There are many things to keep in mind when buying or selling a home. First and foremost it’s a very EMOTIONAL situation. As a buyer, it’s probably the most emotional purchase you’ll ever make and if you’re the seller, there can be a lot of wonderful, loving memories in the home you’re putting up for sale so this can be a very sad time for you. A good Realtor understands this. Never allow yourself to feel pressure in purchasing or selling a home. If you believe your Realtor is making you ‘rush’ through your decision or ‘settle on a home’ that you truly do not like or if you feel that THEY are in a hurry, or give you the feeling that they’ve spent enough time with you and have someplace else to be and your heart tells you this is the case, then GET ANOTHER REALTOR! A Realtor who listens, understands your needs and has only your best interest at heart will minimize the stress of home buying or selling.
The Seller’s side:
· Find a Realtor you trust and feel comfortable with. Take the time to interview them and have them spell out their marketing strategies as well as explain what they can bring to the table to assist you in obtaining a realistic sales price as well as a ‘quick sale.’
· Ask for References. Any good Realtor will be happy to supply you with a list of past clients who will be happy to tell you of their experience with this agent.
· Prepare a list of questions and be sure that you understand the answers the Realtor provides. The only silly question is the one that doesn’t get asked!
· Make an inventory to hand to the Realtor of any updates, upgrades or additions you’ve done to your home and receipts if possible.
· Don’t ever feel rushed. Explain when you set up the interview with the agent that you are not sure how long this will take and that you expect their undivided attention.
· Get tips from them on ‘staging up your home’ as you want it to show at its absolute best! Remember, you never get a second chance to make a first impression so think of what YOU look for when you walk into a home and the condition you want to see it in as if you were the buyer. Trust your instincts!
· Order the HOA / COA documents (if applicable) as soon as you list your home. Make clear what the HOA/COA fees include to the purchaser. This is an ‘out of pocket’ expense to you as the seller but is required by the Property Owners Association Act. Be sure you’re not in any violation of the covenants and if so, resolve the issues before settlement. Homeowner and Condo Associations can legally place a lien against your property which can delay closing.
· Get fees and commissions discussed up-front. Give your Realtor the chance to explain how hard they work and how they earn their commission. Ask them for an `estimated seller’s settlement charges’ sheet. This will give you a good idea of what you can expect to get back from the sale of your home at settlement. I stress that this is ‘estimated.’ The settlement company is the one who actually provides you with the final HUD1 (settlement sheet) that will show your true bottom line.
· Understand every document you are signing. Be sure your agent explains the listing agreement. This document is what enables them to actually put your home on the market. Agree to how your home will be listed in the ‘general and internet remarks’ on real estate websites including the MRIS. Do you prefer to have restricted hours for viewing your home? Do you approve of having ‘lock box’ access to your home or do you want ‘by appointment only’ showing instructions? It is the Realtor’s duty to explain EVERY aspect and possible consequence of the options available to you. If you want your home sold ‘as is’ understand what that means and the potential ‘red flags’ to buyer’s agents that can result by disclosing that. Advise your agent of any known structural defects or problems you have with your home. Also, disclose if there are pets on the premises.
· When offers come in on your home, it is the agent’s fiduciary responsibility to go over each offer with you. Ask your agent for advice on which offer to accept. The one with the highest price may not be the one in your best interest.
As a seller, you need to be sure that your Realtor has shown you comparable sale prices in your local area that can be used to justify a list price for your home.
A good Realtor will provide a Comparative Market Analysis (CMA) for you. Advise your agent of any special features you have added or items you have upgraded as these should also be considered in determining your asking price. This is important in the event an appraiser comes in with a lower value for your home because he/she used different sales comparables.
Remember we compare apples to apples and not apples to oranges.
I have never lost a suggested list price to a low appraisal although I have been questioned by appraisers many times as to where I got my ‘comps’ from. A good Realtor does their homework! I was prepared and my listings appraised at the sales price, although clearly, had I NOT done my homework and been as prepared as I was, the value would have been lower had I left it to the appraiser’s resources.
If a suggested list price is determined by the proper variables, the appraised value should not be an issue.
Age of home, number of bedrooms and bathrooms, updated windows, fireplaces, type of flooring (carpet, tile, hardwoods), decks, finished patios, sunrooms, upgraded appliances, finished versus unfinished basements to name a few, are all part of the appraisal equation. Cosmetic items do NOT enter into an appraisal. Maintenance issues like a good coat of paint, maintaining the exterior of your home, loose banisters, heat/cool systems being serviced etc., basically ‘curb appeal’ are not considered nor do they increase the value of your home.
The Buyer’s side:
· Find a Realtor you trust and feel comfortable with. Set up a time that is convenient for you to meet and determine your goals. Go over them prior to your beginning your home search. Explain the pricing, area’s preferred, time line involved in beginning your home search and explain the features you want your home to have. Draw up a ‘wish list’ and then depending on the prices of homes you like in the area you prefer to live in be prepared to change the list to appease your needs and pocket book.
· Know your budget and limitations. You don’t want to be ‘house poor.’ Be realistic!
· Get Pre-Approved for a loan before you start your home search. Find a reputable loan officer and mortgage company. If you don’t know of any then ask your Realtor to assist you in finding one. Be cautious of ‘on-line’ lender’s who offer you tremendous rates with low to zero closing costs. Often times you will pay large ‘junk fees’ or points which can cost you dearly. Although there are many good mortgage brokers out there, be aware that by using one your loan can very well be given to an out of state mortgage company who is not fully aware of the laws in Virginia and can pose a delay of settlement because they insist on unnecessary papers to be signed that have no validity in our state.
· Discuss all financing programs available to you and decide which one’s in your best interest. Be aware that VA and FHA loans can come with some drawbacks to a seller (specifically that the appraisals have a tendency to come in low.) Any government funded loan has stricter requirements in the area of inspections as well as potential mandatory seller contributions. This can be a deal breaker.
· Apply for homeowner’s insurance as this is required by your lender and needs to be in place when you go to settlement. You need to provide this information to the title company.
· Be sure to get a list of utility companies that service your area and have the utilities turned on in your name by the time of settlement.
· Be sure you receive and sign the receipt for the Homeowner Association/Condo Association Documents. Go over these documents and understand their covenants.
· Understand every document you’re putting your signature on. Always sign an ‘exclusive buyer’s agreement’ with your Realtor. They represent you! If you don’t understand the wording in the offer you’re about to put down on a home, have the agent explain it until you do! Don’t let ANYONE intimidate you when it comes to your knowing what you’re signing!
· Be prepared to know what you need to have in advance of writing an offer on a home. They are covered in the text below:
As a buyer, your Realtor should have you prepared to ‘hit the ground running’ when you’re ready to begin your home search. The first thing you need to do is apply for a mortgage and see what you qualify for. If you don’t have a mortgage lender in mind then ask your Realtor for several referrals. The lender will take some basic information from you over the phone and get you ‘pre-qualified.’ This changes to ‘approved’ status once you fill out the loan application and your lender verifies your financial and employment information. If you find you qualify for a $500,000 loan but you’re more comfortable with a monthly payment on a home that’s $350,000, your Realtor should be showing you what’s available in the price range you prefer. If you can not find anything in that price range, then inch your way up monetarily in increments of $10,000 until you do find a home that fits your criteria, offers a comfortable monthly payment and is a home you love.
The two items you should have when presenting an offer on a home are: an approval letter from a reputable lender and an earnest money deposit (EMD.) The EMD demonstrates to the listing agent and seller that you’re serious about purchasing that particular home. As a result, if the offer is accepted, then the listing agent takes the home ‘off the market’ and shows it as ‘under contract’ in the listing. A typical EMD is 1% of the sales price. If the market in your area is very ‘hot’ (meaning there are more buyers than homes available in your price range) than there is a strong potential for multiple offers on that property and you may need to present a higher EMD. On the other hand, if a home has been sitting on the market for a period of time (60 days or more?) then a lower EMD may be acceptable. Ask your agent what they feel is appropriate. The EMD can be used towards your down payment or closing costs.
Your Realtor should also carefully explain to you what it means to be in ‘default’ of the contract. For example, when you have a ratified contract, don’t go out and apply for a new credit card, car or boat loan. It’s your responsibility to ensure that you are ready for settlement on the specified date in the contract and that you adhere to the financial clauses in the contract. Once your loan application has been accepted don’t do ANYTHING that can damage your credit or lower your credit scores. Your credit gets pulled one last time when you go to ‘final underwriting’ (a process done by your mortgage company, normally a day or two before settlement.) If anything changes in your score, back end ratio’s or credit report, this can cause your loan to be pulled and you stand to be in default of the contract and can lose your EMD as well as the home. Don’t change mortgage companies mid-stream as this can delay settlement causing a severe domino effect on everyone involved. Chances are the seller is using their equity to buy another home and the person they’re purchasing from is depending on the same, and so on. Remember, you can always refinance later.
THE SETTLEMENT COMPANY OR ATTORNEY’S DUTIES:
Once a binding sales contract is obtained, a copy needs to be given to the settlement company chosen to handle the closing transaction. It is the buyer’s right to choose whichever company or attorney they wish to use. The seller has the choice of either using the same company or choosing one of their own. If the seller chooses to use their own, then a split settlement will take place and both settlement companies work together to get the transaction completed. The Real Estate Settlement Procedures Act (RESPA) spells out the duties of different parties in a residential real estate transaction. Please see the section below regarding RESPA for more information.*
A settlement company’s job is multi-fold: 1. they gather information from both sides of the transaction to make sure that the contract terms are correctly reflected on the HUD-1 settlement statement, 2. they ensure that the loan instructions provided by the lender are followed correctly, 3. they obtain the title report, order the survey (if one is required) and gather information from multiple sources to ensure that the appropriate pro-rations are made for taxes, homeowner associations dues and other matters that may apply to a particular transaction, and 4. they make sure that all of the appropriate documents are signed at closing, the transaction is recorded with the appropriate county clerk’s office and the funds are disbursed accordingly.
*It is important to note that a settlement company does not give legal advice and that they don’t actually represent the buyer or the seller. They represent the contract and ensure the agreed to terms are met.*
Each party has the right to hire their own attorney if they wish to have counsel advise them specifically on certain transactional matters or to guide them through contract disputes, should any arise.
The settlement company is basically a repository for information needed to get the deal closed. They will typically communicate with your agent for any items that may be needed. Occasionally, the settlement company will contact a buyer or seller directly with very specific questions that the agent may not be able to answer or for which the agent may not have the necessary information.
RESPA – Real EstateSettlement Procedures Act
Information by State
*view the RESPA link under links and articles on my web site
RESPA is about closing costs and settlement procedures. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is enforced by HUD. There is more detailed information about RESPA found under the “RESPA” links and articles site on my webpage .
More about RESPA FAQ’s for Homebuyers FAQ’s about Escrow Accounts Know Your Borrower’s Rights Your Rights and the Responsibilities of the Mortgage Servicer Sample Complaint to Lender Buying Your Home: Settlement Costs Comprando su casa Spanish Version Property Tax Alert Private Mortgage Insurance (PMI) Act Information State and Local Consumer Agencies Other Federal Resources Industry: Statute Final Rules & Regulations Proposed Rules Statements of Policy Federal Register Notices Public Guidance Documents FAQ’s for Industry Settlement Agreements Joint Report to Congress
FOR BOTH BUYER’S AND SELLERS:
COMMON CAUSES THAT DELAY SETTLEMENTS:
Your sales contract requires that a date for settlement be entered. This date is extremely important as it is your time line by which each party must satisfy all requirements as set forth in that contract. In Northern Virginia, paragraph 18 of the Regional Sales Contract is the appropriate place to fill in the settlement date. Although the actual date can be changed through a written addendum to the contract, all parties must agree to that change. Otherwise, the original settlement date will be enforced.
Sometimes, the settlement date will come but the settlement does not take place. This occurs for many reasons. Each real estate transaction requires the cooperation and action of many different parties: buyer, seller, agents, lenders, appraisers, surveyors and settlement companies, to name a few.
Unfortunately, situations arise where one or more of the parties are not prepared on time.
A common-delay situation occurs when the mortgage lender’s underwriting department is backed up with other loans and your loan is one of many that sits on their desk until they ‘action’ it and give the ‘clear to close.’ Sometimes an appraisal is delayed, which in turn can delay the lender in processing the loan documents when needed. Another scenario is when a title issue arises and the seller may need additional time to correct the matter. Perhaps homeowners’ association documents do not arrive in a timely manner, a survey was not completed on time, or the termite inspection reflected that work needed to be done to correct damage that was found.
There are numerous reasons for the settlement to be delayed, whether through negligence, error or simply an insufficient amount of time to address issues. The important thing to remember is that you need to keep an open mind and remain flexible so that problems can be resolved and the transaction can eventually take place. For this reason you may want to allow a ‘time cushion’ to avoid problems should the settlement be stalled. Try to avoid coinciding settlements that rely on your first transaction taking place on a specific date in order to proceed to your next transaction. Always give yourself some additional time, in case you need it.
As a Realtor, I have the right to stay on the loan officer and follow the process to see where we actually stand on our closing ‘going as scheduled.’ Trust me I start this process the week before our anticipated settlement date. Once the loan is approved and sent to underwriting it is up to that department to take the necessary action to insure the conditions of the buyer’s particular loan program are met and that the loan instructions are sent to the settlement company.
If an out-of-state mortgage company is used and you must rely on their capabilities to E-mail loan documents and closing instructions to the settlement company, be sure they understand the laws in the state of Virginia. Their laws and requirements may be quite different. Also consider we may be dealing with different time zones, different computer systems that are incompatible with their OWN branch in this area and we may be left with FED/EX or UPS to overnight the papers and instructions we need to close. These can all result in a delay of settlement.
A realistic time line for the entire transaction is 4-5 weeks from the date of ratification to closing on a home. There are ways we can help with the settlement closing on time. We can get the termite inspector out immediately, order the Home Owner or Condo Association Documents (HOA, COA) as soon as the home is listed, deal directly with a lender rather than a mortgage broker and if a home inspection is required, get that done as soon as possible. Again, I recommend you discuss this with your Realtor and loan officer.
Does either side require a POA (Power of Attorney)? A limited (or specific) POA can be drafted by the settlement attorney if one or more parties is unable to attend the closing. This POA is only good for this specific real estate transaction but is necessary if one party is unable to sign in person.
Is anyone on the deed deceased? If so, an origional copy of their death certificate is required. A copy of the will and list of heirs may also be needed. Ask your realtor so they can find out what is necessary for you to bring to the settlement table.
****CERTIFIED FUNDS—VERY IMPORTANT****
In the state of Virginia a settlement company is not allowed to accept any personal check for an amount greater than $1,000. Therefore it is crucial that any money owed at the settlement table above $1000 comes in the form of a certified bank check or money order. Your loan officer should tell you this but I’ve seen it slip through the cracks and delay settlement. This is one item that you do have control over and by your knowing this in advance you can come to the settlement table prepared.
I know there is much to learn and understand about a real estate transaction but I would be terribly remiss if I didn’t try to educate you to the process involved and to know what you can expect. This article is food for thought. Of course there is more involved than what’s been covered here but at least I hope you have a better feel for some of the important things to consider when buying or selling a home.