:

The lender will not loan more money than what the home is “worth” according to the appraisal. If there is a difference between the loan amount and the appraisal amount then either the buyer will need to pay the difference in cash at closing or the seller will be required to lower the price to the appraisal price to continue to closing. VA and FHA buyers are protected by the contract and are not obligated to purchase the property if the appraisal comes in lower than the sales price but may choose to make up the difference in cash.

SURVEY:

Lenders or title insurance companies often require a survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements.  It's common to allow the seller to try to use any existing survey they might have first. There are many reasons why an existing survey will not be accepted by either the title company (who issues title insurance based on the survey) or the lender. The survey must show any placement of permanent structures including a fence. If the seller has added or removed a fence since the existing survey was performed – a new survey will be required. If the seller poured a patio slab or built a workshop then you’ll need a new survey. In your contract, either the buyer or the seller can purchase the survey if a new one is required. Your closing coordinator will facilitate the order of a new survey after first attempting to use any existing survey.

TITLE POLICY:

The lender requires that the seller or buyer purchase a title insurance policy. This protects the lender against loss resulting from claims by others against the home. There are two types of policies:

*The Owner’s Policy protects the buyer from claims by others against the property. *The Lender’s policy protects the lender from claims by others against the property.

After your contract is executed your closing agent will deliver a copy to the title company so they can begin to research your title.  Then need to make sure that there are no liens against the property before they issue title insurance and clear title to the buyer. A past marriage or common-law marriage, tax delinquency, construction lien, or debt liens are all issues that will need to be clearly defined or resolves properly before ownership of the property can change hands. The seller will be notified if there is a “cloud” on the title that needs to be resolved prior to closing.

BUYER’S WALK-THROUGH:

Prior to closing the purchaser may opt to inspect the house again. This is called a buyer’s walk-through or a re-inspect. It is typically done the day before closing so that the buyer is assured that the property is in the same condition as it was when he/she put in their offer on your property. They may come back with their REALTOR and/or ask their home inspector to perform a re-inspect on their behalf.

The buyer will be checking to make sure:

-there aren’t any new stains or damage that was not there at the time of the offer.

-the home has been cleared of all personal property and all blinds, drapes, lights and other Fixtures have been left.

-any repairs that were agreed upon have been properly completed.

-the lawn and yard have been maintained as agreed upon in the contract.

SETTLEMENT AND CLOSING:

As soon as the lender has collected all the required information from the buyer as well as any additional documents related to the property – tax certificate, appraisal, survey, wood destroying insect report, etc. the file will be sent to the lender’s underwriters to review. After the loan has been approved by the underwriters, the lender will begin to prepare the documents for each party to sign.

When the title company receives the final loan documents from the lender they can prepare your settlement statement. It shows where all the monies in the transaction are going. It will show what fees each party is paying. The final HUD-1 Settlement Statement usually isn't ready until the day before closing but it can be prepared a week or an hour before closing. You will be notified as soon as the HUD-1 is ready for you to review.

If you are required to bring money to closing and the amount is over $1500 you will need to bring certified funds. The title company cannot accept a personal check over $1500. You can arrange to bring a cashier’s check or wire the money directly to the title company.

THE DAY OF CLOSING: 

Make sure to bring your photo ID and any required funds to closing.

A representative from the title company will explain your paperwork as you sign it and be there to answer any questions. If you are using a mail-away your paperwork will either be mailed or emailed to you and you will need to sign the documents – have some notarized and then overnight the originals back to the title company.

If you are using a Power of Attorney, whoever is being represented by the Power of Attorney is required to call the title company some time on the day of closing to verify that they are alive and well and haven't revoked the Power of Attorney. When you call in, state that you are doing your Alive and Well Call. The title company’s representatives are familiar with the procedure and anyone who answers the phone should be able to help you.

POSSESSION AND FUNDING:

There are two parts to a closing and both are required before possession transfers:

Closing & Funding 

The title and full ownership does not transfer until the buyer’s lender has provided funds for purchase to the title company to be wired to the seller's mortgage company. This is called funding.

Even if both parties have successfully signed all of the paperwork and provided any funds required at closing the keys to the property will not be given until funding has been completed.

Chances for funding on the same day of closing are best if closing takes place early in the day. It normally takes approximately three hours for funding to be achieved. The paperwork needs to be faxed to the lender for approval and the lender then needs to wire the money to the title company in order for it to be disbursed as stated in the settlement statement.