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Review Your Closing Statement Carefully

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Closing Statement

When you go to the closing for your home (whether buying or selling), you will receive a closing statement that outlines the various costs and charges, who pays for them, and the bottom line for you – either money you’re walking away with or money you’ll need to bring with you. These closing statements (formerly called the HUD-1) are typically sent to you by the title company a few days before closing so that you can review them and understand what the final outcome of the sale or purchase will be. Read that closing statement carefully. This past week, we saw a lot of mistakes and omissions on those statements that could have been costly for both parties. Your agent should review the documents, but there’s nothing like reviewing them for yourself. Ask questions and make sure you get the answers. There are a lot of different charges on those statements and you should understand what each one is, who it is being charged to, and why it is being charged.

Mistakes on the Closing Statement?

In reviewing your closing statement, look at each individual line item. Is it something you are aware of, something you agreed to in the contract, or a normal cost of doing business with a lender or title company? It should be. If there’s something that looks out of place – ask. Often, the lender charges and various fees generated by the act of closing on a property can be very confusing and the names of these fees can vary. If they’re lender charges – ask you lender. If they are title fees – ask the title company. Point is – ask. Talk to your real estate agent when you receive the copy of the closing statement. They should be able to help you understand the various numbers on there.

If there are mistakes, omissions, or additions that you weren’t aware of, it’s definitely time to ask some questions. We’ve seen incorrect amounts, double charges, charges for items paid outside of closing, charges that should never have been charged, amounts charged to one party that should be charged to the other, incorrect commissions amounts, dates wrong with prorations (which skew the numbers)…you name it, we’ve probably come across it once or twice. Typically, it just takes a quick call to the title company to have the issue corrected, but the quicker the issue is caught, the less chance it will cause any delays.

These mistakes are not nefarious in nature, so don’t panic. The closing statements are put together by people and like most things that require human involvement, there are chances that things will be missed or done incorrectly. Often, it’s a simple matter of data entry and can be corrected easily. Sometimes, it is an issue caused by contracts and the obligations set forth in them, which may take a little investigation to get corrected, but they will get corrected.

Like all things in real estate, the closing statement should be checked over and reviewed so that you know exactly what you’re signing. When you have questions, you should get answers. If not, it’s time to put a pause on the pace of things and work to get the answers you need. Do not sign anything that you do not fully comprehend or something you still have questions about. Your agent, lender, and closer will work to explain those items that you may not understand and correct any mistakes that may be present.

image courtesy of Silenceofnight

What Does a Title Company Do?

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Property Records

What is a Title Company?

A title company is a key part of a real estate transaction. Along with buyers, sellers, lenders, and real estate agents, they are involved in the process throughout the entirety of the transaction and their role cannot be overemphasized. Here is a quick breakdown of just what a title company does to make deals come together successfully.

Title searches. As “title” is in their name, a substantial role of a title company is to research and ensure clear title. This means they search through property records to make sure that there are no existing liens or judgments on a property or that those liens are paid off at the time of closing so that a buyer can get a clear title in the sale. The research is critical and a title policy is an insurance policy for the buyer should any missed issues ever arise down the road. A seller must have a legal right to sell the property to a buyer and title searches and insurance help serve as a guarantee.

Money handling. One of the biggest functions of a title company is to collect earnest money and hold it in an escrow account. They cannot release these funds without approval of all parties, so these funds are in a neutral safe zone until everyone agrees on release or until they get applied per the contract on the closing statement. Once a sale is closing, title companies also accept payments from buyers and lenders and then use those funds to pay off a good number of other parties, not the least of which are the seller and the seller’s mortgage company. A title company must outline the use of all funds in a transaction and pay off existing mortgages, liens, contractors, tax offices, insurance companies, and more.

Data collection. Title companies receive a final version of the contract, receipt it as the final version, and accept all amendments. They assemble all of the pieces of the transaction as they come together – from home warranties to loan specifics to surveys and mortgage payoff information. When closing instructions arrive from a lender, title companies assemble all of the parts and put together the packages for each party. From tax statements to child support liens to homeowner’s association covenants and bank routing information – everything must pass through the title company.

Neutrality. Title companies remain a neutral third party and serve simply as a processing hub for information. They do not represent one party more than another and simply process documents as they are set out by the contract and by other parties. They assemble loan documents and closing instructions from the lender, but do not make the rules or dictate terms. Sometimes this can be a refreshing break and an extra set of eyes on a transaction that ensures compliance by all.

Closing. Most transactions will actually be closed at a title company office. The closer will assemble all of the documents necessary for closing (deed transfer, loan documents, etc.) and meet with buyers and sellers to get these documents signed and notarized. Experienced closers have gone through hundreds or thousands of these closing sessions and are knowledgeable about the towering stacks of documents and are able to explain them in a manner that is clear to everyone involved. It is common for buyers and sellers to sign separately and in many instances it is even possible to arrange for closing by mail-out or mobile notary if one party is unavailable to close at the actual title company office. Of course, title companies will help to arrange all of this as well.

As the rates for title insurance are regulated by the state (Texas Department of Insurance), the fees for services from one company to another can only vary ever so slightly. Instead, many companies set themselves apart with excellent customer service or finding ways to go the extra mile for clients. Whether it is working after hours or weekends or providing complimentary pens and fancy beverages, each title company has a unique approach to satisfying its customers, but what remains the same is the imperative role they all play in making a real estate purchase a fruitful one.

image courtesy of sonnysawyer43

Closing on a Home While You’re Out of Town?

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Closing on a Home

Tips for Closing on a Home When You’re Away

As much as we in the real estate industry like to believe that each real estate transaction is everyone’s top priority at all times throughout an entire transaction, the reality is that life does not stop just because you’ve signed a contract and will soon be closing on a home. What this means at times is that coming together at the closing table at an agreed upon date and time is not always possible. Many customers, both buyers and sellers alike, face time or distance constraints that prohibit them from being at a specific title company at a specific time on a given date for their closing. Whether it is a business trip, family vacation, delayed move-in plans, tight work schedule, or simply some unforeseen emergency; there are plenty of reasons why scheduling a closing on a home can get complicated in those last days. But fear not – all hope is not lost. There are several very sound options available should you not be able to make the prescribed date and time of your closing.

Mobile Notary

Basically, once the lender sends all of the loan documents to the title company, the title company can find a notary in a location where you will be on closing day. This authorized notary will come and meet you practically anywhere and will attest to your signature on all relevant documents. The originals of those documents must then be sent (generally by overnight shipment) back to the title company before a file can fund and the closing is officially done.

Why it’s a good idea:

  • They come to you
  • Work on your schedule
  • Not restricted by business hours

Why you might want to think twice:

  • You have to know in advance a designated place and time for the notary to meet you
  • There is generally an additional charge for this service
  • It can delay actual transfer of ownership because of the time required for the documents to make their way back to the title company
  • This may not be possible in foreign countries except at consulates or with extreme restrictions
  • Notary works only as a notary and cannot answer any questions you may have about specific forms or documents

Power of Attorney

You sign a legal document giving another person full legal authority to sign on your behalf. This is typically a spouse, trusted friend, or advisor.

Why it’s a good idea:

  • Generally no additional fee required
  • You only have to work with one person’s schedule

Why you might want to think twice:

  • You must trust the person to whom you give the power of attorney
  • Original Power of Attorney document must be provided to title company at closing
  • You must be accessible by phone so that the title company can do an “alive and well” phone call to make sure you are 1) alive and 2) have not revoked the Power of Attorney
  • Verbiage on the Power of Attorney form should be cleared with your lender and the title company in advance

Courtesy Closing

Many title companies are large enough to operate on a national level or to have office partnerships between branches or other companies. As a favor, one title company can ask one of their sister or partner offices to do the closing at that location.

Why it’s a good idea:

  • Conveniently go to a location in the city near you
  • Have title experts on hand to answer any questions because they are familiar with the documents/industry
  • No additional fee

Why you might want to think twice:

  • Person helping with the transaction won’t be familiar with your file
  • Not available in every area
  • Not available with every title company
  • Could still result in delays with original documents making it back to the main office

Mail-Out

Title company sends closing documents to you via email, overnight mail, or courier. You find a notary and then return the documents back via overnight mail.

Why it’s a good idea:

  • Minimal fees
  • Sign at your convenience
  • Electronic receipt of documents for reference later
  • Advanced time to review documents and read through everything before signing

Why you might want to think twice:

  • Notary required and you may have to seek that out
  • Requires advanced preparedness by all parties, especially the lender
  • Can delay funding as original documents must be returned in most cases before funding can occur
  • Technology (computer, email, printer) may be required

As you can see, there are several options for closing on a home while you’re out of town. To ease the process, be sure to notify your agent immediately after finding out your plans. If they know in advance they can help plan out how you will close on the home and make sure all the pieces to the puzzle are in place to keep everything running smoothly while you are away.

image courtesy of the fabulous Ines Hegedus-Garcia who writes the excellent Miami real estate blog, www.miamism.com

Buyer’s Walk-Through and Acceptance

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Walk This Way

Walk this way!

Congratulations! You’ve made it almost all the way to closing, but before you sit down at the title company and sign the all-important closing documents, aren’t you forgetting something? The buyer’s final walk-through. This is one last opportunity for you to go back through the house you are buying to make sure that everything is in order. This is your last chance to make sure everything is exactly as you expected it and that the sellers didn’t change anything or cause any damage to the home. At the closing table (or at the home if your agent brings the form with them), you’ll sign off on a form called the “Buyer’s Walk-Through and Acceptance Form.”

When do you do it? If repairs were negotiated as a part of the contract, you’ll want to schedule a walk-through a day or two before closing. That way, if anything is incomplete or not done to your satisfaction, there’s still time to resolve the issue before closing. It’s always a good idea to do another walk-through the day of or evening before closing.

What are you looking for? First and foremost, you want to make sure the house is still standing and in the same condition (or better) than when you first made your offer on the home. If suddenly there are giant holes in the walls or missing items that should stay with the house, that’s not a good sign. Or if the seller hasn’t even begun packing (believe us – it happens) then you know you have a few bumps ahead that you still need to tackle.

If all meets your expectations, proceed ahead, go to closing, sign those documents, and prepare for your new home.

If things are amiss, you do have options. Most commonly those options include delaying closing (hours or days, depending on the situation) or re-negotiating money in lieu of repairs.

If you’re leasing the property back to the seller, you will still want to do the “final” walk-through before closing. Recognize that the seller will still have furniture in the home, but it’s still great for peace of mind and checking in on the condition of the home. Don’t be afraid to take pictures. You’ll want to do another walk-through when the sellers move out as well.

image courtesy of Tim Green aka atoach

10 Things to Know About Closings

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Closing Time

Real Estate Closings and You

After all that time waiting, you get the call…it’s closing time! Closing is the time to sign all of those final documents and move all the money around to the appropriate parties. Closing seems as if it’s a million miles away from the day you made/accepted the offer on your house, but once it arrives, the excitement once again builds. Sitting at the closing table, pen in hand, you start signing off on all that paperwork – you’re almost across the finish line. Here are a few things about closing a real estate transaction in Texas that we wanted to share with you that you may or may not know.

  • The date in the contract is an “on or before” date. This means that if all parties agree to close a day early, they can. A week early? Still a yes. A whole month? Absolutely!
  • Closings most commonly occur at a title company.
  • Buyer and seller do not close at the same time. There is no requirement that one party close before another.
  • Photo ID is required. Signatures will be notarized and the escrow agent will want to make sure you are who you say you are.
  • Power of Attorney can be used, but generally the original POA document is required. A call will be made to the person granting the POA just to make sure they are 1) alive and 2) not revoking the POA.
  • Monies for closing are required to be in certified funds – cashier’s checks or wires. Don’t bring a suitcase full of cash (although it might be impressive) or a personal checkbook.
  • Don’t expect the keys right away. Unless otherwise specified in a temporary lease agreement, possession transfers at closing and funding. This means that the closing office has to make sure that all funds for the deal have been received. If the buyer is securing a mortgage, it could take a few hours…and sometimes a few days.
  • Taxes will be pro-rated based on the previous year’s assessed value. This can change each year, most noticeably with new construction (where the previous year’s tax value is based on just the land, not land and a house).
  • Average closing time for a seller is thirty minutes or less. There’s a lot less paperwork involved in selling than in buying.
  • Average closing time for a buyer is about an hour. The biggest factors in this much lengthier process are the complexity of the transaction, the experience of buyer, what documents the lender requires (some require more than others), and knowing what to expect, what to bring, and what information the buyers will be signing.

image courtesy of gill.holgate

5 Home Buying Mistakes After Contract

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5 Home Buying Mistakes After Contract

Ahhh, pressing pen to paper (or clicking on a digital signature line)…you’ve just purchased a new home. Now that your offer is a contract and you’re on your way to buying a home, there will be a lot of things you’ll need to take care of and get done. More importantly, there are quite a few things you shouldn’t do.

Each of these mistakes are pulled from real life scenarios that we’ve seen happen. Making any one of these can destroy all the hard work you and your agent have put into getting you to this point. Sometimes, they can be fixed, but more often than not, they will scuttle the deal and have your lender denying you faster than you can say “Oops.” Avoid these five mistakes and keep the road ahead clear of obstacles and you’ll be sliding your key into the lock of your front door before you know it.

5 Ways to Destroy Your Home Loan

Make large purchases – As your lender is looking through your file and checking all the figures, this one is a common mistake. You’re excited, you just bought a house and now you need a flatscreen TV for that man-cave you’ve always dreamed about. So you buy it…no big deal, right? To a lender it is a big deal. Although you’ve been approved and the lender is working behind the scenes to make your loan happen, any large changes in your cash reserves and bank account statements will throw red flags to the underwriter. And just because you’re just days away from closing doesn’t change this – every lender performs a pre-close audit to double check all the figures. Wait until you’ve closed and funded before getting extravagant. Best advice? Wait until you’ve received a month or two of mortgage bills to rebalance your budget before making any large purchases.

Credit, credit everywhere – Now that you’ve seen how strong (hopefully) your credit is, you figure now’s the time to think about adding a new car in the driveway. So you hop on down to the local dealer, find the car of your dreams (and it matches the curtains too!) and sit down with the car dealer to talk financing. First thing they do? Run a credit report. Even if you don’t buy the car, that credit check will show up on the lender’s credit report. You’ve just given the lender a reason to worry. Credit checks can lower your scores and in times of tightened lending standards, any movement in your overall credit score can cause a loan to fall apart. Best advice? Don’t open any new lines of credit – cars, store cards, or credit cards and don’t spend on credit during the closing process. The more you can avoid this, the better your chance of closing on time.

Late payments – It goes without saying that you should pay your bills on time. You always should and if you’ve been approved for a home loan, you’ve probably done well at it so far. Don’t mess up your closing by suddenly changing course and paying a few bills late here or there. Best advice? Simple – pay your bills and pay them on time.

Make too much money – This one might sound a little odd, since more money is better usually, but any large deposits into your bank accounts can trigger more investigation by the lender and hold up closing. Where did the money come from? Why are you receiving it? By the time you’ve signed a contract and have moved through the basic approval process and into underwriting, anything – negative or positive – can affect your loan. Don’t give the underwriter a reason to take a second look at your file and ask more questions. The more questions, the more paperwork, the more time, the more chances things can go wrong. Best advice? Speak with your lender about any money you might be receiving – even gifts from family members prior to the loan application process. They will be able to guide you on what you should and shouldn’t do. Try to freeze-frame your current standing financially (using the above advice as well) and give the underwriter the same picture of you on day one as they see on the closing day – deviating from that too much in any direction can cause you trouble.

Lose/change your job – No one chooses to lose your job, but it does happen. If you lose your job consult with your lender immediately. If you’ve been eyeing a job change, you should also let your lender know. Best advice? Stay put if you can and don’t make any sudden changes (do you see a theme developing here?). No one can avoid losing a job, but it never hurts to stay on the bosses good side while you’re heading toward closing.

By avoiding these five mistakes you can help make your closing smooth and comfortable for you. There is nothing more frustrating for home buyers than dealing with an underwriter who needs red flags cleared up. The minute you go under contract for a home, remember to keep your finances in order…the same order when you applied for the loan.

Thanks to Linda Rudd with Legacy Mutual Mortgage for the inspiration for this post during our office meeting.

image courtesy of haldean

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