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Prepare for closing

Step 9 - Prepare for closing

Attorney Review
The process begins by having your attorney review your contract. If your attorney has any objections to the contract terms, then your attorney should consult with you and either suggest modifications or disapprove the contract.

After your contract is approved by your attorney, you must work toward removing all contract contingencies. As indicated in Step 8, the most common types of contingencies include home inspections, mortgage financing and sometimes the sale of an existing property.

Inspection Contingencies
Today, very few properties are sold in “as is” condition. If the seller did not pre-inspect his or her property before placing it on the market, then it would be a wise idea for you to perform your own inspection. You can find a list of inspectors in our Helpful Pros directory.

Ordering, completing and reviewing inspections can sometimes take between 1 to 2 weeks. If inspection problems arise, you will probably want to obtain some professional repair estimates. Once estimates are obtained, you will discuss with the seller how the repairs will be paid for and who will pay for them. For more information on repair issues, refer to our Contractor Estimates and Seller & Buyer Repair Agreement links.

What should you inspect?
Most buyers usually choose to perform a general home inspection, radon and termite test. If the property has private sewer and water systems, then you should have the septic and well water tested, too. Bad weather conditions and busy inspector schedules can often delay testing periods, so plan accordingly. Make sure the septic tank was not pumped just prior to testing because doing so will invalidate the results. Qualified inspectors should know what to look for and what to test. View a sample inspection report.

Mortgage Application and the Lender’s Appraisal
Contracts usually require buyers to take mortgage application within 5 to 7 days. Experience shows you should apply for a mortgage only after you have received a fully executed contract in hand. Many things can go wrong between the time you start negotiating to the time your contract is signed and approved. Therefore, wait until your contract is approved and then take application. Please Note: Verbal contracts are not valid - all real estate contracts must be in writing!

After your contract is approved, you will need to simultaneously coordinate your property inspections and take mortgage application. We recommend having your inspections preformed immediately, because if inspection issues arise and cannot be resolved, then it makes little sense to take application and pay for a lender appraisal. Also keep in mind, lenders place time limits on the mortgage documentation they receive from you, so if you wait too long to close, some documents will need to be updated and resubmitted for approval. Interest rate lock-in periods can also expire if a loan is not closed on time.

When taking your mortgage application, you will need to provide the lender with a copy of your sales contract and a copy of your earnest money check. The lender will order an appraisal which usually takes between 1 to 2 weeks from the date it is ordered. However, the process can sometimes take longer, especially during periods of heavy buyer refinancing.

Sale Contingencies
If you have an existing home to sell, you are at a slight disadvantage, because most sellers prefer not to accept offers with a sale contingency, especially in an active real estate market. In this situation, you may wish to pay for your property inspections and appraisal after you receive an offer on your existing home. Why? Because another buyer could possibly bump your contract.

However, if you delay performing inspections on the new home you want to purchase, then you won’t immediately know the true condition of the property. This could leave you in a real predicament, especially if your new home requires major repairs. In this instance, moving forward with the inspections on your new home may be the best thing to do.

Property Survey
Sometimes, lenders require properties to be surveyed. Your attorney may also advise you to do so. The main purpose of the survey is to make sure there are no encroachments to the property lines. Surveys can sometimes take weeks or months to prepare, so plan ahead! In some cases, a previously performed survey will be acceptable to the lender; however, the seller may be required to sign a survey affidavit indicating no boundary lines have been changed.

Underwriting and Mortgage Commitment
After the lender has gathered all the necessary documentation from you, your application will be reviewed by the lender’s underwriting department. The underwriter will review all pertinent documents including the appraisal, your employment information, your credit report, and will analyze your debt and income ratios. If all information is current and satisfactory, the lender will issue you a commitment letter.

The commitment letter will outline the terms and conditions of your loan. You must sign the commitment letter and return it to the lender before your loan will be allowed to close. You will need to meet all terms and conditions of the mortgage commitment before your loan is allowed to close. View a sample commitment letter.

Marketable Title
Once you have received your commitment letter, the next step requires examining the property title. The seller’s attorney is responsible for making sure the seller’s title is duly marketable. The title must be free of liens and have no objectionable issues. A clouded title can delay or ruin a sale, so it is best to involve your attorney to determine the marketability of the title. The lender’s attorney will also examine the property title. In some states, title insurance policies and closing agents may replace the work of attorneys.

Scheduling Your Closing and Performing a Final Walk-Through Inspection. Closings frequently occur within 30 - 60 days after a contract is signed. At closing, the closing agent or your attorney will ensure all monies are properly collected and distributed. This will include tax adjustments, utility bills, rents, security deposits and repair escrows. Your attorney will also record your deed and make sure all existing loans are paid in full.

Once a closing date is scheduled, you should record the time, date and place of your closing. Contact your cable, electric, gas, oil, or utility companies. Advise them of your move-in date and make sure all utilities are operating and ready to be converted into your name. Have your mail forwarded to your new residence. Cancel any newspaper subscriptions and make sure your insurance policy is in effect! Touch base with your moving company and be sure they are ready to help with your move.

Plan a final “walk-through inspection” a day or two before closing and make sure all necessary repairs have been completed. Your new home should be delivered in a condition that is acceptable to you. If problems arise at this point, you may need to delay your closing or hold some money in escrow until all issues are resolved.

During your walk-through inspection, make sure everything is in order. Check to see if the appliances, furnace, plumbing and electrical systems are operating properly. Inspect keys, garage door openers and the security alarm system. If all is in order, confirm your closing time and date with your attorney. Print out a copy of our Buyer’s Checklist for future reference.

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