Top 5 Seller Items to Check BEFORE Closing
By Elizabeth Dougherty
This past week’s HomeSeeker TOP 5
discussed how stressful “the closing” was for the
buyer. If you have ever sold a house, you know it
is just as stressful for the seller. Until the cashier’s
check from the title company (or attorney) is in
your hand, there is always that doubt that the
closing won’t “close” or that the amount will be
less than expected or needed.
By closing day, the typical seller has already
packed and moved all their belongings out of the
house. Many sellers will use the proceeds from
this sale towards the purchase of their new home.
If things go wrong at the closing, well, it’s
not a pretty picture.
Insist on seeing all your documents in
advance. Have the title company or attorney
explain everything to you beforehand. The one
form that summarizes the entire transaction is the
one used by almost every title company, namely,
the HUD Statement. If you want a line-by-line
explanation of the HUD-1 Settlement Statement
go to http://www.alta.org.
1 Cash to/from Seller
The single most important question
that sellers ask at closing is “How much
money will I be getting today?” It’s a great
question, but closing is the wrong time to ask it!
Do not accept ANY offer on your property if
you do not know ALL the expenses that you will
be paying at closing. Your agent will help you
understand this BEFORE you sign any offer.
When you get to closing, line 603 on the
HUD statement will tell you EXACTLY how much
cash (usually a cashier’s check), that you will be
receiving at closing. This number should not be a
surprise to you and should be exactly what you
are expecting.
2 First Mortgage Payoff
For most sellers, paying off the
existing mortgage will be the single
largest deduction from the proceeds of the sale.
This is also where the largest monetary mistakes
in closing usually occur. The title company will
request a payoff from your mortgage company
and if you state that it is accurate then that
amount will be deducted from your proceeds.
Your title company has no way of knowing
whether it is accurate or not. Only you do. BE
VERY CAREFUL. First mortgage payoffs are
OFTEN incorrect. Make sure the escrow accounts
have been properly accounted for before closing.
Make sure that you are not due any return on
your PMI payments. Make the mortgage company
answer all your questions before you send them
hundreds of thousands of dollars. Afterwards,
they just don’t seem to act as quickly.
3 Escrows
Mortgage escrows on your existing
first mortgage are often incorrect and the
cause of the problems above. Many mortgage
companies OVER COLLECT on insurance and tax
payments on purpose to build up a reserve. This
reserve is your money. Make sure you get it back.
Check with your insurance company. Check with
the county tax office. Do the math. You could
save, or make, thousands of dollars. Don’t be shy
in dealing with the mortgage company. It is your
money.
4 Prorations
As we explained to the buyer, this
is one of the most confusing parts of the
closing. As the seller, you will receive a credit for
any insurance you have paid ahead, but you will
receive a debit for any unpaid property tax.
Normally the largest pro-ration debit for the
seller is the unpaid property tax, which can be
thousands of dollars. Lee County property taxes
are due the 1st day of October each year and are
delinquent after January 1st. http://www.leeco.us.
5 Title Fees
Like all items in a real estate
transaction, title fees are negotiable.
Alabama custom is that closing fees be split
between the buyer and the seller. If you are
paying the buyer’s title insurance fee, then you
should pick the title company or attorney.
Elizabeth Dougherty, a resident of
Auburn, is a former Real Estate Broker
and Mortage Broker. She can be
reached at EADougherty1@aol.com.
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