5 Steps You Can’t Skip During Escrow

 5 Steps You Can’t Skip During Escrow

The escrow process, which is also known as closing or settlement, is the endgame of thehome-buying process. It is when the buyer, seller and other necessary parties get together to seal the deal.

While your real estate agent and lender may assist you during the process, you should prepare yourself by knowing what to expect once you are in the thick of it.

To do so, brush up on these five prominent hurdles you’ll face during the escrow process.

Escrow Steps for Success

1. Have a Solid Contract

The sales contract or purchase agreement is the blueprint for the escrow process. The real estate agent or attorney typically writes the contract. It should clearly state the terms of the deal and what must occur before escrow closes and the property changes hands. It should not contain blank spaces.

The contract will include details about these specifics:

§  What happens if the agreement fails

§  What personal property is included in the deal

§  The closing date

§  What happens if escrow is delayed

§  Who pays what cost

§  Financing arrangements

§  Occupancy date

2. Clear Contingencies

Contingencies are contractual conditions that must be met before the contract becomes official. Inspection, appraisal, and financing are common examples, although contingencies can be written for any event or issue. Contingencies come with a time limit to complete the task.

Once each contingency is completed, the buyer and seller should sign a document removing the contingency from the contract.

3. Review Title Reports

Typically, there are two title reports: a preliminary report and a final report with title insurance. Review the preliminary report to verify the legal description of the property and to learn about any liens, encumbrances or other items affecting the property’s title.

Later, with the final title report, make sure the title is clear and the title or escrow agent knows how you want to take title to the property. Common titles are as follows:

§  Joint tenancy

§  Tenancy in common

§  Tenants by entirety

§  Community property

§  Sole property

4. Track Transaction Costs

In the end, title and escrow costs are combined with mortgage and other transaction costs on federally mandated closing documents. Obtain a Good Faith Estimate to gauge what these costs may be. Then compare them to the HUD-1 Settlement Statement, which is the final line-by-line list of all mortgage and closing costs.

If there are significant discrepancies between the GFE and the HUD-1 Settlement Statement, ask about them, as they may be open for dispute.

5. Be Prepared on Closing Day

On closing day, come to the table only after reading and fully understanding your HUD-1. Bring a pen and paper for taking notes, an attitude of good faith, plenty of time and the willingness to back out if the deal doesn’t follow contractual guidelines. Parties present at closing include these particulars:

§  Lender

§  Seller

§  Seller’s real estate agent

§  Closing agent

§  Attorneys for you, the lender or both

The buyer will deposit any escrow payments and sign necessary documents. The seller signs over the deed and closing statements and receives any money due.

After signing, the deed and mortgage documents are delivered to the county courthouse or other government repository for recording as public records.

Updated from an earlier version by Broderick Perkins.

Is It Nailed Down? What Stays in the House and What Goes

Is It Nailed Down? What Stays in the House and What Goes

The doors, the windows, and most likely the azalea bush by the driveway—you’d expect those to stay with the new house you just bought, and you’d be right. But what stays in the house when you buy it?

Who claims the washer and dryer? Will the sellers bequeath the lawn mower? What about the bathroom fixtures? Your real estate attorney will know specifics about what you are legally entitled to keep as the new homeowner, which can vary between states.

Generally, though, the basic rule is this: if it’s nailed down, it stays. If it’s not, it goes—unless otherwise negotiated.

Here’s a primer on the basics of what stays in the house for the new owner:

Appliances
Most appliances are moveable items, and moveable items are considered personal items or possessions of the seller. The real estate agent should have explained things such as, “The seller was leaving all the kitchen appliances and the washing machine—but not the dryer.”

If there are leftovers that haven’t been mentioned yet—say, the portable air conditioner in a basement window—ask the experts as you negotiate the closing. The seller might agree, especially for a price.

Landscaping
Plants, shrubs and trees in the ground remain with the new house. Backyard equipment—such as lawn chairs, tables, swings and grills—are all considered the seller’s personal items. A swing set may get a bit tricky, because it is possible to claim it’s attached to the ground in some cases.

If you have a questions about anything specific, the real estate attorney should make sure it is answered by the closing. The seller may be very willing to let you have backyard items for a price.

Light Fixtures
Light fixtures, lamps and chandeliers usually spark discussion between the buyer and seller. Items clearly attached to the home—and if removed may damage walls—are considered fixtures. Fixtures must remain in the new house unless the seller explicitly states the item isn’t included in the sale.

The seller may not care about the $40 Home Depot sconce, but the family-heirloom, lead crystal chandelier could be held dear. If the buyer agrees to let a priceless fixture go, it falls on the seller to remove the chandelier without damaging anything.

Lamps attached to nothing but the cord plugged into an outlet fall under “movable items” and go with the seller. It’s a good idea, if you’re the buyer, to inventory all the fixtures and fans in the new house, and you should make sure you and the seller know exactly who wants and gets what items before closing.

Everything Else
Built-in bookcases—they’re nailed down, so they stay. Ditto custom-made valances. But the owners have a right to claim store-bought curtains hung on rods.

As one Wall Street Journal expert notes, it’s become more commonplace to have large televisions mounted on the wall, but they can be easily popped out. The owner of a 80″-plasma TV may not imagine letting that go over a $30 wall bracket. Those gray areas can be negotiated.

If the sellers plan to move cross-country or downsize, you might even be doing them a favor by agreeing to take on some of their household goods. And if there’s something they desperately want to keep, that could play in your favor if you ask for a give-back on a price point.

The one thing no one wants is for a pair of $50 curtains or a cheap TV wall bracket to make or break a home sale. So make sure you know what stays in the house when you’re buying it.

Based on an earlier version by Susan Wellish.

The Upside of Downsizing Your Home

The Upside of Downsizing Your Home

You worked so hard to own your home, it’s hard to imagine moving on—much less to a smaller abode. But while downsizing your home may involve major lifestyle changes, there are a lot of advantages to moving into a smaller space.

Downsizing remains one of the most effective ways to lower housing and energy costs.

These are just a few of the advantages:

§  Lower mortgage payments

§  Lower utility bills

§  Less to clean

§  Easier to maintain

§  Less yard maintenance

While the size of the average American home remains fairly large, there are signs that downsizing may increase in the future.

Home Downsizing Trend: No More McMansions

The average American home has grown from under 1,900 square feet some 20 years ago to more than 2,400 square feet, according to 2013 U.S. Census data.

Families who bought five, ten, or even 15 years ago or more might find many rooms unused as their children have grown and moved out. While the Baby Boomers continue to hold on to many of those larger homes, according to recent reports, experts predict an uptick in downsizing as the oldest Boomers enter their mid-70s.

“We continue to move away from the McMansion chapter of residential design, with more demand for practicality throughout the home,” writes Kermit Baker, chief economist at the American Institute of Architects. “There has been a drop-off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts and gazebos.”

Large foyers are becoming a thing of the past. The formal living room is being replaced by a more flexible open plan, such as a large family room/breakfast nook/kitchen combination.

Downsizing Your Budget

For some homeowners, of course, downsizing is not a matter of choice, but of necessity. Many families are still digging out of the recession, which had an impact on home values, employment and retirement nest eggs invested in the stock market. A couple finding itself with a diminished income may simply be unable to keep up with mortgage payments and maintenance costs on a 2,800-square-foot home on a half-acre lot.

Still, the very idea of downsizing takes some getting used to—much less carrying out a downsizing plan. If you feel stuck, a home downsizing consultant can help you formulate a plan of action, appraise and sell belongings, and estimate how much money you stand to save.

Learning to Live With Less

Downsizing your home means a change in lifestyle and attitude. You may have to learn to live without a garage, that extra bathroom, and the basement storage where you tossed years’ worth of home goods, equipment and mementos. A smaller home can mean less room for guests and less opportunity for privacy.

As you consider downsizing, ask yourself these questions:

§  Do you feel ready to live more simply?

§  Are you prepared to divest yourself of resources?

§  How many of the things you’ve accumulated over the years do you truly treasure?

Home downsizing is really about making do with less. But some people would say that less is more. Rather than devoting your time and energy to supporting and maintaining your home, you may find yourself devoting more of your time and energy to enjoying it.

Based on an earlier version by Ben Garson.

Find a House to Fit All Your Needs and Wants

Find a House to Fit All Your Needs and Wants

To find a house is more than simply choosing a place to rest your head.

The location impacts virtually every aspect of your life, from your commute to grocery shopping to leisure time. A home’s layout can promote or hinder your lifestyle, and large monthly mortgage payments can seriously dent your budget.

Before jumping into a home purchase, carefully consider whether you can find a house to fit the way you live.

Your Commute: Getting Around

Is your potential new home well suited to getting where you need to go?

Will you face frustrating gridlock on your morning commute? Do the rush-hour drive to check whether traffic flows smoothly. Daily two-hour traffic snarls—maybe even each way—can ruin your mood and your schedule.

Will winter ice or spring storms make the roads hard to navigate? Research the city or township’s record of road maintenance. In snowy regions, a street that never sees a snowplow can severely impede your ease of movement. Streets riddled with potholes are inconvenient and dangerous.

Accessing the Essentials

Everyone needs groceries and household items. Explore the local shopping areas. If the closest grocery store takes more than half an hour to reach, how will that fit into your lifestyle? Are you prepared for two-hour grocery runs? Or will you accept the higher prices and limited choices of nearby convenience stores?

On the other hand, you might decide that a quiet, remote location is worth the trade-off of easy access to goods. And perhaps a favorite restaurant or grocery store close by delivers.

Leaving Room for Fun

Both your home’s location and its setup will affect how you spend your time off. Do you enjoy the nightlife? If so, consider the house’s distance from the local hotspots. Is it a distance you’re comfortable with? Or will you need to scale back your social life?

For an avid hobbyist, you’ll want to make sure your new home has room for what makes you happy. If you’re a passionate home chef, a tiny galley kitchen may quickly frustrate you. If you are a fitness fanatic, make sure there’s room for your home-gym equipment.

Find a House for Your Lifestyle

You know how many bedrooms and bathrooms you need. Yet it’s easy to become wowed by extras and lose sight of the essentials.

If you mean to buy a “forever” home, that dramatic sweeping staircase can put stress on aging knees. That alluringly vast lawn will consume your free time. A finished basement rec room won’t do for young children who demand more parental supervision.

Take a minute to carefully consider the home’s structure and layout to determine whether the space matches your lifestyle.

Budgeting for Your Home and Your Life

Even after the bank has cleared you for a mortgage, consider those monthly payments. How deeply will they impact your quality of life?

Some people are content to live frugally, enjoying the comfort of home ownership. Others feel edgy when they don’t have cash on hand, whether that’s the freedom for a little guilt-free shopping or a larger savings safety net.

So before you sign that contract, take some time to really consider whether the home fits all of your needs and wants. Your future self will thank you.

Updated from an earlier version by Gilan Gertz.

Pre-qualification and Pre-approval: Do You Really Need Both?

Pre-qualification and Pre-approval: Do You Really Need Both?

What kind of mortgage you can afford and what kind you can get are important things to know when you begin the home-buying process. You might have a ballpark price range for your next home, but you run the risk of setting your sights too high—or too low—without some additional legwork. Narrow down your range by getting pre-qualification and then pre-approval.

The Difference

Pre-qualification (sometimes abbreviated as ‘prequal’) is a basic overview of a borrower’s ability to get a loan. You provide all the information, without any kind of paperwork to back it up.

Pre-approval is more in-depth. The lender will look at your bank statements, credit score and other information to demonstrate your financial capability. Neither is a guarantee you’ll get the loan, but a pre-approval is more reliable and more favorably viewed byREALTORS® and potential sellers when you start home shopping.

So why get pre-qualified?

§  It’s quick and can be done online or over the phone

§  You’ll know if you can afford a mortgage

§  It can give you a basic idea of what kind of mortgage you can get

A Good Idea, Not the Final Step

While pre-qualification is relatively easy, don’t rely entirely on that information. Mistakes can be made and discrepancies can and will be found during the pre-approval or the final approval process.

Being pre-approved is not a sure-fire way of obtaining a loan, either. For example, if you are pre-approved one month, but then you take out a loan for a new car next month, you can damage your ability to get a mortgage. You do not want to change careers, spend too much money or take out loans during the home-buying process. If you do, you can hurt your loan eligibility.

While being pre-qualified and pre-approved won’t guarantee you a loan, it’s recommended you do both. At the very least, get pre-approved. Many REALTORS® and sellers won’t consider you as a strong home-buying candidate without a pre-approval letter.

So when you’re looking for a new home to buy, it’s in your best interest to do the following:

§  Get pre-qualified

§  Get pre-approved

§  Shop for a home based on your pre-approval amount

§  Apply for the loan

If you follow these steps in order, it can save you a lot of time and aggravation during the mortgage loan and home buying process.

Download the realtor.com® Mortgage App for Android or iOS.

What is a Lien?

What is a Lien?

A lien is not the end of the world, nor is it uncommon.

Maybe you’ve had some bad luck recently. Perhaps you lost your job, or business is painfully slow, or you had unexpected bills.

To cover yourself, you borrow money to get back on your feet again, thinking your luck will turn around—but things don’t seem to be going in your favor.

Before you know it, you’re further into debt, and creditors are calling. Rather than face them, you avoid the issue. After all, you don’t have the money––what can they do?

Creditors’ Tool

When creditors want you to know they mean business, they may choose to take legal action by placing a lien on your biggest asset—your home.

A lien is a legal document acting as security for the debt by giving the creditor a stake in your home. When there is a lien on your home, what you can do with the property is limited. You may not be able to take out a second mortgage or home-equity loan with an unpaid lien

If you decide to sell your home, the lien must be paid off at closing with the proceeds of the sale.

Common Liens

There are a number of different types of liens creditors may place on your home. The most common are mechanic’s liens, judgment liens and tax liens.

§  Mechanic’s Lien: When general contractors build your home—or repairmen, carpenters, plumbers or painters work on your home—they may file a mechanic’s lien on the property as insurance to make sure they’re paid.

§  Judgment Lien: If you have lost a court case and there was a judgment against you, the winning party of the lawsuit can file a judgment lien against your home until the payment is collected. This type of lien is also sometimes imposed by an attorney if you do not pay your bill for legal services.

§  Tax Lien: If you do not pay your federal, state or county taxes, the government may file a tax lien on your home.

Removing a Lien

It is in your best interest to have any lien against your home removed as quickly as possible. The simplest way to have a lien removed is to negotiate with the lien holder. For example, settling the lawsuit or paying any outstanding bill to your contractor should remove the lien. If you owe back taxes, the Internal Revenue Service may agree to remove the lien on your home if you plan to sell the property and agree to a payment plan to repay the past due amount.

If you feel the action is unjustified, you can file a lawsuit to have the court order the lien removed. Your case will be investigated, and if there is no basis for the lien, or if you can prove the debt was paid, it will be removed.

Updated from an earlier version by Aviva Friedlander.

Four Essential Tips for Staging Your Home

Four Essential Tips for Staging Your Home

Buying a new home is so personal. Yet, to sell yours, you’ll want to remove so many of your homey, personal touches. This is part of staging your home: buyers should be able to picture themselves living in your house—not picture you living in your house.

Successful staging will boost your home’s appeal—and your chances of selling. And there are two rooms that often need the most staging: bedrooms and bathrooms.

You might decide your house looks good enough as-is. But even in a strong market, a little staging could boost the offers you receive.

Think like a buyer

Staging lets you see your house with fresh perspective and helps you correct any eyesores you may have become used to over the years. It helps you to view some of your beloved items as clutter and gives you the initiative to clear away unneeded items.

Staging will also help you in the packing process, which inevitably involves streamlining and downsizing.

Bedrooms equal comfort

A bedroom should be a place of serenity. Stage your bedroom to convey a tone of comfort and relaxation. You want it to appear spacious. Here are some tips for presenting your bedroom:

§  Paint it in soft, neutral tones

§  Remove all furniture other than a bed, a dresser and a few knickknacks

§  Remove at least half of your wardrobe from your closet to make the closet seem larger

§  Clear away clutter, shoes, reading material and family photos

§  Invest in new linens and throw pillows

§  Steam clean the carpets, clean the windows and dust the shades

Bathrooms can be beautiful

Purchasers don’t spend a lot of time in bathrooms, so your bathrooms have to make a great first impression. Bathrooms should be impeccably clean and somewhat modern. Here are some bathroom staging tips:

§  Replace old bathroom fixtures, such as towel rods and faucets, with sleek new ones

§  Hang luxurious-looking towels to match the bathroom’s color scheme

§  Layer towels on the rack, smaller towels over larger towels

§  Before an open house, put a bouquet of fresh flowers in the bathroom

§  Ruthlessly clean mold and dirt from tiles and shower doors

§  Add spa-like accessories, such as candles, scented soaps in baskets and glass containers holding cotton balls

Cleanliness is a virtue

Cleanliness trumps all. Buyers have to imagine themselves living in your home, and they will have a hard time picturing themselves living in a dirty house. In fact, the top of your to-do list when you list home to sell should be a deep, thorough clean, like your house probably hasn’t seen since you moved in.

§  Remove mold and mildew

§  Scour away lime stains left by hard water

§  Clean windows inside and out

§  Steam carpets

§  Wash all linens and curtains

If you smoke or have a pet, be especially vigilant about eradicating those odors—because a clean, well-staged home should bring you a quick and profitable sale.

Based on an earlier version by Gilan Gertz.