Real Estate Investing

Congratulations! You’re a lucky seller who actually has a contract on the house you’re selling.  Now let’s hope these next three weeks go smoothly so you’ll be able to move on with your life.

Week One

The contract on the home went full binding last week (or in escrow).  You’ll spend some time this week out of your house while the buyer has inspections completed.

Home Inspection - You *can* be present for the home inspection, especially if the inspector notes problems. For example, an inspector recently noted on one of my listings that the wiring going from the new HVAC unit to the house was incorrect.  My seller pulled out his inspection report and showed HIS inspector specifically noted that the wiring WAS correct.   Generally, though, most sellers are absent during the inspection.  Special note: I do note in my contracts that the buyer’s agent must be present during the inspection.

Termite Wood Destroying Organisms Inspection - Depending on the stipulations of the contract, either the seller or buyer will order the termite inspection.  Pray there is no evidence of active termites because if termites are found, the seller can pay anywhere from $600 UP depending on the infestation and damage.

Septic Inspection - Many times the county or city can conduct a septic inspection.  Other times a home inspector may complete it.  Again, depending on the contract either you or the buyer will arrange this.

Week Two

You’re about two weeks from closing at this time.  Here’s when you should receive the Repair Inspection Contingency Removal form and negotiate the repairs to be made.  In your contract, you’ll have agreed to pay up to a certain amount in repairs or replacement costs.  This is where the rubber meets the pavement - you put your money where your mouth is.  Sometimes sellers can negotiate to simply give X amount to the buyer at closing - a 50:50 chance the offer will stick.  Buyers may not want to mess with having to ”fix” something once they move in, or they may see the value in just accepting the money as the repairs won’t cost as much as the amount offered.  If there is a major repair to be made, however, there’s little chance the seller will keep from having to make the repair.  If the house needs to be re-plumbed, for example, the buyer can walk away if the seller won’t repair.   That’s why the inspection contingency is there.

Start packing!

Week Three

If you haven’t already been called, the title or closing attorney will be asking you for the contact information for your mortgage holder or other lien holders.  They are getting the payoff information so the proper amount can be collected and checks cut to pay these bills.

If you bought your house less than five years ago, you may be able to get credit for your title insurance.  Find your title and fax it to the closing company.

You may at this time have to challenge your mortgage company - especially if they try to charge you a prepayment penalty when you don’t have one.  Yes, this has happened.  Yes, the seller was correct.  But don’t think you can get out of the interest they’re charging you on the loan because interest is paid in arrears, or at the end of a month.  They may also charge you other little fees that add up.  If you’re getting a new loan, you may be able to sweet-talk your way out of it, “I’ve done business with you for many years and hope to continue to do business with you if you’ll work with me on this…”

Attend the closing with your agent!  Congratulations and happy trails to you.  Move!

Again, there are a gazillion other details that go into a selling a house and this is just a sampling of what could happen.  Every transaction is different.  Every transaction has unique challenges, twists and turns. 

Photo taken from here.

One of my favorite stops online each day is Brip Blap, a site devoted to “personal finance, wealthbuilding and the journey to financial freedom.”  Besides the financial aspect, their articles expand to other thought-provoking ways to improve your life.  Today’s post - again about finance - discusses what would happen if you have less than three weeks to live.

Like the writer, I would have to look beyond meeting my immediate desire to cash in all my assets and just play, explore, and have fun because I also have a family to consider.  As I thought about the whole three weeks concept, though, I wondered what three weeks can do for one related to real estate - sometimes the busiest days in a person’s life!  So today, we look at three weeks before closing through the eyes of a buyer.

Week One

*Buyer wrote a contract for a house last week and is now in full binding, ready to close in three weeks.

This week, the home inspection.  Find a reputable home inspector - your agent can make recommendations, but also check with the local Better Business Bureau to investigate whether there have been complaints against the inspector.  Try to be present at the inspection because you’ll get tips on home maintenance and can see first-hand if there are problems with the house.  You’ll need to pay the inspector at the time of inspection, so be ready to pay from $200 to $500 depending on your location and size of house.

After the inspection, your agent will work with you to write a Repair Inspection Contingency Removal in which you’ll address with the seller any required repairs of replacement problems.  The seller may counter-offer the proposal, based on the amount of money set-aside in the contract for repairs and whether there are major system problems.

Keep in touch with lender providing any necessary financial information (pay check receipts, tax forms, etc.) to get the loan to underwriting.

Week Two

Continue to be in contact with lender to answer any questions, provide information requested.

Home being appraised - appraisal is ordered by the lender.  Once the appraiser goes to the house, it may take 3 to 5 days for the appraisal to be complete.

Follow up with Realtor to see if termite inspection, septic inspection, etc. complete. Be sure you read over contract again to make sure all contractual obligations are being met.  Also follow-up on repairs being made.

Week Three

Clear to close comes to mortgage lender!  At this point, closing instructions via the loan package will be sent to the title company or closing attorney.  From there, they will be able to put together the settlement statement which will be sent to your Realtor.  Go over these numbers with your agent and/or your lender to make sure there are no unexpected costs that weren’t disclosed.  Make sure they are legitimate charges.

Schedule your closing time and location if you haven’t already done this.

If you have to bring money to the closing, make sure that it’s in the form of a cashier’s check because most title companies will not accept personal checks, especially if it’s for a large’ish amount (over $100).

Go on your final walk-thru a day or two before closing to be sure the repairs have been made.  The seller should provide receipts at closing.  At the walk-thru, you’ll look to verify that no major changes have occurred since you first wrote the contract for the home (for example, no holes in walls, no missing light fixtures).

Attend your closing and be prepared to sign your name about 127 times!

Receive the keys to your new house!

These are just highlights of about 1,000 other things that can happen during the three weeks to closing.  Tomorrow - three weeks through the eyes of a seller!

Photo taken from here.

Compared to home prices in May of 2007, the only May flowers seen in 2008 were likely on top of a casket.  Home prices plunged in 20 major cities by 15.8 percent from a year ago, according AP News through Comcast. 

Nine metropolitan cities _ Las Vegas, Miami, Phoenix, Los Angeles, San Diego, San Francisco, Seattle, Wash., Portland, Ore., and Washington, D.C. _ posted record lows in May. And the value of housing in Detroit is now lower than it was in 2000.

But a possible bright spot in an otherwise dismal report, seven metros _ Tampa, Fla., Boston, Detroit, Minneapolis, New York, Dallas and Atlanta _ showed smaller annual declines.

I wonder how this decline is going to affect the Extreme Makeover home that was built for a family in Georgia.  I know the show typically features deserving families, but my thoughts are they might be following in an already established pattern of bad financial decision-making.  After the show left, the homeowners apparently refinanced for the value (perhaps a home equity loan that gave them a boat-load of cash), but they were unable to pay the money back.  Now the home is to be auctioned on the courthouse steps. 

The Atlanta Journal Constitution reports,

The Harpers, who declined interview requests when reporters knocked on their door Friday, told WSB-TV they got the loan for a construction business that failed. Failure seemed an impossibility in February 2005, when ABC-TV viewers got a look at the stunning home constructed in a subdivision three miles east of I-75.

This makes me sad.

Graph from MSNBC (here!).

Harper House photo taken here.