by P. Andersen, 9/26/14
It has been a few weeks since we discussed the process of buying a home. If you recall, part 2 left us at the contract signing. This is the point of no return, assuming things go well with the rest of the process. Part 3? Part 3 takes us from Contract to Closing.
If you thought the stress ended with the contract, well – who are we kidding, you knew the stress didn’t end there! With a house, does the stress ever really end? Still, that contract signing was a really nice milestone in the process, as it means that everyone agrees upon the basics of the sale. So, what happens between contract and closing? And what is involved in the closing itself???
From Contract to Closing
A few things happen during this time. From the buyer’s perspective, there are at least three things that you can expect.
First, the house must appraise to value – the bank will send in an appraiser to make sure the loan is not larger than the appraised value of the house. This can take a few weeks, to get scheduled, completed, and a report to be filed. If the house does not appraise to value? I have heard where a request was made for another appraiser to make a report, with success. In the end, this step is essential – the bank does not want to have a loan outstanding that exceeds the value of the property… Read more about what they look for here.
Secondly, a title search must be done on the house to verify the title is clear. Are there any liens on the house that went unstated? The title search will find the problems, and the title insurance (one policy for the bank, and if you are smart, one for you) will protect you should something come up down the road. I am no title expert, but you can read more about them here. One last note: Due to the Coop ownership structure, title insurance is generally not taken. Because there is no real property changing hands, only shares, title searches are not generally done. Note that there IS title insurance called Coop Leasehold Insurance Policy. This article is from 2006, but gives Coop buyers some insights you might otherwise overlook…
Next, you need to have homeowners insurance. Some banks will offer to get the insurance for you, but as you might expect, I think a broker is the way to go. The price is usually pretty reasonable, given the size of the investment, and your trusted advisor (Levitt-Fuirst???) can guide you to a company that is right for you.
Finally, you will be asked to send 4,827.5 documents to the bank to verify just about everything you have told them up to this point…. It can be exhausting, but here is my advice to you. Collect everything ahead of time! You need tax records, bank statements, copies of checks and deposits, statements from every fiduciary account you hold, proof of employment, and and and and and… Be patient, be close to a scanner, be prompt and be responsive. Don’t hold things up, get your paperwork in!
Congratulations, you made it! The house appraised at or above the loan value, the title came back clear, and you somehow managed to appease the bank with 4,827.5 documents proving you are a good risk with regard to this very big loan. And here you are, the date of closing.
On the morning of the closing, you will do a walk through to make sure the house is still in good shape (the owner is required to keep the property in good shape). Remember those things you asked the seller to do? The concessions? Make sure they were done. Make sure things seem to still work, and the place is as you expect it to be. Even the yard should be kept in the same shape as when you decided to buy.
Now, it is off to the lawyers for the signing! And signing. And signing… You will generally be required to bring a bank check to pay for those large closing costs we talked about (your lawyer will give you the amount and the HUD statement of what makes up that amount), and you should bring your personal checkbook in case there are some outstanding items that got missed. After signing and reading several hundred documents, you will be given keys, and off you go! Whew.
On a personal note, buying a home is a very exciting thing. When you buy a car, that excitement comes when you drive off the lot. When you buy a home, the excitement is when you drive into your driveway for the first time. After all this time, you finally reached your goal. Congratulations!