Frequently Asked Questions

1.  How do I e-sign a document?

click here and it will give you a step by step explanation.

2.  How is "closing fee" different from "closing costs"?

Closing COSTS include title work, recording fees, prepaid expenses, appraisals, etc...

Closing FEE is the charge from the title company to actually close the transaction.  It's usually around  $350 and generally split between the buyer and the seller.  Each side would pay $175 in this case.

These two often get confused.  Often a seller agrees to not pay any closing costs and they see the closing fee is split.  They think that that is different that what was agreed upon.  It's only the CLOSING FEE not the CLOSING COSTS.

Easily misunderstood.

3.  What is the process for purchasing a home?

we start with an offer and the seller has 3 options:  accept, counter, reject (or allow to expire).  This usually happens quickly unless it's a short sale (then it may take weeks!)  

Title work is usually ordered immediately if it's not already done.

Once an offer or counter offer is accepted, we order an inspection immediately.  This is usually completed within 5-10 days.  Inspections generally run $350-600 depending on size and what is ordered.  I have two favorite ones I use (Pillar to Post and Security) but you may choose whomever you wish).

We then prepare a "buyer's inspection response" and can ask for certain items to be repaired.  This is like round two of negotiations.

If the buyer/seller cannot agree on an inspection response, the buyer may walk from the transaction and get their earnest money back.  HOWEVER, there are conditions when that does not happen.  For example, a buyer MUST give the seller a chance to redeem the property or they are in breach of contract and could lose their earnest money.

Once the property is accepted by the buyer, a notice is sent to the lender to order an appraisal.  Caution:  do NOT instruct your lender to do this before the property is accepted.  The appraiser might appraise the home, you reject the home and you're liable for the appraisal fee on a home you don't buy.

Once the appraisal value comes in you move to closing (assuming the value is there.  see next two questions).  

The bank has to clear underwriting and satisfy all conditions so they get a "clear to close".  They will forward a closing packet to the title company for closing.

You will need to have insurance already secured.  They can pay for this at closing or you can prepay on your own.

We set a closing time that works for everyone.  Sometimes, the buyer and the seller cannot meet at the same time for various reasons (travel, schedules, logistics, babysitting, etc.).  That's usually not a problem.  The title has several options to close the loan including separate closings, remote closing, power of attorney (see question 6) etc.

Closing will take about an hour.  You'll walk out with keys to your new home.

Elapsed time is about +/-5 weeks.

4.  Hey!  I sold my house for less than it's worth.  How come it only appraised for the purchase price?

This is not unusual.  Appraisers know what the purchase price of the home is and will typically hit the "target number" if they can.  RARELY will an appraiser value the home for more than the purchase price.  Personal note:  I bought a home $20k under value 5 years ago.  Yep, it appraised for the purchase price.

5.  The home I'm buying appraised less than the purchase price.  Do I still have to buy it?  What options do  I have?

We generally have three options:

a.  have the seller reduce the price to the appraisal and close

b.  if the seller refuses to reduce the price, we can walk away and get our earnest money returned.  You will STILL lose your appraisal and inspection costs.

c.  negotiate a price that works for both of you.  This may/may not be an option with your lender.

6.  I'm out of town for the closing time.  Can I use a power of attorney?

Yes and no.  Generally the SELLER can close with a power of attorney.  If the BUYER has a mortgage they cannot.  The title company can prepare a POA.

7.  What is the HUD statement?

The HUD is the reconciliation of all elements of the transaction...in effect the balance sheet.  Every penny of the transaction is accountable to both the buyer and the seller.  New laws require that the HUD statement be given to the parties 3 business days before closing.  This will slow the process slightly but should allow us to have more dependable closing times.

The HUD has two pages.  Page 1 is shows the overall transaction reconciliation.  Page 2 shows the individual charges that are carried forward to page 1.  This form will change from time to time.

8.  I'm a seller.  Why is there a charge for property taxes on my HUD statement?

Taxes in Indiana are done in arrears.  This means in 2015, we are paying for 2014 taxes.  A BUYERis taking on the responsibility of the SELLERs property taxes so the SELLER prepays the BUYER those funds so they can pay the taxes.  In effect, the SELLERs taxes become the BUYERs taxes...the SELLER is paying the buyer up front so they can pay those.

Generally, it's about one year worth of taxes that show as a CREDIT to the buyer and a charge to the SELLER.

Buyers:  Don't get too excited.  It's not free money.  You'll have to do that same someday when you sell your home.

9.  What is  a limited agent?

An agent has a fiduciary responsibility to represent the best interest of his/her client.  When a listing agent sells one of their own listings, they become a LIMITED AGENT.  This means they represent both the buyer and seller but cannot show partiality to either party.  

here's a typical scenario:

Buyer: What do you think I should offer on the home?

Limited agent:  Here's the comps on the property.  What do you want to offer and I'll see if the buyer will accept it?

 

Seller:  The buyer offered me $10k less than asking.  Should I counter or accept?

Limited agent:  It's your call.  Let me know what works for you and I'll see how they respond.

10.  Why get an inspection on the property?

This is CHEAP INSURANCE!  All inspectors go thru rigorous training and examination by the state of Indiana to get qualified and licensed.  Their job is to inspect structural, mechanical, radon, termite and sometimes mold aspects of the home.  They generally do NOT do cosmetic items such as paint, carpet, etc.  You'll get a 20-35 page pdf report of all aspects including photos.  We use this to determine a basis for response to the seller.  Once your inspection is done, you will never get that money refunded even if you don't proceed with the transaction.

I've seen deals fall apart on inspections and the buyer was relieved that they DID do the inspection rather than proceed. 

I WON'T LET YOU BUY A HOME WITHOUT AN INSPECTION!

 11.  What does pending mean?  How about active pending inspections?

When a home goes "pending" it means it is sold and closing is fairly assured.  Typically, it is not available for showing again.

Sometimes an agent (include me) will classify the home as "ActiveB, ActiveI or ActiveC".  These all means there is an accepted contract on the property but it's not yet "pended" but is available to show in the case of a back up offer.  ActiveB means they are accepting back up offers.  Active I means it is contingent on inspections.  Active C means it is contingent on contracts.

The decision on how to classify the home is either made by the listing agent or dictated by company policy.  I generally don't "pend" a home until I get through appraisals and closing is assured.