What exactly is a closing date? And how important is it to having a smooth and hassle free home purchase?
This all depends on what kind of negotiation you are performing. There can vast amounts of variables to contend with when you are negotiating and each one of those can get in the way of a successful closing, making the closing date more of a burden than the light at the end of the tunnel.
On the other hand, a closing date can give a organization bulls eye for which to aim over the course of buying your new property.
Lets examine some of the fundamentals of closing dates.
When you make an offer to buy a home you will sign a Purchase Agreement or a Purchase and Sales Agreement. This is a binding contract between you and the person selling the home. This document also has your offer with any contingencies and stipulations you may require.
Once examined by the seller, she or he can either accept your terms and sign the agreement, or return it to you with a counter offer. IN this counter offer there is often a new closing date, as it will undoubtedly take more time for the negotiation process.
When Do You Set The Closing Date?
Once both parties have come to a consensus on the price of the home, a closing date must be established. This is the date by with the house must be in full custody of the new owner. When you are jointly selecting a closing date you must keep in mind to make time for several things. These often include:
Application for a mortgage Secure an appropriate loan Time for one party to move out and find a new home Time for the buying party to sell their existing home and move into the new one Property inspections Title report review Obtaining a Mortgage Special circumstances, such as one party leaving town for a period of time or the holidays Any other legal situations that may arise
It is also important to note that no one party can change the closing date, however both parties can push back or pull forward the date if they both sign a release form stating that is their intention.
As part of the closing date, both parties need to know what their individual responsibilities are before closing can occur. If these responsibilities are not met, the contract is breeched and there can be legal recourse. Therefore, it is essential that you and the seller get together and come up with a reasonable timeline for all of the tasks that need to be completed plus time allotted for any unseen circumstances.
For instance, if there is a structural problem with the home it has to be determined in advance who is to pay for the amelioration of the situation and how much time they have to do it. Providing there is no animosity between you this should be easy.
The seller may request that their closing date set dependant on their ability to find a new home to buy. As a buyer you must be sensitive to this situation. Remember, they will need to go through the same process that you are in the coming months, so don't be overly eager to put them on the street, they need a place to live as well. In this case, the best thing to do it set a date (30-90 days) to meet again and set a closing date. This may seem like an eternity but it is fair.
As this whole process is going on you should be very vigilant in keeping your broker up to date on any changes that are bring made. She or he will be prorating and calculating any expenses that are inherent in any changes that are being made. It is her job to keep track of these things, and it is best way to avoid any future conflict.
Speed Up The Closing Date
One sure fire way to speed up the closing date even before you have begun your search for a home, is to get re-qualified for a mortgage of a certain amount. There are a lot of factors that can trip you up when you are looking for a loan. This is especially true if you are self-employed. Getting this all done in advance should give you an idea of what your price range for a home is.
Even if your new home costs more, at least you know what to expect and there won't be any surprises. Plus the bank will be familiar with you and the process of revaluating your loan should not take as much time.
If you would like a rough estimate on how long it usually takes to close a home sale, simply ask your mortgage broker. They've been doing their job for a while and know exactly what to expect.
With all of this said, it is also a good idea to get the closing out of the way as soon as possible. Besides the fact that it will get you into the home of your dreams faster, it also makes it easier to deal with contingencies.
It also helps to schedule the meeting with your escrow agent as soon as possible. The best idea is to ask them when they are not very busy. This way it is easier on them, and it will give both parties more time to pick their brain. While the escrow agent may be completely familiar with all of the aspects of the contract, both parties may not be. It works in everyone's favor of everyone involved has a complete understanding of what is going on and how it's being executed. But you must realize that the escrow agent is a third party who is sworn to be neutral. You cannot ask for legal advice or any interpretation of the law. All they can do is explain the procedure to you.
Choosing a closing date at the end of the month may seem like a good idea, but this is rarely the case. Firstly, as was mentioned before, this is the obvious choice for an arbitrary closing date and everybody is probably thinking the same thing.
Also it is much harder to find moving materials at the end of the month as many people pick this time to move, especially when hiring cross country movers. The best option is to do it in the middle of the month on a weekday. You may have to take a day off work, but it is worth it. Anyway, after you sing the papers you'll be too excited to work anyway. Take some time to celebrate.
Finally, when you are trying to calculate just how much the closing costs for your home purchase are going to be use the purchase price of your home as a guide. IN most cases the closing costs will be around 4-5 per cent of the purchase price of your home. This includes, inspections, moving and any legal fees you may incur during the process.