This cheat sheet helps you do your homework, so you know what you’re signing when you close the sale of your home.
You’ve already cleared several hurdles by finding the right home, negotiating the best price, and getting approved for a mortgage. The last obstacle on your homebuying track is the closing, which can be both tedious and tense. By knowing what to expect and doing some legwork, you can smoothly put your closing behind you. These seven steps will guide you.
1. Set a Closing Date
Ask your title company to set a closing date and time that meshes with the end of your lease or the sale of your existing home. Don’t want to skip work? Ask for an evening or weekend closing. Tight on cash? Schedule your closing for the end of the month. That’s when you’ll pay the least amount of interest at the closing table.
2. Gather Your Funds
Buyers usually have to bring money to the closing. Ask the title company what forms of payment it accepts. Chances are you can’t use a personal check.
If you have to move money into your bank account to pay your closing costs, do so a week ahead to avoid last-minute problems. If the title company requires the funds in the form of a cashier’s check, stop by the bank a few days before closing to pick it up.
3. Purchase Title Insurance
If you’re getting a mortgage, you have to buy a title insurance policy. Think it protects you against problems with the title of your home? Nope, it protects the lender in case the sellers really didn’t own the home or someone else had a claim on it.
To cover yourself, you can buy an owner’s title policy from the same insurance company that sells you the lender’s title policy. Or, shop online at Closing.com, EasyTitleQuote.com, or FreeTitleQuote.com. An owner’s title policy insures you against losses from fraudulent claims against your ownership and errors in earlier sales. In some areas, sellers traditionally pay for the buyer’s title policy.
Whether or not you get the owner’s policy, if you buy a title policy from the same company that issued the prior owner’s title insurance, you can ask for a reissue discount or “bring-down” rate. There’s a discount because the title company only has to check the records filed since that prior owner bought the home, not since the dawn of time.
4. Line Up Homeowners Insurance
Get quotes and compare policies to be sure coverage will start by your closing date. An annual policy should run $500 to $1,000, depending on your home’s size, age, and amenities. To get a lower premium, opt for a high deductible or buy your homeowners insurance from the same company that insures your car.
If you live in an area where natural disasters occur, like earthquakes, floods, or hurricanes, you’ll need separate insurance to protect your home from those hazards.
5. Review Your Good Faith Estimate and HUD-1 Settlement Sheet
Your lender already gave you a Good Faith Estimate (GFE) that showed your estimated closing fees. Some of the fees on your GFE can’t change and others can rise by 10%. Before you go to the closing, compare the numbers on your GFE with the numbers on your HUD-1 settlement statement. Question your loan officer about any fees that increased.
6. Do a Walk-Through
Schedule an appointment to walk through the home one last time just before your closing.
- Make sure repairs you requested have been made.
- Look for major changes since you last viewed the property.
- See if the sellers left everything they promised to leave.
- Check to see that the sellers took all their personal belongings.
- Test electronics and appliances to ensure they’re still working.
- Turn on the HVAC and hot water. Are they functioning right?
- Walk the yard to be sure no plants or shrubs have been removed.
7. Resolve Issues Identified in Your Walk-Through
If your walk-through uncovers problems:
1. Delay the closing until the seller corrects them (if your state allows it). But that’s often not feasible because your lease is probably over and you’ve already scheduled movers.
2. Negotiate a discount to your sales price to cover the cost of the work needed. If the air conditioning is on the fritz and a contractor says the repair will cost $500, ask that the sales price be reduced by that amount. If you make that request at closing, however, be ready for a delay while the title company redoes the paperwork.
3. Have the title company hold a portion of the seller’s proceeds in escrow until the dispute is resolved. Once that happens, the funds will be released to you or the seller, depending on the outcome.
- Do You Have the Right Amount of Homeowners Insurance?
- Do You Need an Umbrella Policy?
G.M. Filisko is an attorney and award-winning writer who has endured several property closings, but the easiest was done through the mail. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Across Chicago’s near north side, the Average Sale Price has remained stable while market times have dropped to well below 2013 ranging on average from 2 weeks to 3 or 4 months. This suggests what the facts show which is that much of the distressed inventory has been absorbed. Distressed sales have dropped by 50%.
Have a plan for reviewing purchase offers so you don’t let the best slip through your fingers.
You’ve worked hard to get your home ready for sale and to price it properly. With any luck, offers will come quickly. You’ll need to review each carefully to determine its strengths and drawbacks and pick one to accept. Here’s a plan for evaluating offers.
1. Understand the process.
All offers are negotiable, as your agent will tell you. When you receive an offer, you can accept it, reject it, or respond by asking that terms be modified, which is called making a counteroffer.
2. Set baselines.
Decide in advance what terms are most important to you. For instance, if price is most important, you may need to be flexible on your closing date. Or if you want certainty that the transaction won’t fall apart because the buyer can’t get a mortgage, require a prequalified or cash buyer.
3. Create an offer review process.
If you think your home will receive multiple offers, work with your agent to establish a time frame during which buyers must submit offers. That gives your agent time to market your home to as many potential buyers as possible, and you time to review all the offers you receive.
4. Don’t take offers personally.
Selling your home can be emotional. But it’s simply a business transaction, and you should treat it that way. If your agent tells you a buyer complained that your kitchen is horribly outdated, justifying a lowball offer, don’t be offended. Consider it a sign the buyer is interested and understand that those comments are a negotiating tactic. Negotiate in kind.
5. Review every term.
Carefully evaluate all the terms of each offer. Price is important, but so are other terms. Is the buyer asking for property or fixtures — such as appliances, furniture, or window treatments — to be included in the sale that you plan to take with you?
Is the amount of earnest money the buyer proposes to deposit toward the downpayment sufficient? The lower the earnest money, the less painful it will be for the buyer to forfeit those funds by walking away from the purchase if problems arise.
Have the buyers attach a prequalification or pre-approval letter, which means they’ve already been approved for financing? Or does the offer include a financing or other contingency? If so, the buyers can walk away from the deal if they can’t get a mortgage, and they’ll take their earnest money back, too. Are you comfortable with that uncertainty?
Is the buyer asking you to make concessions, like covering some closing costs? Are you willing, and can you afford to do that? Does the buyer’s proposed closing date mesh with your timeline?
With each factor, ask yourself: Is this a deal breaker, or can I compromise to achieve my ultimate goal of closing the sale?
6. Be creative.
If you’ve received an unacceptable offer through your agent, ask questions to determine what’s most important to the buyer and see if you can meet that need. You may learn the buyer has to move quickly. That may allow you to stand firm on price but offer to close quickly. The key to successfully negotiating the sale is to remain flexible.
G.M. Filisko is an attorney and award-winning writer who has survived several closings. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
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The National Association of Realtors published a study on ‘Foot Traffic’ which is an indicator for the number of buyers in the market which rose to 57.0 in August. Google released a report at the end of August a report that shows that the number of people looking online at homes is higher at this time of year than it has been in six years and that number demonstrates a growing number. There will be seasonal fall off as the holidays approach, but these are good indications of stability returning to the market.
Published: May 13, 2011
Home improvement trends embrace energy efficiency, low maintenance exteriors, and double-duty space.
Today’s home improvement trends show that we like our houses to work harder and smarter for the money we spend maintaining and improving their value.
- We no longer want bigger; instead, we want space that’s flexible, efficient, and brings order to chaos.
- We’re watching our wattage with monitors and meters, and guarding our weekends with maintenance-free exteriors.
Here’s a look at seven hot home improvement trends that improve the way we live with our homes.
Trend #1: Maintenance-free siding
We continue to choose maintenance-free siding that lives as long as we do, but with a lot less upkeep. But more and more we’re opting for fiber-cement siding, one of the fastest-growing segments of the siding market. It’s a combination of cement, sand, and cellulosic fibers that looks like wood but won’t rot, combust, or succumb to termites and other wood-boring insects.
At $5 to $11 per sq. ft., installed, fiber-cement siding is more expensive than paint-grade wood, vinyl, and aluminum siding. Still, it’s a solid investment. If you should decide to sell your house, you’ll recover 79% of the project cost, according to the “2015 Remodeling Impact Report” from the NATIONAL ASSOCIATION OF REALTORS®.
Maintenance is limited to a cleaning and some caulking each spring. Repaint every seven to 15 years. Wood requires repainting every four to seven years.
Trend #2: Convertible spaces
Forget “museum rooms” we use twice a year (dining rooms and living rooms) and embrace convertible spaces that change with our whims.
Foldaway walls turn a private study into an easy-flow party space. Walls can consist of fancy, glass panels ($600 to $1,600 per linear ft., depending on the system); or they can be simple vinyl-covered accordions ($1,230 for 7 ft. by 10 ft.). PortablePartions.com sells walls on wheels ($775 for approximately 7 ft. by 7 ft.).
A Murphy bed pulls down from an armoire-looking wall unit and turns any room into a guest room. Prices, including installation and cabinetry, range from $2,000 (twin with main cabinet) to more than $5,000 (California king with main and side units). Just search online for sellers.
And don’t forget area rugs that easily define, and redefine, open spaces.
Trend #3: A laundry room of your own
Humankind advanced when the laundry room arose from the basement to a louvered closet on the second floor where clothes live. Now, we’re taking another step forward by granting washday a room of its own.
If you’re thinking of remodeling, turn a mudroom or extra bedroom into a dedicated laundry room big enough to house the washer and dryer, hang hand-washables, and store bulk boxes of detergent.
Look for spaces that already have plumbing hookups or are adjacent to rooms with running water to save on plumbing costs.
Trend #4: Souped-up kitchens
Although houses are trending smaller, kitchens are getting bigger, according to the American Institute of Architects’ Home Design Trends Survey.
Kitchen remodels open the space, perhaps incorporating lonely dining rooms, and feature recycling centers, large pantries, and recharging stations.
Oversized and high-priced commercial appliances — did we ever fire up six burners at once? — are yielding to family-sized, mid-range models that recover at least one cabinet for storage.
Since the entire family now helps prepare dinner (in your dreams), double prep sinks have evolved into dual-prep islands with lots of counter space and pull-out drawers.
Trend #5: Energy diets
We’re wrestling with an energy disorder: We’re binging on electronics — cell phones, iPads, Blackberries, laptops — then crash dieting by installing LED fixtures and turning the thermostat to 68 degrees.
Are we ahead of the energy game? Only the energy monitors and meters know for sure.
These new tracking devices can gauge electricity usage of individual electronics ($20 to $30) or monitor whole house energy ($100 to $250). The TED 5000 Energy Monitor ($240) supplies real-time feedback that you can view remotely and graph by the second, minute, hour, day, and month.
Trend #6: Love that storage
As we bow to the new god of declutter, storage has become the holy grail.
We’re not talking about more baskets we can trip over in the night; we’re imagining and discovering built-in storage in unlikely spaces– under stairs, over doors, beneath floors.
Under-appreciated nooks that once displayed antique desks are growing into built-ins for books and collections. Slap on some doors, and you can hide office supplies and buckets of Legos.
Giant master suites, with floor space to land a 747, are being divided to conquer clutter with more walk-in closets.
Trend #7: Home offices come out of the closet
Flexible work schedules, mobile communications, and entrepreneurial zeal are relocating us from the office downtown to home.
Laptops and wireless connections let us telecommute from anywhere in the house, but we still want a dedicated space (preferably with a door) for files, supplies, and printers.
Spare bedrooms are becoming home offices and family room niches are morphing into working nooks. After a weekend of de-cluttering, basements and attics are reborn as work centers.
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By knowing how much mortgage you can handle, you can ensure that homeownership will fit in your budget.
Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.
Why not just take out the biggest mortgage a lender says you can have? Because your lender bases that number on a formula that doesn’t consider your current and future financial and personal goals.
Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?
Consider those lifestyle issues as you check out these four methods for estimating the amount of mortgage you can afford.
1. Prepare a detailed budget.
The oldest rule of thumb says you can typically afford a home priced two to three times your gross income. So, if you earn $100,000, you can typically afford a home between $200,000 and $300,000.
But that’s not the best method because it doesn’t take into account your monthly expenses and debts. Those costs greatly influence how much you can afford. Let’s say you earn $100,000 a year but have $1,000 in monthly payments for student debt, car loans, and credit card minimum payments. You don’t have as much money to pay your mortgage as someone earning the same income with no debts.
Better option: Prepare a family budget that tallies your ongoing monthly bills for everything — credit cards, car and student loans, lunch at work, day care, date night, vacations, and savings.
See what’s left over to spend on homeownership costs, like your mortgage, property taxes, insurance, maintenance, utilities, and community association fees, if applicable.
2. Factor in your downpayment.
How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which protects the lender if you default and costs hundreds each month. That leaves more money for your mortgage payment.
The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.
But, if interest rates and/or home prices are rising and you wait to buy until you accumulate a bigger downpayment, you may end up paying more for your home.
3. Consider your overall debt.
Lenders generally follow the 43% rule. Your monthly mortgage payments covering your home loan principal, interest, taxes and insurance, plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 43% of your gross annual income.
Here’s an example of how the 43% calculation works for a homebuyer making $100,000 a year before taxes:
1. Your gross annual income is $100,000.
2. Multiply $100,000 by 43% to get $43,000 in annual income.
3. Divide $43,000 by 12 months to convert the annual 43% limit into a monthly upper limit of $3,583.
4. All your monthly bills including your potential mortgage can’t go above $3,583 per month.
You might find a lender willing to give you a mortgage with a payment that goes above the 43% line, but consider carefully before you take it. Evidence from studies of mortgage loans suggest that borrowers who go over the limit are more likely to run into trouble making monthly payments, the Consumer Financial Protection Bureau warns.
4. Use your rent as a mortgage guide.
The tax benefits of homeownership generally allow you to afford a mortgage payment — including taxes and insurance — of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.
Here’s an example: If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.
However, if you’re struggling to keep up with your rent, buy a home that will give you the same payment rather than going up to a higher monthly payment. You’ll have additional costs for homeownership that your landlord now covers, like property taxes and repairs. If there’s no room in your budget for those extras, you could become financially stressed.
Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.
Related: More on Mortgages from HouseLogic
G.M. Filisko is an attorney and award-winning writer who’s owned her own home for more than 20 years. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
Published: July 1, 2011
The Fourth of July — Independence Day — is a great time to reflect on how lucky we are to live in the United States of America, and what we can do to make our nation better, stronger, and more prosperous. As President Kennedy famously said many years ago, “Ask what you can do for your country.”
We’d all like to do our part. But our individual efforts sure seem small compared with the goings-on of world politics and global economies.
How can we — average American home owners — really achieve big goals, such as influencing national energy policy and building a strong economy? After all, we’ve got our own daily stuff to deal with: work, home repairs, getting the kids to softball practice, and the dog to the vet.
One good way is to reduce energy consumption in our own homes. This simple act can have a major impact. Not just in terms of helping hold the line on the family budget, but in slowing the ever-spiraling costs of energy. Lessening demand — even incrementally — eases the price of energy, which can free up capital that creates jobs and helps get our economy kicking.
Here are examples of small contributions you can make that add up:
- Ask cable or satellite providers for an energy-efficient set-top box, (the device that receives and dispatches TV signals to your DVR). Set-top boxes, which run 24 hours a day, have become a leading energy drain in the home. Newer Energy Star-rated models are at least 30% more efficient. If all set-top boxes sold in the U.S. were Energy Star-rated, energy savings would total $2 billion each year, and greenhouse gases would be reduced by an amount equivalent to 3 million cars and trucks.
- Replacing an old, kaput dishwasher with an Energy Star-qualified model cuts the annual energy cost of the machine by 50% — to $60 from $120. If every clothes washer purchased in the U.S. this year were an efficient Energy Star model, the national energy savings would total $350 million, not to mention conserving 32 billion gallons of water.
- Buying a high-efficiency gas or electric water heater, when yours reaches the end of its useful life, saves 3% to 4% on the average home’s hot water bill. Energy standards enacted by the U.S. Dept. of Energy in 2010 were designed to cut energy usage of new water heaters by 3% to 4%. Over a 30-year period, U.S. consumers should save $8.7 billion and reduce CO2 emissions by 170 million tons — that’s equal to the yearly emissions of 30 million cars.
- Replacing a 60-watt incandescent light bulb with a 13-watt compact fluorescent equivalent saves $30 over the life of the bulb. Alternative: LED bulbs, although costly ($30 for 7-watts), last 3 to 4 times longer than CFLs, burn cooler, and — unlike CFLs — contain no mercury. If every home in America replaced just one incandescent bulb with an Energy Star-qualified CFL, the savings would be enough to light more than 3 million homes. The savings would also reduce greenhouse gas emissions caused by fossil-fuel energy production equivalent to 800,000 autos.
More easy ways to be patriotic (and save):
- Create a breeze with a ceiling fan instead of using the AC. For every degree you raise the air conditioning thermostat above 78 degrees, you can save 3% to 8% on cooling costs.
- Install a programmable thermostat and save as much as $180 per year.
- Plump up attic insulation from R-11 to R-49 and save up to $600 per year.
- Turn down the thermostat on your refrigerator and save $22 per year.
- Outsmart sneaky energy vampires by turning off (or putting “to sleep”) computers, printers, and other electronics when not in use: Shave another $100 from your annual energy bill.
Let’s put the independence in Independence Day.
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