Getting to the Closing Table

You've decided you want to buy a home -- condo, single family, multifamily -- the process is the same with some variations.

We start by searching for the right home. When that is found, we write an offer and if the price, terms and conditions are acceptable to all parties, the offer is signed and becomes a contract. We usually have a house inspection by a professional inspector and if the inspection is good, we move forward with the transaction. The contract has been sent to the bank, the bank orders an appraisal, puts together all financial information and produces a commitment to loan the money.

A few days before closing, the buyers' attorney will tell the buyers how much money to bring to the closing. This should not come as a surprise to the buyers as they will have been given a "Good Faith Estimate" by their lender at the beginning of the loan process. On the day of closing, the buyers and sellers meet at the closing table. Typically, what happens in this area of Vermont is we meet at the buyers' attorney's office. The buyers' attorney is representing the lending institution but typically acts as a representative of the buyer also. The sellers can hire their attorney to be present but the attorney is not usually there.

The attorney goes over the HUD Settlement statement with the buyers and sellers to make sure the money that is exchanging hands is correct. There is a buyers' side and a sellers' side. The bottom line on the buyers' side is the amount they have brought to closing. The bottom line for the sellers is the amount they are taking home after the closing is over.

After everyone agrees on the HUD Settlement statement, the buyers start to sign a pile of closing papers with their attorney. They will sign the note that promises to pay back the loan. There are many disclosures that the bank will provide. The buyers will also either give over a bank check for the amount they are to bring to closing unless the money has already been wired into the attorney's trust account. After all the paperwork has been signed, the sellers produce the deed to the property that has been written by the sellers' attorney. It is signed and handed over to the new buyers.

Keys are given from sellers to buyers and now we have new homeowners! The process takes about one hour barring any complications. At the end, everyone is happy (well, usually!) and we REALTORS feel great because we were able to facilitate the buyers and sellers coming together in a win-win transaction. It is really an honor to be a part of such an important part of people's lives!

Recent Rural Development Loan

We represented a buyer who bought a home in Fairfax on a Rural Development (RD) loan. She was able to finance 100% of the purchase price AND get closing costs from the sellers. Keep in mind that all negotiations are specific to a property and that a sales price is specific to what a seller will sell a house for and a buyer will pay for the house.

The buyer and seller agreed on the price, terms and conditions. We did a building inspection and there were minor repairs that needed to be done. But the house had one major problem that we knew ahead of time would come up in the appraisal. In RD loans, safety is all-important. This house had a sliding glass door to... nowhere. I mean, it was to somewhere, and that somewhere was an eight foot drop. There used to be a deck there, but now there wasn't.

We determined from the lender that if the seller put up an adequate barrier, that would suffice. The seller put up an attractive lattice barrier but it was not high enough. A carpenter put in a board at the top of the slider and screwed it in place. That door was not opening.

The bank hires an appraiser to determine the value of the house for the bank and to also evaluate the condition. He was satisfied with the sliding door repair.

What did not satisfy him was the vinyl in the kitchen that was torn and missing in areas. He did not like the leaking sink in the bathroom, and he wanted GFCI outlets in the kitchen and bathroom. He especially didn't like the peeling paint on the exterior. We understood the electrical repairs and leaky sink. The appropriate tradespeople were hired and the repairs were made. The seller reluctantly scraped and painted the outside. But the missing vinyl? The buyer was going to replace the entire floor as soon as she closed on the house, so she didn't want to spend money repairing missing vinyl.

The solution that worked for everyone was a bit ridiculous: the ripped pieces were cut out so there were missing 12x12" square areas. The completely missing areas were trimmed neatly to make open square areas. Then peel and stick 12x12" tiles were put in the missing spots. The main color of the kitchen floor was yellow so they put in yellow peel and stick tiles. Unfortunately, they ran out before finishing. So, we stuck in black tiles! Black and yellow tiles -- it looked like the Yellow Brick Road! Ugly, but the appraiser was satisfied.

In an RD loan, the appraiser is not only appraising the property for value compared to recent sales and other properties on the market, but is creating a report indicating what repairs must be done to satisfy the lender. The buyer gets a safe house and the lender knows the house has gone through stringent requirements. But sometimes the requests seem ridiculous, like covering the openings in the kitchen floor in this house.

We are happy that RD loans exist. In this case, the buyer did not have enough for an FHA downpayment which is 3.5% and she did not have sufficient cash for closing. The buyer and sellers came to agreement on price, terms and conditions that worked for everyone. The buyer is thrilled with her new home and the sellers loved that she loved the home they had owned for years.

Even if she moved in with a yellow and black kitchen floor.

Post Tropical Storm Irene Appraisals

Many properties under deposit and past the appraisal process recently had to be reappraised - a reinspection, really -- to determine that the properties were not damaged in Tropical Storm Irene. Given the pictures of Vermont devasatation in newspapers and online, it's understandable that banks would want reassurance that the properties they were about to lend money on were in good shape.

In most cases, the appraiser went back to the property and did an exterior inspection to see if the location was near a body of water and if the exterior looked to be in good condition. This did not take long but appraisers were doing inspections for many properties in addition to their current work load. In most cases, we had to delay closings until the inspection could be completed and underwriters sign off on the inspection.

With more stringent guidelines for lending in general, closings are taking longer. Underwriters are often out of state and are not aware of subtle differences in Vermont requirements vs other states. (For instance, we don't have termites in Vermont but they want to see termite inspection reports.) Buyer and sellers (and their agents) have to be patient with requests for different verifications. And recently, we've had to be patient and leave time for last minutes snags. Like flooding!

All the properties we had under deposit during the storm have closed, but we are now suggesting that closings are scheduled farther out than in the past. If we can move the closings up to earlier dates, that is much better than asking for extensions.