After Executed Contracts

After executed contracts, you can relax a little, but just a little, as there is still a lot of work to be completed prior to the closing. Many people will be working for you at this time in order to finalize the transaction and “get closed.” Not everything will be in your control, so it is important that you have your “team” available in advance and that you trust them to get everything completed in your best interest.

Closing Date: This is probably one of the most confusing of any term in the contract, causing much frustration for both buyers and sellers. If the contract reads “on or about,” then the date in the contract is a “target date” not an absolute date. It is very likely that the closing will NOT actually be on the specific date as stated in the contract. The buyer and/or seller can postpone the date of the closing for up to about 30 days. If one party (let’s say the seller) wants to extend the closing 15 days later from the “on or about” contract date, even if the other party (let’s say the buyer) does not want it extended, the date will be extended! Therefore, when scheduling mortgage rate lock-in dates, movers, lease termination, contract dates to purchase or sell another property, etc., great caution must be used!

Showing the Property: The property will no longer actively be shown for sale. Any agent requesting to show the home will now be told there are “executed contracts” on the property.

WHAT THE BUYER WILL BE DOING:

Mortgage Process: If you are getting a mortgage, you will now submit the necessary paperwork to get a “mortgage commitment.” A mortgage commitment is a term the banks use that means the bank has reviewed and confirmed all the information about the buyer and that the bank has officially approved the buyer to receive the money for the mortgage. In NY State, this entire process usually takes about 45 days, but can vary tremendously depending on the number of applications the bank is processing and the type of loan being processed. During a decrease in interest rates, the banks may be deluged with re-financing requests, thereby extending the amount of time it takes to obtain a mortgage commitment.

Appraisal: One of the items the bank providing the mortgage will require is an appraisal of the property. The bank will send out an appraiser to the property usually within one to three weeks after the bank receives its copy of the executed contracts. If a buyer is applying to more than one bank (in order to shop for the best rate), there may be more than one appraisal.After the appraiser visits the property, the written appraisal is usually completed and submitted to the bank within five to seven business days.

Survey of Property: A “map style” survey is not required to transfer title of a property from a seller to a buyer. However, it is usually the buyer’s lending institution’s requirement that a survey is provided in order for the buyer to attain a mortgage. Therefore, a survey will be needed for the buyer to attain a mortgage on a single or multi-family home or on an attached home/townhouse in a “Homeowners Association” that is a “PUD.” Properties that are in Condominium and Co-Op associations do not need a survey. If the seller is able to supply a current survey (usually less than 10 years old), then a buyer will usually not need to procure a new survey. If a survey is not available, too old or simply not accepted by the bank, the buyers, at their expense, will need to hire a surveyor to attain a new survey. It usually takes upwards of two to four weeks lead time to get a surveyor to a property! After the surveyor physically surveys the property, it may take an additional two to three weeks to receive the written survey map, depending on the size and shape of the property. Therefore, this process should be started early!

Mortgage rate lock in: Buyers should absolutely NOT LOCK IN ON A RATE THAT WILL EXPIRE WITHIN 30 DAYS AFTER YOUR “ON OR ABOUT” CLOSING DATE IN THE CONTRACT! Remember, the “on or about” contract date is not an absolute closing and moving date. The buyer and/or seller may extend that date, for up to approximately 30 days past that date. So, as a buyer, don’t risk losing the rate and your lock-in fee by accepting a lock-in expiration date that will expire too early! The rate-lock date must extend at least 30 days past the “on or about” contract date! Anything earlier than that exposes you to the risk of paying extra points for rate extensions or losing the “locked-in” rate completely.

Terminating a Lease: For buyers that are tenants purchasing a property, this is probably the most difficult issue since the buyer/tenant has to give notice to the landlord. The buyer/ tenant has an “on or about” closing date in the contract, whereby the closing date can be extended by the seller or even by the buyer if the mortgage commitment is not received from the bank in a timely fashion. Therefore, the buyer/tenant needs to schedule some flexibility with the landlord in case the closing date gets extended. The buyer/tenant may have to pay for an additional month of rent, even though the buyer/tenant only needs to stay a few days into the next month.

Title Search: This will be the final step for the buyer’s attorney before scheduling a closing. A couple of weeks before the targeted closing, the buyer’s attorney will order a title search to make sure that nobody else is laying claim to the property; the home is “lien free” except for those liens already known on the property (current seller’s mortgage, etc.). It also verifies that the property description from the appraisal and/or listing sheet matches what the Village/Town/City has on record as to legal space, number of bedrooms and baths, sheds, out buildings, etc. This is why it is vital that the seller has all the Certificates of Occupancy intact prior to closing.

WHAT THE SELLER WILL BE DOING:

If there were any terms of sale in the contract for the seller to perform, this would be the time for the seller to take care of those items. This may include, but is definitely not limited to:

• Attaining a “Certificate of Occupancy” or “Fire Underwriter Certificates” for any modifications and/or additions to the home in which the seller had not previously procured a building permit.

• In the City of Peekskill, an updated certificate of occupancy is required for all transfers of title.

• Repairing/replacing any items that the buyer and seller agreed would be completed prior to closing.

BOTH BUYERS AND SELLERS:

Movers: It is time to call movers to get bids and to schedule a moving date. Please remember, this date may be extended so you and the moving company will need to be flexible

Insurance: Call your insurance company and inform them of your move. Schedule a cancellation of your insurance on your current property and order insurance for your new home. For the new property, your insurance company will ask you many questions, including: How many feet away is the closest fire hydrant? How far away is the fire department? Try to have that information available for your insurance provider.

Actual Closing Date: Ok, so let’s move ahead about 30 to 45 days... and now the buyer received the written mortgage commitment, the bank and buyer’s attorney have approved the title report and the buyer’s, seller’s and bank’s attorneys set an actual closing date, time and location. After all that is accomplished, here’s what’s next.

Sellers

• Call the utility, telephone and cable TV companies to inform them of the “shut-off” date. The seller will need to provide these companies with a forwarding address, so the companies can bill the seller for the services provided up to that date.

• If applicable, the seller calls the oil, propane and water companies for a final reading.

The oil and propane companies will come out and read how much oil and propane is remaining in the tanks and provides a certificate for the closing, detailing the amount of oil and propane left in the tanks and the dollar value of those products. The water company will come out to read the meter in order to provide a final bill to the seller for the closing.

Buyers

• Call the utility, telephone, cable TV, satellite, water, oil, propane, etc. companies to order service to start as of the closing date.

Seller Move-Out: After the seller vacates and the movers are gone, the seller then cleans the home to “broom-clean” status. The home must be vacated by the seller and be completely empty & clean for the walk-thru and closing. All movers, cleaners, trash hauler, pet pickups. etc. must be completed at least 3 hours prior to any closing in order to give the buyer enough time to perform the walk-through and get to the closing! Any deviation from that time schedule may result in money being left in escrow at the closing and the closing itself being extended from the typical two hours to considerably longer!!! This may be an added expense for both the buyer and the seller, and will definitely be added time, frustration and worry for all.

Walk-through: This is the final step before entering the doors of the closing. Here, the buyer will do a final inspection, not to find any additional items that might have been missed on the original inspection, but to look and make sure the home is in at least the same (or better) condition as it was during the original inspection. Also, the walk-through ensures that any areas, such as floors, walls, counters, etc. that were previously covered by area rugs, window treatments/pictures, appliances/books, etc., which were not visible during the original inspection, are in good condition. And, lastly, the purpose is to ensure that everything that was supposed to be included with the sale is on the premises and that everything that was supposed to go was, in fact, removed from the house.

Paint cans and scrap-wood: This is probably one of the most discussed items at a walkthrough. Please remember that the buyer and seller should be specific as to what items are to remain or to be removed.

Light fixtures removed: Any light fixtures removed should be replaced, by the seller, with a “porcelain” light-bulb fixture. They usually cost about $2.50 each or less. No bare wires should be exposed.

Holes in walls from pictures: It is reasonable for the seller to leave small holes left by nails from pictures and posters. However, the seller is required to remove any hooks and nails from the wall. If there is significant hole/damage left by a particular picture/mirror, etc., then the seller should patch that damage. But, no painting is necessary.