Transaction trauma: 5 things buyers and sellers can do to prevent their own drama
1) Be Sure you are Emotionally and Financially Ready to Sell (or Buy)
Moving isn’t for the faint of heart. There is a great deal that goes into the entire process emotionally, financially and physically. Get real with yourself and ensure you have prepared yourself for what is to come. Do you have some money tucked away for those little unavoidable surprises that will creep up on you? And have you reconciled yourself to part with your old space and move onto a new beginning. Starting fresh can be a wonderful, liberating process full of new hopes and adventures but it definitely also comes with some nostalgia and sometimes sadness. It’s okay to take time to consider this and reflect.
“When I see folks moving on from one stage of their life to the next, be it empty nesters downsizing or growing families moving up to their next space, I always recommend they take just a little bit of time to enjoy and reflect and feel the full emotion of what is happening. I think its healthy and beautiful and good for them before moving into their new space. Have a last night picnic on the ground and tell stories if you can, take lots of pictures, and don't forget to talk about all the exciting adventures and ideas you have ahead in the new home you are moving to.” Suggest Syna Soolkall, Realtor for the Hustle & Heart Group in Seminole, Florida.
2) Learn how to prevent money surprises during escrow
There are tools already built into your transaction that, paired with some smart conversations with your real estate and mortgage brokers, can virtually eliminate the potential for nasty surprises. “I once saw a mortgage billboard that read, simply, “surprises are for birthday parties.” This alludes to the very common fear of homebuyers that they will show up at the closing table and having their closing (and their keys!) held hostage until they produce thousands of dollars more than they expected.” Says Heather Stotts, Owner and Broker for the Hustle & Heart Group (A Remax Collective) in Seminole, Florida.
Expert support. When you first get preapproved and start house hunting, be up front and just tell your real estate and mortgage pros how much cash you have available to put into the transaction. This empowers them to tweak the timing and terms of your purchase in advance to avoid money drama at closing. Avoid surprise costs as escrow by being honest with your real estate and mortgage professionals about how much money you have available to put into the transaction.
Good Faith Estimate. When you apply for a mortgage, the loan officer will prepare a good faith estimate -- a standardized list of costs associated with obtaining the mortgage and a breakdown of the monthly mortgage payment due on the mortgage for which you were approved. The keyword here is estimate. The actual costs due at closing, the interest rate and the mortgage payment itself may vary significantly between the time the estimate is issued and the time you close escrow. When you first receive your good faith estimate, read it! Talk with your mortgage professional to determine which numbers are likely to change and by how much. Then, when you are preparing to make an offer on a home, ask your mortgage rep to draw up another good faith estimate using the specifics of the price and terms you are offering.
Prepaids. When you close escrow, as part of your closing costs, you pay prorated mortgage interest and property taxes from the date of closing till the end of the month. The date of closing can make a difference in thousands of dollars required to close. Ask your Realtor to help you set your closing date in accordance with the cash you have at your disposal.
3) Know when to remove contingencies or waive objections.
In real estate-speak, removing contingencies is the equivalent of pulling the trigger: it’s that last chance point of no return. Your contingency period generally runs anywhere from 10 days to 3 weeks after you enter into a contract to buy a home. Usually this period is to conduct your due diligence and decide either to bail or to seal the deal.
However, while contingencies offer the buyer a chance to be extra certain, they can be a real headache for the seller. And, sometimes negotiations for extras, reductions in prices or delays can get out of hand during inspections or contingency periods. “Before you know it the deal looks nothing like the original offer.” says Soolkall.
A seller may not even accept an offer with contingencies in the first place but that doesn't mean a buyer shouldn't walk away from a deal if this is the case, they have to feel very certain of what they are getting into or they may be stuck with something they didn't want or expect.” Says Stotts. “We don't want that ever for our buyers (or sellers). We want everyone comfortable with the deal. If it is good for everyone, it is good for us. There is always a good buyer and seller match out there and always another home, it’s never worth forcing anything that doesn't feel right”.
4) Know what to look for in your closing papers.
300 pages. A pen. A table. And you. Thus starts the surreal experience of signing your closing papers to get the keys, possession and mortgage payments that go with your new home. Most homebuyers know they should read these papers, but have no clue what to look for and wonder if they should be perusing the pages there and then, in front of the notary, Realtors and maybe even sellers and attorneys. Let the high blood pressure begin. Fortunately, out of the 6-inch stack of title and loan docs, there are a select few documents and items that are truly critical:
· Essential Details. Peruse the entire package to ensure that your name (and your co-buyer’s name(s)) and the property’s address are accurate and appear the way you would like them to show on the County records. Typos are not infrequent, but they are super easy to have corrected.
· The Note. This is your promise to repay the loan. Look for the loan amount, the term of the loan, interest rate, monthly payment, due dates, late fees and other critical terms like whether there is a balloon payment or prepayment penalty. Make sure these details jive with the good faith estimate you were given early on in your transaction.
· The Mortgage or Deed of Trust. This paper secures your IOU (the note) with the property, allowing the lender to take your home back if you fail to pay. It should list any “riders” -- additional documents that add terms to the note, like an adjustable rate rider or prepayment penalty rider. Check to be sure that any riders listed on the mortgage or deed of trust are included in the document package.
· Estimated HUD-1/Settlement Statement. Review this standardized list of closing costs, debits and credits to your escrow to ensure that it accurately reflects seller credits agreed on in the contract, deposits you’ve made, and inspection or appraisal fees that you have had billed to escrow.
“Strange as it may seem, the closing table is not the place to read your closing documents. Smart homeowners ask their Realtor, mortgage professional or escrow holder and real estate attorney to provide them with a copy of their closing documents as far in advance as possible, ideally at least 72 hours before the signing appointment. This gives their attorney and the buyer or seller time to review the documents, discuss them, ask questions, initiate revisions, if necessary and make the closing a stress free success when it comes time to sign” Says Amanda Felten, Attorney at Weber Crabb and Wein of St. Petersburg, Florida.
5) Get the right Realtor.
This might seem like a “Duh” point but buying a home is not an ordinary business transaction. As such, your relationship with your Realtor is not like your relationship with your accountant. “It is more personal, like your priest or maybe your doctor. You have to be comfortable really getting into the truth with your Realtor ”Says Stotts. “Sometimes I joke I am a therapist. I have confidentially discussed some of my homeowners innermost fears and even relationships”.
In an ideal situation, your Realtor will learn all sorts of private financial, emotional and relationship details about you and your family, and you will be comfortable making these true confessions. On the other hand, if you don’t like -- or trust -- your Realtor, or they are unable to translate your vision into a home, a traumatic transaction is virtually inevitable!
In the end, your process will be full of ups and downs and it’s good to know upfront, this is totally normal. There is rarely “perfectly smooth” transition in life and buying / selling a home and moving is no exception. But generally, the good outweighs the bad and the new future and adventures you embark on are well worth the challenge.