Closing the Deal
There are literally hundreds of points that you can negotiate in a real estate transaction, and it is important to feel confident about negotiating with potential sellers, or there may be a danger that a seller will talk you into agreeing to terms in a contract that are not in your best interest. You Real Estate agent can advise you of the shortcomings and advantages of all terms presented.
There are many points that can protect and enhance your purchase, including financing and home inspection contingencies. Most purchase contracts are standard documents, containing standard language that may not fit your situation and may in fact be unfavorable to you. Your Coldwell Banker Hedges Real Estate Agent will explain the language, so that you can make an educated decision in order to make the best possible purchase decision.
There are two types of contingencies found in most transactions: 1) Financing Contingency, which makes the purchase conditional on the buyers' ability to obtain a loan from a lender; 2) Inspection Contingency, which allows the buyers to have professionals inspect the property to determine potential property issues prior to entering a binding contract to purchase. In order to protect your position, your Coldwell Banker Hedges Realtor sees that the purchase contract contains provisions which protect your purchase interests, including a clear and marketable title, having the seller agree to maintain the property in its present condition until closing and making any agreed-upon repairs to the property.
If there are items that are not disclosed as part of the property in the Property Disclosure document, you may want to include them in your contract for sale. Deciding what stays with the property is a negotiable item. Appliances that are not built in such as washer, dryer, refrigerator, portable microwave, and freestanding stove are not automatically included in the real property, just as anything is else not permanently attached to the property. Ask you Realtor about how to properly negotiate such items.
Earnest Money Deposit
The Earnest Money is a deposit paid by the prospective buyer of real property as evidence of the good faith intention to complete the transaction. The amount can vary, depending on the value of the property, and it serves as a source of payment of damages to the seller if the buyer defaults. You could forfeit your Earnest Money deposit under certain circumstances, such as terminating a purchase without legal reasons provided for in the contract. Once the offer is mutually accepted, the earnest money is held in trust by the listing agent’s firm and is credited toward the buyer's purchase price at closing. If closing fails to occur, the defaulting party may lose any claim they have to the earnest money deposit.
The Contract of Sale otherwise known as the Purchase Agreement is a legal document which binds the buyer to a set purchase price and binds the seller to convey the clear and marketable title. The contract also services as the initial directions to the escrow company to begin processing the transaction. When your Coldwell Banker Hedges Real Estate Agent prepares your Purchase Agreement, make sure you are perfectly clear about the following details:
Who is paying the various expenses of the sale, including closing costs?
Sellers customarily pay for the real estate commission, updating the abstract, the State transfer tax, seller closing fee, document preparation, and their portion of the year's taxes and assessments. Buyers customarily pay buyer’s closing fee, their portion of the year's taxes and assessments, and their loan fees. Occasionally sellers and buyers decide to share the expenses of buying and selling. This must be negotiated during the purchase offer time and often depends on local real estate market conditions, other terms of the purchase contract, and timing considerations.
What is the actual closing date and date of occupancy?
The closing date is the stated in the contract and is mutually agreed upon between the buyer and seller. It is considerate to set a closing date that leaves enough time to prepare to move in, and doesn't add additional expenses. The date of closing can affect your closing costs. Be sure to ask your lender for a good faith estimate. Many times the seller will request to remain in the property after closing, in part to assure that closing actually occurs without the seller having moved from the property. If that is the case, the seller actually becomes the tenant of the buyer after closing, so proper documentation is needed to assure the buyer’s rights to the property.
A Home Warranty is becoming more of a standard in home buying and selling transactions. The home seller may have already purchased a home warranty and if not, you should consider buying a policy yourself at closing. Coldwell Banker Hedges Realty has two different types of home warranties to offer buyers and sellers each with different advantages. The warranties will cover the cost for repairs or replacement to most mechanical systems for one year from the date of closing with a small deductible. The warranty can be extended beyond the first year by paying the premium each year. Advantages of a home warranty:
- Savings - You have one low deductible per-service call instead of paying the full cost of repairs.
- Security - You don't have the worry of you're going to pay for costly repairs if a breakdown occurs.
- Convenience - You have a network of local, professional technicians at your service with a toll-free, 24 hour Customer Service Hotline.
A professional building inspection will bring to light problems or repairs that are recommended to be made on the home before the transaction of sale. The sellers’ limitation for any and all repairs is a point of negotiation at time of contract. In the event that the estimated cost of repairs exceeds this limitation, the buyer and seller enter into re-negotiations on how the repairs and expenses are to be addressed. Your Coldwell Banker Hedges Real Estate Agent is skilled at helping you achieve your goals during this phase.
An appraisal is an opinion of a property's monetary value usually completed at the request of the lender and for the lender's benefit. Appraisers consider numerous factors such as square footage, construction quality, design, floor plan, amenities, energy efficiency, lot size, topography, view and landscaping. Other issues taken into account are neighborhood quality and a property's proximity to transportation, shopping and schools.
Title Opinion & Escrow
In the State of Iowa, when a property is under contract, the buyer or lending institute requires a preparation of a title opinion. A title opinion is a legal review of the property’s abstract. The opinion outlines the requirements in order to obtain clear and marketable title. The opinion lists cautions to the buyer of all current restrictions to the property. It is the seller’s responsibility to bring the abstract up to date to prove they have clear title to the property. A final title opinion of the abstract is then completed certifying all actions have been completed for clear title is in order.
Escrow is the third party which transfers the money and documents (including title and deed) from the buying and selling parties. The escrow company prepares documents, draws up the closing statements, obtains necessary signatures, records documents and receives and disburses funds.
Now that you've found a home to purchase, you want to protect your investment with a home owner’s insurance policy. The insurance provides coverage for fire damage, water damage, personal possessions, personal liability, vandalism, theft, loss of use of the house, and as well as many other coverage. If you are financing your home purchase, your lender will require you to buy at least basic hazard insurance. Be sure to talk to your insurance representative fully about insurance options.
Some homes in Eastern Iowa require flood insurance because of the location of the property. Your lender will require you to buy flood insurance to protect their investment. To find out more about the risks involved and coverage of flood insurance, please go to FloodSmart.gov.
After The Closing
Once you've purchased your home, make sure you know your rights as a homebuyer.
One of the best parts about buying a home is the tax break you receive from the government.
- Interest on your Mortgage
- Property Taxes
- Some Closing Costs (including home inspections, appraisals or loan application fees)
- Loan Points (deductible in the year that you pay them; in a refinance, the points are written off in increments over the term of the loan)
What Is Not Deductible?
- Home improvement Expenses
- Homeowner and Home Owners Association dues
- Insurance Expenses
Note: Be sure to consult with your tax counsel about the tax benefits of owning your home.
For free publications from the Internal Revenue Service, call 1-800-TAX-FORM and ask for the following publications:
521 - "Moving Expenses"
534 - "Depreciation"
541 - "Tax Information on Partnerships"
551 - "Basis of Assets"
555 - "Federal Tax Information on Community Property"
590 - "Individual Retirement Arrangements"
908 - "Bankruptcy and Other Debt Cancellation"
936 - "Home Mortgage Interest Deduction"
If you have additional questions, ask your Coldwell Hedges Real Estate Professional.
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