Closing Checklist

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Once you are under contract, there are several steps you need to take in order to close on time. Failure to close on time could lead to losing the contract you spent time, money, and effort on. Nearly everything in a real estate transaction is time-sensitive, so make sure to follow up with your lender, realtor, insurance agent, etc. Your NextHome Simplicity realtor will help you stay on track, but we have made this list to help you know what to expect during your transaction. Call, text, or email your agent if you have further questions. 

 

Step 1 – Earnest Money 

Typically a buyer has 3 to 5 business days, depending on the terms written in your contract, to deliver the earnest money to whoever holds the earnest money. Earnest money is often held by the closing attorney – check with your Realtor to find out who you need to deliver the earnest money to. If the earnest money is not deposited within the agreed amount of days, the contract is voidable (can be voided by the seller) per the Mississippi state contract.  Check your  ” Contract For The Sale and Purchase Real Estate” document under “earnest money” or ask your Realtor what you need to do. A Buyer can personally deliver or send the earnest money to its destination.

*** If a buyer backs out of a contract for a legitimate contingency (one that is outlined in the contract), the buyer can keep their earnest money. If the buyer backs out after the expiration date of a contingency or for an illegitimate reason, the buyer will forfeit their earnest money to the seller. **Steps 1 – 4 should be done simultaneously

 

Step 2 – Insurance

Often, buyers ask for 5 – 10 business days to find acceptable insurance, as a contingency (provision written into the contract to protect the buyer and or seller from an unforeseen event or circumstance) of their contract. Finding the best and most affordable insurance quote can greatly affect the buyer’s monthly payment. See our “recommendation” tab for local recommended insurance agents.  Recommended Insurance Agents 

*** If the property is in a floodzone check to see if the flood insurance is transferable. The buyer and seller must have the transfer signed before you close! Transferable flood insurance is often cheaper than a new flood policy.

 

Step 3 – Home Inspection

At NextHome Simplicity, we recommend all buyers obtain a home inspection. Under the terms of a typical contract, the home inspection must be completed within 10 business days, after the acceptance of an offer (the day you are under contract). As a buyer, you or your NextHome Realtor must call an inspector immediately, to get on their schedule. If the inspection is not completed within the agreed-upon business days, it is not likely the buyer will be able to back out of the contract due to a poor inspection report / retrieve the earnest money.

Once the home inspection report has been completed and delivered to the buyer, the buyer and seller have “X” amount of days to negotiate repairs. “X” is however many days are written into your specific contract to request repairs – most often buyers ask for 5 days to negotiate repairs, but sellers can ask for an extension if they need more time to price the requested repairs. If the buyer is just very unhappy with what is found in the inspection report, they may withdraw from the contract and get their earnest money back, without requesting repairs from the seller.  The buyer can also back out of the contract and receive a full refund of their earnest money if they and the seller cannot reach an agreement on the requested repairs. For a buyer to back out and receive a full refund of earnest money; the home inspection must be performed by a licensed professional, the home inspection contingency must be a valid addition to your contract, the home inspection must be completed within the contractual timeframe, and there must NOT be language added to the contract making the earnest money non-refundable. See Step 1 for more information.

Some sellers require buyers to purchase a home “as is” which may be advertised in their listing and some buyers may mention purchasing a home “as is” in their offer, to make their offer more attractive to sellers, but in both circumstances, a buyer has the right to make the offer contingent on an inspection, then purchase a home inspection, and back out of the contract if they are unhappy with the inspection findings. As a buyer using a loan to purchase a home, you need to be aware of sellers who are selling “as is”. Most loans require the home to be in “move-in ready condition” and this means different things to different loan types. For most loan types this means there can not be any missing flooring, all “built-in” appliances must be present and functional, there can not be holes in the walls or ceilings, and in some cases, this means there can not be cracks in windows, missing thresholds, flaking paint, etc. These types of defects are found during an inspection, but they are also found during the appraisal inspection and appraisers will require these things to be fixed before closing. An appraisal inspection is a quick inspection of things a bank/lender requires the appraiser to review.

Sellers do not always agree to repair items requested by buyers. Sometimes sellers reject “repair requests” or they will only agree to do a handful of repairs. If the seller agrees to repair items requested by the buyer, the buyer has the right to have the inspector re-inspect the property for a small fee. Home inspection fees are typically paid before closing to the inspector, and most cost between $300-$500 depending on the square footage of the property. Most often, buyers pay for their own home inspection, and they can use the inspector of their choice. We have a great list of preferred inspectors we work with regularly, some of which we ourselves have personally used in the past and are happy to recommend.  Recommended Inspectors

 

Step 4 – Other Inspections

Depending on the “purchase property” (the property you are purchasing) and the “contract terms” (the contingencies written within the contract), some properties and lenders require additional inspections. Ask your NextHome realtor or lender if your loan requires a well or septic inspection. Additionally, some buyers choose to obtain a survey, pool inspection, etc. Call your NextHome realtor to ensure you are responsible for an inspection and if so, make sure the inspection is completed in the time frame negotiated in your contract.  Recommended Inspectors

***If the buyer is a VA buyer, the well and septic inspection will have special instructions.

 

Step 5 – Appraisal

A cash buyer is not required to obtain an appraisal but can do so if they choose.

If the buyer is using a loan to purchase a property, the lender will require an appraisal.  Once the property passes inspection and requested repairs, if any, have been completed, the appraisal is ordered by the buyer’s lender. The lender will typically have the buyer sign an authorization to order the appraisal at the beginning of the loan process. So if the home inspection has not been completed or there are home inspection issues that are still unresolved, it is important to let the lender know before they order the appraisal. Otherwise, if the buyer backs out of a contract due to a poor inspection report and the appraisal has already been completed, the buyer will have paid for the inspection and appraisal for a home they are not purchasing.

NOTE: Typically, a buyer does not want to order the appraisal until the inspection has been completed. The appraiser cannot be chosen by a lender, buyer, seller, or Realtor when the buyer is using a loan to purchase the property. The appraiser will be randomly chosen by the lending company’s “automatic system”. If the property does not appraise for value, the buyer has 5 options: 1-The seller can either renegotiate for a lower purchase price that reflects the appraised value (this is common in a buyer’s market). 2– The buyer can pay the difference out of pocket between the appraised value and the contract price (common in a seller’s market). 3 – The buyer can back out of the contract and receive a refund of their earnest money.  4 – Buyer and Seller can meet in the middle to renegotiate the contract (most favorable outcome). 5 – Buyer or Seller can request re-appraisal, but the lender would have to agree. Appraisals typically cost between $450 – $650, and the fees must be paid before they are ordered. Once the appraisal is ordered, it may take 1 – 2 weeks for the appraisal to be completed.

*** If the property does not appraise for value, the buyer has the right to back out the contract and obtain their earnest money back if the contract has an appraisal contingency. If there is an appraisal contingency, the seller has the right to reduce the appraised value or request the buyer to pay over the appraiser’s value – but the buyer may back out of the contract.

 

Step 6 – Utilities 

Don’t forget to call the utility companies BEFORE closing day. As a seller, you need to know that the utilities must be on for the inspection and the buyer’s final walkthrough. Upon request, many companies will automatically transfer the buyer’s name to the account on the closing day, but don’t schedule the transfer too early in case the closing date changes. A few companies, such as water and waste providers, will only allow buyers to change the bill into their name with proof of the deed. You will get a copy of the deed at closing.

 

Step 7 -Termite Inspection

Cash buyers do not need to purchase a termite inspection, but if the buyer is using a loan, a termite inspection is required.

Unless otherwise negotiated in the contract, the termite inspection is typically the last inspection step completed in the purchase process. A Wood Destroying Termite Report (WDIR) has an expiration date and must not expire before closing. Typically, the seller will pay for the termite inspection, but the buyer can purchase their own. See our “recommendations” tab.  Recommended Inspectors

 

Step 8 – Closing Disclosure 

The closing attorney or lender will send the buyer and seller a “closing disclosure,” showing the exact amount of funds they will need to bring to closing or will be receiving at closing. Any funds brought to closing must be in the form of a certified check. The closing attorney is most often chosen by the buyer who is paying most, if not all, of the attorney fees. If it is agreed that the seller will choose the closing attorney, they will need to make this decision the day they are officially under contract and this information may need to be added to the contract depending on where the earnest money is held. Ask your NextHome realtor for more information on this. The closing attorney is essential. This is the person who will do a title examination, correct any title issues, and record the change of deed. If you do not have a real estate closing attorney, we have a list of great ones we highly recommend you take advantage of.

 

Step 9 – Final Walk-Through

After the seller has officially moved out, the buyer will complete a final walkthrough to ensure no damage has been done during the moving process. If the property is new construction, the buyer will complete at least two walkthroughs to ensure all items negotiated have been properly completed. Let your Realtor know when you’re available to complete the final walkthrough.

 

Step 10 – Closing Day  

Be prepared! Unless you’re a cash buyer, closing typically takes 1 -1.5 hours. Anyone signing documents will need to bring their valid photo ID and a certified check for any funds needed to close on closing day. If you are married or purchasing a property jointly with another party, your spouse or the other party must be present to sign documents as well.  Recommended Closing Attorneys

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 Other Things To Know:

  • A “verbal acceptance” of a contract is not legally binding.
  • When a buyer is using a loan to purchase a property, things such as furniture, boats, above-ground pools, backyard playsets, etc. can not be included in a real estate purchase contract. A lenders appraiser will give no value for these items and the lender will not provide “extra funds” for these types of items. These items must be left with no value added or purchased with a bill of sale outside of the sales contract.
  • There is a difference between a loan appraisal, refinancing appraisal, and a cash appraisal. When a lender orders an appraisal for a loan, each loan type has its own set of stipulations and qualifications. Often, an appraisal completed for a loan is much more strict because the appraiser has to follow guidelines given for that specific type of loan, in order for the appraisal to be accepted by the bank/lender’s underwriters.
  • Cash buyers have very little closing cost because a large portion of closing costs are paid to the lender.
  • Lenders charge on average 3%-5% of the loan amount in closing cost.
  • Most contracts fall apart due to home inspection reports – the first home inspection was performed in the 1960s but did not become very popular until the 1980s!
  • Home inspection reports are often 20 – 60 pages long – even for new construction homes. The larger the home, the larger the report will be. Do not stress over a large report, stay focused on the major issues.
  • Termite contracts, alarm system contracts, etc can be transferred to the buyers.
  • A seller or buyer can purchase a home warranty before or after closing. Home warranties are not warrantied by the seller – they are contracts with a third party company such as American Home Sheild or Home Warranty of America. A home warranty often covers things like hot water heaters, the AC system, all plumbing fixtures, garbage disposal, stove, and other large appliances but a home warranty may also cover a garage door, doorbell, pool pump and more. The amount of coverage depends on the home warranty company and the plan/extras purchased.
  • Any modifications to a contract need to be written and signed by all parties for those changes to be legally binding.