The Contract
A. Negotiation of contract terms between attorneys
B. Signing of contract with client including discussion of final terms
C. Contract deposit (usually up to 10%) provided by buyer
Mortgage, Title Insurance, Survey
A. Buyer applies for and obtains Mortgage Commitment
B. Buyer’s attorney obtains Title Insurance report and survey (if available)
C. Clearance of title problems
Closing
A. Usually conducted at lender’s attorney’s office
B. Buyer provides remainder of purchase price by certified or bank check
C. Buyer obtains Homeowners Insurance prior to closing
Post Closing
A. This office will forward to the client a final closing statement with copies of signed documents and a final accounting
B. Any post-closing agreements between Buyer and Seller will be monitored
C. The original deed will be returned by the County offices usually within 4-6 months
Buying or selling a home is one of the most important decisions a person can make; a home purchase is often the most expensive investment a person will make in their lifetime. There are many factors that go into this decision, and many steps along the way for which you may desire legal counsel. This office understands the legal and personal concerns involved in the purchase/sale of a home or business property and are happy to assist with the often confusing process – from signing a contract through closing.
Some of the most important procedures involved in the purchase or sale of real property are further explained on the following pages, highlighting areas where this office may be of assistance.
I. The Contract
The first step in purchasing property is negotiating the Contract. This may be done thorough an attorney, broker, or directly with the seller. It is important that you do not sign a formal contract until you have discussed all of its terms with your attorney. This is especially true when you are purchasing directly from the seller. When the Contract is signed, the buyer makes a contract deposit of up to 10% of the purchase price which is held in escrow by the seller’s attorney.
After the Contract is fully executed, the purchaser has three main duties:
- Obtain termite inspection
- Obtain mortgage financing
- Obtain title search – usually done by the Purchaser’s attorney
Note: Home Inspections
This office encourages those purchasers who wish to have a home inspection performed by a licensed inspector to do so prior to signing a Contract. Most Sellers will not agree to sign a contract which is subject to the purchaser’s later inspection of the house. Hopefully the inspection will not reveal any major problems. If there are problems, further negotiation can be conducted before contracts are signed.
II. Mortgage, Title Insurance & Survey
Mortgage fees and application rates will vary according to the lender that is chosen. If you wish, this office can assist you in locating a mortgage lender or broker. Most mortgage approvals are given within 30 to 45 days of your application. It is important that the purchaser obtain a commitment before the deadline imposed by the Contract.
Once the mortgage commitment is received, the purchaser needs to order Title Insurance. Often, the purchase’s attorney will order the title insurance. However, the broker or buyer himself may recommend the title company of their choice. The title insurance company will forward a “title binder” to counsel for all parties. This will include “judgment and departmental searches” against all sellers, buyers, and the premises which will reveal any outstanding judgments, liens, or violations against the parties or premises.
Purchasers may also need a property survey. A typical survey will cost between $350 and $500. If the seller has an existing survey in their possession, it is customary for that survey to be provided to the purchaser.
III. The Closing
Closings (when title passes from seller to buyer) are usually held at the office of the lender’s attorney. The buyer will be asked to sign numerous documents including several copies of the Mortgage and Note as well as notices which will be provided to local tax authorities and the IRS regarding your new ownership of the home. The seller will furnish the purchaser with a deed (which transfers title to the property). Both parties will also sign what is known as a “HUD-1” Settlement Statement. This form lists all costs and charges in connection with the closing of which the Federal Government keeps track.
IV. Post Closing
Sometimes agreements are made between buyer and seller which survive the closing. We must monitor such agreements even though the house has been legally “sold”. At the conclusion of all matters a final closing statement will be provided to each buyer and seller.
Closing Cost Estimates
This is a partial list estimating many of the charges commonly paid at closing
Purchaser
Mortgage Application / Appraisal Fees | approximately $250 – $500 |
Mortgage Origination Fee (Points) | Each Point = 1% of Mortgage Amount |
Processing / Review Fee | $100 – $400 |
Survey | $250 – $600 |
Title Search / Insurance | determined by price of home |
Inspections (structural/termite/lead paint) | $250 – $500 |
Attorney’s Fees | $800 – ½% of the purchase price depending on property size and type |
Fire/Hazard Insurance | determined by insurance company |
Recording & Search Fees | $300 – $500 |
Condominium or Homeowners Association Dues (if applicable) | check with association |
Interest (to lender) from date of closing to end of month rate | varies depending on date of closing and interest rate |
Escrows to be deposited with lender for: Property taxes and Hazard Insurance | 2 – 3 times the monthly cost of each |
P.M.I. (Mortgage Insurance) | If mortgage exceeds 80% of purchase price Mortgage insurance will be required by lender at their rates |
Seller
Real Estate Broker’s Fees | usually 4-7% of sale |
Realty Transfer Taxes | varies depending on location, type and cost of premises. Call for quote. |
Attorney’s Fee | $800 – ½% of purchase price depending on property size and type |
Mortgage Satisfaction Fee(pickup) | $150 per mortgage |
The closing process is one that requires cooperation from numerous persons, including counsel, mortgage officer, real estate agents, title company personnel and both parties to the transaction. Hopefully all will work in a timely fashion so that the process will proceed smoothly. This office works together with brokers, mortgage lenders and other attorneys in an attempt to make the process a little less complicated.
This guide certainly does not discuss every possibility which can arise in a real estate transaction, but is intended to give an overview of the general process. Please feel free to call for a more in depth free consultation regarding your next sale or purchase.