OVERVIEW OF A REAL ESTATE CLOSING
STEPS FROM CONTRACT TO CLOSING
Below is a basic overview of the steps involved in a real estate transaction, with each phase subject to many different hoops and hurdles, requiring experienced legal representation to navigate the intricate closing process and to protect your rights and interests along the way. Most people are not familiar with the home buying or sale process. At the Law Office of Maria R. Cozzini, LLC we guide our clients throughout the entire process, offering sound advice and keeping our clients fully informed as to the status of their transaction, from contract to closing. Our focus is on you and your transaction, and making every effort to protect your rights and interest during the entire closing process.
1. Contract - After finding a home or deciding to sell, the parties enter into a real estate contract, based upon negotiated terms. If they are dealing with a property listed on the MLS, a realtor will prepare the contract. If there is no realtor involved, an attorney will prepare the sale contract. The contract contains material terms, such as the purchase price, amount of the deposit, mortgage amount and type, closing date, and what items are included in the sale. In today's market, many buyers include additional terms to strengthen their offer, such as waiving an appraisal contingency (if the property appraises for less than the contract sale price, the buyer will cover the difference even if the loan amount is reduced) or limiting inspection rights to major items. In some cases, the buyer will offer a use and occupancy provision to allow the seller to remain in possession after closing for a specified time, giving the seller more flexibility when making moving arrangements. Whether you are buying or selling property, Maria R. Cozzini, Esq., would be glad to review the offer with you so that you understand the terms and their potential effect on your contractual rights and interests, and answer any questions that you may have.
2. Attorney Review - A contract prepared by a realtor is subject to attorney review. Real estate contracts often contain confusing language and legal jargon that can make it difficult for most people to fully understand what they are signing. We carefully comb through all paperwork and fine print, and advise you on any risks that we see and any action that should be taken to minimize those issues During the attorney review period, attorneys representing the buyer and seller will review the contract and propose modified terms to better protect their client's interest in the real estate transaction. Attorney review must commence within three business days or the contract will be considered final as prepared. Attorney review should be treated with the utmost priority, so as not to jeopardize the deal. Until attorney review is completed, either the buyer or seller may cancel the sale contract. The buyer may decide to purchase another property that comes on the market or the seller may accept another offer. Maria R. Cozzini, Esq., gives your contract the immediate attention that you deserve, so that attorney review can be completed as efficiently as possible without undue delay, while safeguarding your rights and interest in resolving the contract terms.
3. Deposit - After attorney review is complete, the buyer will pay the deposit. The deposit can be held by the seller or buyer's attorney, and is held in an attorney trust account. The deposit is not paid to the seller until closing. If the contract is canceled pursuant to its terms and the buyer is not in breach, the deposit will be released to the buyer.
4. Mortgage Contingency - Most contracts are subject to a mortgage contingency, if the buyer requires financing to complete the transaction. Prior to making an offer, the buyer will obtain a pre-approval letter from a lender, showing that the buyer is qualified for the mortgage loan. The pre-approval will be provided to the seller with the offer to purchase, so that the seller knows that the buyer is qualified to obtain the financing provided in the sale contract. A pre-approval is not a mortgage commitment. The buyer will have to submit a complete application with the lender before a mortgage commitment can be issued. The buyer is provided a specified amount of time to obtain a mortgage commitment, typically 30 days. The contract will specify the amount and type of mortgage that the buyer requires to complete the transaction. There are many different types of mortgage programs, including conventional, FHA, VA, and hard money or private loan, There are also special mortgage loans that may be available, such as programs for medical professionals, which require no down payment or mortgage insurance. There are also first time home buyer programs and even grants that are available in certain cases. The buyer should consult with their lender regarding different loan options, requirements, costs, and the interest rate that will be charged on the loan, so that the buyer can determine the best financing alternative for them. The lender should provide a rate lock agreement so that the interest rate will remain in effect through closing. The attorney will work with the buyer and title company to resolve any closing conditions required by the lender. The lender will require an appraisal of the property to determine that the property is suitable as collateral for the loan. If the mortgage appraises for less than the contract sale price. in certain cases, Maria R. Cozzini, Esq., will negotiate with the seller for a price reduction equal to the appraised value.
5. Inspections - Since real estate is sold As-Is, the buyer must know the condition of the property prior to closing. Seller does not warrant the condition of the property after closing. It is very difficult to bring a claim against the seller after closing, unless the buyer can prove that the seller was fraudulent in not disclosing a known defect, which is a high bar to meet. To determine the property condition, the buyer should conduct the following inspections: home/structural, pest/termite, radon, environmental, including mold and asbestos, septic, if applicable, and underground/oil tank inspections. Water testing will be required by the seller, if the property is serviced by a well. If the well water does not meet current state standards, well water remediation may be required. Cosmetic items, items at the end of their estimated life, and upgrades are generally not considered proper repair requests. At the Law Office of Maria R. Cozzini, LLC we will review all inspection reports. We will offer our guidance with respect to the inspection results, answer your questions, and negotiate resolution of any inspection issues, whether on behalf of the buyer or seller.
6. Permits. It is important to know whether all required permits and approvals were obtained, for any improvements made to the property. Maria R. Cozzini, Esq. will review the permit history for the property and resolve any permit issues prior to closing. The seller will also be required to obtain a smoke detector certificate and in many towns, a certificate of occupancy, as a condition for closing.
7. Insurance. The buyer will be required to obtain property insurance prior to closing, which protects both the lender and buyer in the event of a loss due to fire or other casualty. if the property sustained major damage on the day of closing, the buyer would be devastated with the loss of their investment. Insurance is an absolute requirement for any mortgage lender.
8. Title. The buyer's attorney will arrange for a title search of the property. Any judgments or liens against the property must be satisfied at closing, so that the buyer will have good and marketable title. A survey of the property will also be prepared and any survey exceptions resolved prior to closing. The buyer will be fully advised as to any easements or title restrictions that affect the property. Maria R; Cozzini, Esq., will work with the title company, lender, seller, and buyer, to clear all conditions so that the parties can proceed to closing.
9. Walk-Through Inspection. Prior to closing, the buyer will walk through the property and confirm that the condition is satisfactory, that the property is broom clean and that all debris and personal property were removed. The buyer will also confirm that all systems are in working condition and any agreed upon repairs were completed. If there are any walk through issues, Maria R. Cozzini, Esq., will provide the strong advocacy required to resolve the problem so that the closing can proceed as scheduled. If the issue cannot be immediately resolved, an escrow agreement may be required, where funds would be held until the required repair is completed or walk through issue resolved.
10. Closing. The closing usually takes place at the office of the buyer's attorney. The buyer must attend the closing, since original signatures are required on the note and mortgage. The seller's attorney will deliver the conveyance documents or deed at closing, which are usually signed by the seller in advance. The deed is the legal document that transfers title to the buyer. The sale proceeds will be paid over to the seller and keys delivered to the buyer.
11. Post Closing. Buyer will receive the original deed once recorded with the county clerk. A title insurance policy will be issued to the buyer, which provides valuable insurance coverage during the buyer's period of ownership from any title claim..
12. Wire Fraud Alert. As part of the real estate transaction, the Law Office of Maria R. Cozzini, LLC will never request a wire transfer from you. Do not ever send a wire without first personally confirming the wiring instructions with the recipient, even if you receive an email that appears to have been sent by someone involved in your transaction. Emails are intercepted and wiring instructions changed. Real estate transactions are targeted for wire fraud. Do not be a victim. Proceed with extreme caution and always verify wiring instructions personally with the recipient.
