What To Expect At Closing
1. What is a final inspection or “walk through”?
On the morning of the closing, the buyer should make a final inspection or walk through of the house & property, to check that the systems are still in working order & that the house & property are still in the same condition as they were when the buyer last saw them. If there are any problems or damage, the attorneys will address & resolve any issues at the closing financially.
2. What are my closing costs?
Closing costs include attorney’s fees, real estate brokerage commissions, & New York State transfer tax. The transfer tax is 0.4% of the purchase price. Non-residents of New York State also have to pay an estimated income tax at the closing. Also, if there is a mortgage, that will have to be paid off from the proceeds of the sale. The title company will file all the necessary papers to have the mortgage removed as a lien on the property & the seller will pay a recording fee for that.
3. Who attends the closing?
The buyer & seller, their attorneys, real estate agents, title company representative, & the mortgage bank’s attorney. If any of the principals cannot attend, they should give their attorney power of attorney to sign any necessary documents on their behalf.
4. What happens at the closing?
The attorneys will have prepared all the necessary transfer documents, including the deed to transfer title from the seller to the buyer & the tax forms for the buyer. When the balance of the monies owed has been received, the seller signs the transfer documents to pass title to the buyer & those documents are then released to the buyer. The keys are delivered to the buyer. Also, any adjustments are made for fuel, gas & real estate taxes. The seller’s attorney will pay all seller closing costs out of the monies held in escrow & then release the balance back to the seller.
5. How are the real estate taxes apportioned between the buyer & seller?
Either the seller or the mortgage lender pays real estate taxes twice a year. The date of the closing is used as the basis for dividing the tax responsibility. If the seller has already paid the taxes, a portion of the money is returned to the seller, using the closing date as the apportionment date. If the taxes have not been paid yet, then the seller must pay for the portion of time that he was in possession of the property, leaving the balance to be paid by the purchaser. Also, the seller will be reimbursed for the price of any oil or gas that remains at the property at the time of the closing.
6. How are liens & judgements satisfied?
At the time of the closing, a portion of the proceeds of the sale will be used to pay off any outstanding liens & judgements. The title company will collect that money & make sure the money gets to the lien holder & that a satisfaction letter is recorded in the public records of the county where the property is located so that the lien is extinguished.
7. Should the seller notify the utilities (electric, phone, oil company, etc.) of the sale?
Yes. The seller should notify all utility companies on the closing date to cancel the service as of that date.
8. Can the seller stay in possession of the house after the closing?
If the buyer will allow the seller to remain in the house after the closing, the seller can stay & rent the house from the buyer. This must be agreed to in the contract & signed by the parties. The seller’s homeowner’s insurance will have to stay in full force & effect until the seller vacates the property to insure against any casualty losses. It is usually a good idea to vacate the property at the time of the closing so that there are no issues remaining after the title passes.
9. Should the seller allow the buyer to take possession before the closing?
This is usually not a good idea for several reasons, the most important one being that the closing may be stalled for one reason or another or, at worst, the sale may never be consummated. This will put the seller in a position of having to vacate the property prior to putting the house back on the market, & possibly make repairs for any damages caused by the buyers.
Also, the buyers may take it upon themselves to start making changes or renovations without the seller’s approval. Moreover, the buyers might start making a list of extra repairs they want the seller to pay for before the closing. The seller shouldn’t put themselves in a position of having to collect for damages or rent or go through an eviction proceeding.
10. Who is responsible for paying the broker’s commission?
Usually the seller pays the broker’s commission, unless some other arrangement is made.