The home selling process comes to completion through the closing, and reaching this stage of the process will probably lift a heavy burden from your shoulders. But before you go out and celebrate over the agreement between you and the buyer, take note that there are many requirements that you need to fulfill in order to pursue the final closing. Nothing is final until everything is written on paper and presented to the settlement table.
Contingencies and Sellers
Although many of the contingency clauses of the purchase contract are the buyer’s responsibility, the seller has a number of requirements to fulfill as well. This applies especially when the seller is still living in the property being sold. Some of the contingencies that you may need to address include the following:
- Home inspection. The lender or seller will arrange for the home to be inspected some time before closing. Be prepared to open the house for such inspection. Any concern that comes up during the home inspection will be part of the negotiations between you and the buyer.
- Other kinds of inspection. To secure their investments, some lenders may arrange for special kinds of inspection. These may include checking for pest and termite infestation, or inspection for presence of radon gas. Just like a standard home inspection, arrange your schedule so that your home will be available for the visit. Coordinate with your listing agent or the buyer’s agent for the required inspection.
Impact of Appraisal
The appraisal process can affect the financing terms for the buyer, but this might affect you in some way. There are two possible scenarios when the appraisal value of the home is determined:
- If the appraised value is higher than the listed price, the prospective buyer will probably be happy because he / she is buying a home that will appreciate in value in the future. As the seller, however, you may be hard-pressed to update the price to reach the appraised value, especially if you and the buyer have affixed your signatures on the contract.
- If the appraised value is lower than the listed price, the lender will approve a loan amount not exceeding the appraisal. As a result, the buyer will have to look for another financial source to top up the lacking amount, or even arrange for a contract renegotiation.
In either case, keep your Realtor close so that he / she can recommend the next steps that you should do. Of course, whatever you and the buyer agree on will have to comply with the stipulations of the contract.
Days or even hours before the closing, sit down with your agent to go over the details of the contract, for any possible lapses in contingency requirements. These contingencies may be in the form of in-house appliances should stay in the home upon purchase, or repairs that you committed to complete as a result of the home inspection of final walk-through.
On the day of settlement
The settlement date is set and agreed upon by both buyer and seller, and so both parties are expected to fulfill their commitments.
Transferring ownership of the property may be completed through paperwork and deed recording, but the actual transfer of the seller to the new home may have some complications, albeit minor and temporary. You may encounter one of these scenarios:
- If, for some reason, you need to stay in the home after the closing, you may arrange for a “rent-back” agreement with the buyer. This involves the seller (or original owner) paying rent to the buyer (or new owner) for extending the stay in the property. Rent-back is allowed for a maximum of 60 days based on the requirement of some lenders.
- The seller may request for an earlier move-in to the property, say a few days before the final closing. This is possible as long as you permit it and the approval is written on paper.
Whatever the transition situation is, both parties must sign a written agreement to expressly describe who is responsible for damages within the home.
Closing or escrow services are usually provided by a particular settlement firm chosen by the buyer. In some areas, it’s the seller who chooses which company will handle the settlement.
During the closing, don’t be surprised if there are changes in the amounts owed by the seller and buyer. It may have something to do with property taxes. If you’ve used an escrow account to pay property taxes, you could receive credit. On the flip side, failure to pay taxes may result to you receiving deductions in your received amount upon settlement.
The settlement or closing is finalized when sufficient funds are provided by the buyer (via escrow), and the purchase and sales contract has been reviewed by the settlement agent to evaluate how much you’re going to receive. Immediately after the settlement date, the property title will now be transferred to the buyer, and the record of the transfer will be sent to the local county office.
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