CHAPTER 6. FROM SALE TO SETTLEMENT
- You receive an offer to purchase your home.
- Negotiate with the Agent of the potential buyer
- Sign a contract
- Wait for your buyer to secure a mortgage loan,
- Make preparations to move
- At settlement, finally collect payment and hand over the keys.
- Move out
- Throughout the process, your agent is at hand to help until you have sold, settled and moved.
Section A. From Offer To Sales Contract
You receive a signed offer
Discuss the terms and buyer's qualifications with your agent.
Every seller has three basic options when presented with an offer.
You can either accept or reject what's offered, or you can make a written counter-offer as soon as possible.
Until you sign, buyers can always withdraw an offer.
Be sure to reply immediately because buyers are in the mood to buy when they make an offer, but moods change.
Either your agent, or the buyer's agent will have the information you need to determine whether the buyer is qualified to buy your home.
Remember the first contract received often turns out to be the best.
Experience shows the first 30 days on the market are critical because a backlog of buyers often exists. These buyers have been looking and waiting for a home just like yours. Overpricing misses out on this buyer backlog, and so does turning down good offers in the early days in hopes of doing better later.
Negotiating the sale price and term sometimes means walking a tightrope between the highest price the buyer is willing to pay and the lowest price you can accept. Arriving at an agreement may take patience, psychology, flexibility - and intuition.
Keep the dialogue going until you agree on price and terms. Remember, sometimes a low offer can be turned into just what you are looking for.
Rely on your agent, who is in a unique position to help negotiations along, since your agent knows your situation. Your agent is professionally trained to find a meeting of the minds where everybody wins. After all, everyone has the same goal: you want to sell, and the buyer wants to buy.
Your signed acceptance of a written offer becomes your sales contract. Except for removing any contingencies, this document is the binding basis for the sale. Contingencies are typically used to smooth acceptance of a contract without delaying the buyer decision. Most contracts are contingent upon financing. This is for your protection as well as the buyer's, because you don't want to be tied to a buyer who can't deliver.
Section B. The Sales Contract
The sales contract is very important document. The terms defined in writing will be used throughout the transaction. Depending on the situation, terms and conditions will vary. Most important is making sure you know who pays what and what the costs of those items are. Here are some typical points contained in a contract.
A description of the property, including separate personal property that is to be conveyed to the buyer.
The amount of earnest money (also "deposit"), this money is a partial down payment that shows the buyer's good faith in buying. Normally, earnest money deposits are returned to the buyer if the contingencies are not met.
The sales price of your home
Financing Terms. The amount of the buyer's down payment. This amount, plus the mortgage loan, equals the purchase price. The amount of mortgage loan the buyer intends to obtain, the maximum interest rate the buyer will pay and a time limit to secure loan approval and/or specified seller financing.
Discount points and who pays them.
The date of settlement
Possession date and any pre- or post-settlement occupancy agreement if you wish to stay in the home after settlement and pay rent, or the buyer needs to occupy before settlement.
Contingencies that will determine the fulfillment of the contract, such as: prompt inspection to determine the condition of your home; required improvements such as painting, roofing, termite inspection.
Your signature and signature of the buyer.
Section C. What Personal property a buyer expects to "go with the home?
When your home is sold there is a distinction between real property and personal property. Generally, the home, land, trees, shrubbery, fences, TV antenna and any fixture inside or outside that would cause visible damage if removed is considered real property. Anything else is personal property. Unless you say in the contract otherwise, real property stays and personal property goes with you. That's why some real property is often written into the contract to be clear it is or is not part of the sale.
You're free to remove whatever freestanding personal possessions you want to take with you, such as the washer, dryer, firewood, swimming pool chemicals, window air conditioner, etc., if the items do not alter the condition of the home. Clearly, you won't take with you the wall-to-wall carpet or built-in cabinets and appliances - unless your buyer agrees and this is spelled out in your sales contract.
When you place your home on the market, decide what's to stay and include these items in the sale price. Usually home sellers leave behind awnings, draperies, blinds, shades and rods bought to fit specific windows. Sometimes buyers ask for personal property like appliances. Whatever you wish to take with you, either remove before showing your home or specify in the written contract that it does not go with the home.
Section D. How long between sales contract and settlement?
During this time your agent will probably be busier than ever. Your agent, or the agent's transaction coordinator, will facilitate the process all the way through settlement by keeping in touch with all parties, ironing out problems, expediting the loan process, arranging inspections, running papers across town, coordinating appointment dates.
You can help speed up the process by signing the contract promptly and making any repairs required as soon as possible. Your sales contract can specify how long you're willing to wait, but it must be realistically based on the time lenders are taking in your area to process loans. Depending on the type of financing your buyer is applying for, a typical waiting period can be any time between 30 and 90 days, but sometimes more or less.
Section E. Settlement
What items do I have to get ready for settlement?
- All the keys for the home. Don't forget garage door opener, garage and shed keys, padlock combinations and code for security systems!
- Warranties on mechanical equipment. Sometimes these are left at the home. Instructions and manuals on maintenance and operation of equipment.
- The Transaction Coordinator and/or Title Company Should provide
- A copy of the sales contract
- Proof that contingencies have been met
- Documents to implement the transfer of title
- Homeowner's insurance policy
- Prorations for continuing expenses, such as utilities, taxes, insurance, interest on an assumed loan
- Latest receipts of payments on water and utility bills, and current meter reading
- Your lender's certification of your mortgage balance and the date to which interest is paid.
What do settlement costs include?
Your settlement costs depend on your area and the outcome of your negotiation with your buyer. Typically, these costs are about 2% of the selling price of the home, plus Real Estate Commission and Sales Tax on the Commission.
What reimbursements can I expect to receive a settlement?
Reimbursement somewhat offsets the costs of settlement and you're due all of the following applicable refunds:
The difference between the purchase price and any amounts due on mortgages
Insurance premiums you've already paid for the portion of the month after settlement
Property taxes you've already paid prorated
Utility deposits held by gas, water, electric and phone companies
Remainder of any service contracts you've already paid
Balance of any escrow funds held by your mortgage lender
What happens at settlement?
Although settlement details vary from area to area, three basic steps are always taken.
You, as the seller, prove you have marketable title,
The buyer pays for the property
You give the buyer a deed or bill of sale.
Settlement usually takes place in less than an hour.
Specifically, you sign the settlement papers and the deed.
Your buyer signs the settlement papers and mortgage note.
All payments by you and your buyer are detailed on standard federal settlement forms. You pay for your closing costs and your buyer pays whatever is owed on the down payment plus the buyer's closing costs.
You receive, either now or shortly after settlement, any money kept in escrow for taxes and insurance and unused prepaid items, such as insurance. Disbursement of funds may be at settlement or within 1-2 working days, depending on local custom. When all papers are signed and checks have changed hands, you hand the buyer your keys. Your home is sold and the transaction officially settled when the papers are recorded.
YOU HAVE NOW SOLD YOUR HOME IT
IS
TIME TO MOVE!
CLICK HERE FOR MOVING TIPS AND INFORMATION
Congratulations!
Now that you're home is sold, your check's in your pocket and moving day's over, you can smile, remembering how you and your agent turned a confusing array of puzzling parts into a completed transaction.
If you know someone who is planning to sell soon, please pass along this handbook with my compliments. We would be glad to share our experience with them. Again, congratulations!
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