Typical Buyer's Step-by-Step Progression
- Buyer makes offer, seller accepts (that sure sounds easier than it actually is!)
- Buyer's earnest money (good-faith deposit) is placed in the listing agency's trust fund
- Lender orders appraisal (buyer or agent might order it for a cash purchase)
- Inspections are ordered after an acceptable appraisal is received (If time is a factor, and we're confident the home will appraise, inspections can be done earlier)
- Any repair issues are negotiated with the seller
- Termite inspection is ordered (must be within 30 days of closing)
- Surveys are ordered after a successful appraisal and inspections--buyers don't want to invest too much into the property until they are sure it's a go
- Buyer applies for hazard insurance and the information goes to the lender and closing attorney
- Nearing closing date, buyer arranges for utilities to be switched over
- Closing takes place at the office of the buyer's attorney. The seller's attorney has forwarded signed deeds to the closing attorney
- Buyer gives attorney certified funds to pay for closing and signs loan papers and other required documents
- Attorney records new deed at the courthouse and disperses funds due to all parties
Question: What costs are involved in a real estate transaction?
- Typical Home Buyer Expenses
- Home inspections
- Their share of yearly property taxes, property association dues, and other similar fees (prorated for date of closing)
- Fees for a title search and duties performed by their attorney, title insurance policies, hazard insurance for a year, downpayment and lender fees, flood zone certification fees
- Cost to record the new deed
- Funds to open lender escrow accounts for property taxes and insurance that will be paid by lender the following year
- Typical Home Seller Expenses
- Deed preparation (attorney fee)
- Tax stamps, a state excise tax based on sales price of the property
- Their prorated share of: property taxes, property association dues, other similar fees
- Real estate commission if an agency is involved
- Fees associated with loan payoff or transferring funds into a checking account (overnight fees, electronic fund transfer)
- Any costs they've agreed to share with the buyer
Question. What do I need to bring to closing?
Everyone will need to bring some current (not expired) government-issued identification with your photo on it, such as a driver's license, passport, or military ID.
If you are the buyer, the money you bring to closing needs to be in the form of "certified" funds, such as an official bank check, certified check, cashiers check, or money order (or wire transfer, or even cash), made payable to the trust account of the closing attorney.
Sellers often think they need to bring their original deed to closing, but this is not really necessary in North Carolina. The recorded copy of the deed in the County Register of Deeds office, which the attorney examines during the title search before closing, is more important than the actual original deed.
The above guidelines are only general; in your specific situation the closing attorney might modify or add to them. Check with your agent or the attorney a few days before closing to confirm you have everything you need.top
Question: Should we consider buying a home in foreclosure?
Purchasing a home in foreclosure often appears to be a good value, but factors outside of the price need to be considered:
- The purchase of a foreclosure often is a "cash only" sale
- Can you view the actual condition of the home inside and out before placing a bid? The home may be in need of extensive repairs driving up the actual cost of the home.
- Are there liens for taxes or mechanics liens that the winning bidder will be responsible for?
- Is there a redemption period for the previous owners? If so, how long do they have the ability to buy the house back before you can move in?
Question: What questions should I ask when looking at homes?
- Many of your questions should focus on potential problems and maintenance issues.
- Does anything need to be replaced?
- What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)?
- Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller's or real estate agent's answers are clear and complete.
- Ask questions until you understand all of the information they've given!
- Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. The HUD Home Scorecard can help you develop your question list.
Question: What is a lease option, how do lease options work and what are the benefits?
A lease option is an arrangement with you and a seller to exercise the option to buy a house after you have rented it for a specific period. A portion of your rent would applied toward the purchase if the option is exercised. This is referred to as rent credit, which most institutional lenders will accept as part of the down payment if rental payments exceed the market rent and if a valid lease-purchase agreement is in effect, a copy of which must be attached to the loan application.
If you are a seller, lease options can give you several advantages, especially in a slow market. These include a monthly rent higher than market rent, top-market value for the property and tax-free use of the option consideration until the option expires or is exercised. Also, the renter is more likely to treat the property like an owner, tax-free use of option consideration until the option expires or is exercised.
Read and understand any lease-option arrangement carefully for details on transferring the option and other important concerns.top
Question: What good is title insurance?
A title search and the issuance of title insurance means the ownership of the property can be cleanly conveyed to the new owners. During the search, the history of the property is researched verifying that all previous claims or liens have been satisfied, allowing a clear title to be issued. If any claim is overlooked, the title insurance protects the owner from the claim. Remember that if it’s not in writing on a real estate deal, it’s not enforceable.
Lender’s Title Insurance insures the priority and validity of the mortgage loan and is required by banks and mortgage companies.
Owner’s Title Insurance protects your investment by:
- Providing a corporate indemnity against insured defects.
- Paying the legal expenses to eliminate any title defects.
- Paying claims arising from errors in title examinations and recordings.
- Paying losses from hidden defects in title and defects not of record.
Question: What risks are covered with title insurance?
- Errors in the public
records such as incorrect information in deeds and mortgages regarding names,
signatures or legal descriptions.
- Judgments, liens, mortgages, unpaid taxes and assessments claimed against the property.
- Claims of ownership by others to your insured property.
- Invalid Deeds due to forgery, fraudulent transfers or transfers by previous owners who were minors or not mentally competent.
Question: The house I am selling is in my name only. Does my spouse have to attend the closing?
Yes, your spouse must also sign the deed. This is because spouses have potential property rights in any real property their spouse owns, and they must release those rights if the property is conveyed. This is true even if you, the owning spouse, got the property before you were married, or inherited the property from your family, or you have a prenuptual agreementtop
Question: I am married, but my house is in my name only, and my spouse will not be a co-borrower on the mortgage. Does my spouse have to come to the closing?
Yes, with one exception (see below). This situation is really the same as the one in the question just above. Even if your spouse does not co-own the property with you, he or she must also sign the mortgage (which is almost always called a "deed of trust" in North Carolina). When you get a mortgage loan, you convey to your lender a property interest in your house, and your spouse's potential property rights need to also be subject to the mortgage. The rule is, "One to buy, and two to sell."
There is one possible exception to this, that applies only to closings where you are purchasing the property in your name only and simultaneously getting a first mortgage loan for said purchase. If the proceeds for the first mortgage loan are being used for purchase money and closing costs only, it is probably not necessary for your spouse to sign the deed of trust. You will need to discuss this with your closing attorney, to see if the exception applies to you. This exception does not apply to second mortgages to finance part of the purchase price, or to mortgage loans you get later; such as a refinance first mortgage loan, or a home equity line of credit.
Of course, if you are buying real property in your name only, for cash, that is, you are not getting a mortgage loan, your spouse is not needed at the closing.top
Question: My spouse has my Power of Attorney. Can she sign for me at the closing so I won't have to attend?
Possibly. You need to inform the closing attorney that you want to do this, because he or she will need to see the Power of Attorney beforehand to see if it is valid for your real estate closing. Also, the attorney will need time to prepare additional documents in this situation, and the original Power of Attorney will have to be recorded. I often see Powers of Attorney that the persons filled out on a form they got at an office supply store; I HAVE NEVER SEEN such a "homemade" Power of Attorney that was valid for a real estate closing.
(IMPORTANT NOTE, added 1-27-2000: Thanks to a recent change in North Carolina Law, eliminating the requirement of a "seal," many such "homemade" Powers of Attorney, prepared from software, etc., might now be valid for a real estate closing, but it is still critical that they be reviewed by the attorney before closing.)
Please note also that a Power of Attorney, though perfectly valid, might have been written to be used only for an earlier, specific closing or transaction. Such Powers of Attorney, containing a limitation to specific property, a specific mortgage loan or lender, or an expiration date, are very common. In this case you will need to sign a new Power of Attorney.
If you are a borrower on the mortgage, your lender also has to approve your non-attendance at the closing through the Power of Attorney; many lenders will require you to attend anyway (if you want the loan). Most lenders that allow Powers of Attorney, require that they be specific for the transaction, as described above.top
Question: When can I, the seller, get my money from the closing?
In North Carolina, the closing attorney is not allowed, under the current rules of the North Carolina State Bar, to disburse any funds, including the seller's proceeds and/or the realtor's commission, until the deed and deed of trust are recorded in the County Register of Deeds office. This means that you will not get your proceeds check at the closing table. If you recall a closing where you got your check during the closing, then it took place in another state, or the attorney was operating at a time when the applicable State Bar rules were different. The attorney's office will need at least one hour after closing to deposit the purchase funds, update their title search (to make sure no liens or adverse conveyances have been recorded just before or during the closing), and to record the documents.
Question: I am expecting proceeds after closing. May I have those proceeds wired to my bank?
Yes. Our fee to wire the funds to your account is $25 and can be deducted from your proceeds. You will need to provide our office with your wiring instructions prior to or at closing.top
Question: When will I know how much money I'll need to bring to closing?
Typically 24 hours or so prior to closing we will provide the HUD-1 Settlement statement to you for your review. The Settlement statement will show on line 303 how much you need to bring to closing (in certified funds). In the event that number changes at closing due to an oversight by one of the parties or some last minute negotiation, a personal check can be made at closing for any shortage. Please note that it is our policy to generate a HUD-1 within 24 hours of receiving the closing package from your lender. In the event we get your package early, you will get your final numbers early.top
Question: I want to terminate my contract, what should I do?
You should contact your agent and let them know that you would like to terminate the contract. If there is a dispute with regard to the release of the earnest money or who is entitled to it, the agent by law may not disburse the money to anyone but the clerk of court, and the parties will be forced to plead their case, so to speak, in front of a judge or magistrate, who will then decide how the earnest money is to be distributed. A termination of contract should be executed so that the buyer and seller can move on. In the event the parties are able to negotiate the terms of the release of the earnest money, a termination of contract setting forth those terms should be executed by the parties and the disbursement should be made by the agent according to those terms.
Question: I am selling my property and your office is handling the drafting of the closing documents on my behalf. May I sign the document prior t o the scheduled closing date?
Yes. The documents that need to be signed can be emailed to you prior to closing. Once you execute those documents (in front of a notary), you may return them to our office prior to closing. In the event you want to come in to our office and sign the documents prior to closing, there will be a $25 early signing accomodation fee. This is charged because of the time associated with reviewing and explaining the documents at a time other than the scheduled closing time.top
Question: Why is my payoff higher that my newest statement I received from my lender?
Mortgage payments are made in arrears, meaning that the month in which you pay your mortgage actually covers the interest from the prior month ( i.e. October payment covers September’s interest. Because you will not be making the payment for the month following the closing (i.e. October closing, you will not make November payment), the interest from the 1st of the month through the closing date must be added to the principal balance to calculate the “payoff”. Also, most mortgage companies charge between $10-75 to provide the payoff information, which further increases the payoff amount.top
Question: Should I make my next payment to my mortgage company?
You should discuss this with your lender, broker or agent, but generally if, as a result of the sale or refinance, your old loan will be paid off by the 15th of the month, then you will not need to make that payment for that month. This is because typically no late charges accrue until after the 15th.top
Question When will my documents be recorded?
Typically any purchase closing completed before 3:00pm will be recorded the same day, subject to lender approval. Because the lender is typically the final voice as to whether our office has the authority to record, this general rule is subject to change for each closing. An example would be if the lender has yet to send us a wire for the loan proceeds. In that event, we cannot record until we receive the money. In the event the seller will not provide keys to the home until we record the deed of public record, please notify Sonia in our office so that the buyer can be advised to alert the lender to the issue.
On a refinance, the Deed of trust will be recorded after the expiration of your 3 day reccision period.top
Question: What is a 1031 exchange?
In a typical transaction, the property owner is taxed on any gain realized from the sale . However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date.
Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of "like-kind", while deferring the payment of federal income taxes and some state taxes on the transaction.
The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a "paper" gain.
The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.top
Question: What is a HUD?
1) The Real Estate Settlement Procedures Act (RESPA) requires the HUD-1 form to be used as the standard real estate settlement form in all transactions in the United States which involve federally regulated mortgage loans. The HUD-1 is a form used by the closing attorney or settlement agent to itemize all charges imposed upon a borrower and seller for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds. Fees associated with the transaction but paid prior to closing are also included on the HUD (i.e. termite inspection or home inspection). They are normally marked "POC," for Paid Outside of Closing. It's used for nearly all transactions that involve a buyer and seller, including cash closings. RESPA states you should be given a copy of the HUD-1 at least one day prior to settlement. In real life, entries may still be coming in a few hours before closing. Most buyers and sellers study the statement on their own, with their real estate agent, and with the closing attorney at settlement. The more people who review it, the more likely that errors will be detected. We encourage you to ask as many questions as necessary to help you understand all charges.<top
Question: When will I get the keys to my new home?
2) The most exciting thing about buying your new home is attending the settlement,
obtaining the keys, and walking through the front door.
So when does this happen? Keep in mind that settlement (sitting down and signing the
paperwork) and closing (when the attorney records the Deed and accompanying documents) occurs in different ways in
different states. In some locales you may sit down with your agent and an attorney, or some
other professional, to sign paperwork and then receive your keys right there. Here in North Carolina you normally
receive the keys once the closing attorney's office has received all the paperwork, your loan has been funded
(i.e., the money is in the attorney's trust account and your lender has authorized the disbursal of such), and
the recording of the deed and other documents has occurred. You might meet your agent at the house, or be able
to pick up the keys somewhere else once closing has occurred and you receive a call to that effect. Check with your
agent as the settlement date approaches so you know what to expect. It's never good to find out at settlement that you
won't be getting keys at that time, and many buyers assume that this is the case. We understand that sometimes folks want
to get the keys early so they can start moving in, especially if they have movers bringing things. You will have to obtain
permission from the sellers in order to do this, and often they are unwilling to do so because of liability issues. But
there are exceptions so speak with your real estate agent in advance. Communication between the buyers, sellers, and their
respective agents is of utmost importance with respect to the turning over of the keys. A general guideline is that for
settlements that occur at or before 2:00pm, documents will generally be recorded around 4:30pm that same day. For Settlements
occurring 3:00pm or later, documents will generally be Question: Do I need a survey?
So when does this happen?
Keep in mind that settlement (sitting down and signing the paperwork) and closing (when the attorney records the Deed and accompanying documents) occurs in different ways in different states. In some locales you may sit down with your agent and an attorney, or some other professional, to sign paperwork and then receive your keys right there. Here in North Carolina you normally receive the keys once the closing attorney's office has received all the paperwork, your loan has been funded (i.e., the money is in the attorney's trust account and your lender has authorized the disbursal of such), and the recording of the deed and other documents has occurred. You might meet your agent at the house, or be able to pick up the keys somewhere else once closing has occurred and you receive a call to that effect. Check with your agent as the settlement date approaches so you know what to expect. It's never good to find out at settlement that you won't be getting keys at that time, and many buyers assume that this is the case. We understand that sometimes folks want to get the keys early so they can start moving in, especially if they have movers bringing things. You will have to obtain permission from the sellers in order to do this, and often they are unwilling to do so because of liability issues. But there are exceptions so speak with your real estate agent in advance. Communication between the buyers, sellers, and their respective agents is of utmost importance with respect to the turning over of the keys. A general guideline is that for settlements that occur at or before 2:00pm, documents will generally be recorded around 4:30pm that same day. For Settlements occurring 3:00pm or later, documents will generally betop
Question: Do I need a survey?
Please mention at least 15 days in advance.
3) A Survey of the property conducted by a Registered Land Surveyor is strongly recommended in order to uncover problems such as encroachments, restrictive covenant setback violations, boundary disputes, deed gaps and overlaps, etc., before you buy. It should be considered an integral part of your due diligence investigation of the property. In addition, if you have plans for adding a pool or a fence to the property, for example, obtaining a survey is the only way for you to proceed with accuracy and avoid costly mistakes. Although it may be a prudent investment, unless it is a specific requirement of your lender, the decision to invest in a survey is yours. Please let us know as soon as possible, and in no case less than 15 Days prior to closing, whether or not you wish for us to arrange for the survey. The cost of the survey will typically be added to your closing statement (HUD1) and can be paid at closing. Please note that most surveys do not include staking the corners of the property. If you want this done, be sure to ask for this to be done at the time the survey is requested.top
Question: I'm buying/selling a For Sale By Owner (FSBO) home. What do I need to know?
4) Although we have seen successful examples of For Sale by Owner transactions, the reality is that Real Estate is a very broad concept that touches legal, tax, investment, finance, retirement, sales, psychology, design, home improvement and more. The decision to proceed without the existence of a licensed professional is one that should not be taken lightly and should be given objective consideration. If you decide to sell or purchase a home "by owner" we must most importantly make you aware that our firm, if retained as your closing agent, will not perform the same duties as a real estate agent. Our duties as your closing agent are outlined in our engagement letter which can be found on our "Buyer" page. If you feel that you require additional guidance and/or representation please contact our office to schedule an appointment with our real estate attorney. These appointments are billed separately from the closing fee and will be invoiced hourly.