I have been writing lately about estate planning. Let’s shift back to real estate. The real estate market is hot, hot, hot. Multiple buyers are vying for the same
property, even offering more than the asking price in an effort to secure their
purchase. Homes for sale are staying on
the market only a very short time before they are scooped up by anxious buyers,
and sellers are just sitting back and cooling their heels while the buyer insanity
continues.
If you are a potential buyer, you must be prepared to move quickly not only
financially but in all other respects as well.
It is important to honor the dates set forth in the offer, and to keep
the seller under agreement (by the Offer) so that you don't lose the deal. Some buyers write personal letters to the
sellers advocating for why the sellers should choose their offer. Other try to make their offer more attractive
by foregoing a mortgage contingency—this is a personal choice, but it is important
that buyer have sufficient financing to purchase the property. Essentially it is an allocation of risk that
sits squarely with buyer from onset. Generally
the mortgage lender will do what is necessary to approve buyers’ application
and meet the closing date, but once in a while (rarely, fortunately) things don’t
work out with the lender as the buyers hope.
If buyer does not get mortgage approval, the buyer is still contractually
bound to purchase the property, (with funds from other sources, if necessary),
and if they don’t or can’t buy, they will be in default and the seller will be
entitled to keep the deposits paid as damages.
If nothing goes wrong, things will move along in the normal
course, and the lender will finally approve the loan to close. At least three days before closing, lender must
give buyer a Closing Disclosure which will set out all of the terms and costs
involved in the transaction. At that
time, the buyer will be informed of the total amount necessary to close. That figure will include not only the balance
of the price due, but also all closing costs associated with the
transaction. The buyer will be instructed
to provide those funds at closing, either by wire transfer or cashier’s check.
So what are the closing costs that are added to the balance of the price due? They will include fees paid to the lender for processing your loan, funds for escrows if the lender will be maintaining escrow accounts for taxes and insurance, legal fees, registry of deeds recording fees, and perhaps some other small fees charged by the lender or the attorney. Depending on the closing date, the lender may also charge “prepaid interest”—this is the amount of interest due on the principal for the balance of the month in which closing occurs. On the first of each month thereafter, you will make your usual monthly payment.
You will be obligated to put homeowners insurance into place
and provide a binder to the lender.
Often the lender requires that the full year’s premium must be paid for closing. You will obligated to pay for a loan policy
of title insurance on behalf of the lender.
As I have stated in earlier posts, you absolutely should purchase the
optional owners policy of title insurance, which is available at a discount at
closing if it is purchased at the same time as is the loan policy. The
closing attorney takes care of just about all of the processing on behalf of
buyer. Buyer should be sure to be
responsive to any lender requests, but a good lender’s attorney should manage
all pieces of this in a smooth manner leading to a successful closing.
So, buyers, put on your running shoes and go after the house
you want. But remember one thing: there
is no such thing as just one perfect house.
There are many, many houses available for sale, and odds are you will be
happy with any of them. Kind of like online
dating.
