As Published in the Savannah Morning News - 9 December 2012
WHAT'S THE BOTTOM LINE?
Once you have negotiated your way through the initial Purchase and Sale Agreement, the requested repairs and any additional negotiations, the most common question I hear is, “How much money will I get at closing?”
From the point of receiving the offer and throughout the transaction, you can determine your net proceeds. Your Realtor® should be adept at estimating your net, and we can prepare a Georgia Association of Realtors form called Estimate of Net to Seller.
There are 3 categories to consider:
· Loan Pay-off Expenses
· Costs of Sale
The above information will be reflected on the U.S. Housing and Urban Development Settlement Statement, which you will receive from the closing attorney before closing. Your Realtor® will also receive a copy and will check it over to make sure that it is correct to the best of their knowledge. Any corrections should be made before closing, so it will be smooth sailing at the closing table.
Loan Pay-off Expenses: If your house is not free and clear of mortgages, they must be paid off at closing. These expenses may include first and second mortgages, lines of credit, reverse mortgages, etc. You may have a pre-payment penalty if you are paying off a loan before it is retired, accrued interest, and any late fees. Your lender(s) will determine what is owed for the payoff, and this information will be submitted to the closing attorney to be included on your Settlement Statement.
Costs of Sale: When you negotiate your offer, you may agree to pay for closing costs. If so, this amount will be reflected on the Settlement Statement along with unpaid property taxes and home owner or condo association dues, all of which are prorated to the date of closing. Real estate commissions, special assessments, document preparation fees, unpaid costs for home inspection repairs, termite or home warranty renewals, and any other expenses may also apply.
Costs of Sale may be negotiated in the Purchase and Sale Agreement, and sometimes costs that are customary for a seller or buyer to pay may be paid by the other party. However, beware that some loans require sellers to contribute to buyer closing costs, and your Realtor® will explain this to you at the time you are presented with an offer.
Credits: You’ll like this section! It is all about credits given to you for pre-paid items, such as taxes, home owner/condo association dues, termite warranty, quarterly garbage pick-up, etc.
The most accurate way to get to the bottom line is to ask the closing attorney for a preliminary Settlement Statement, where each item is listed in black and white, and the seller net proceeds are shown on the bottom line.
In Chatham County, it is customary for the buyer to choose the closing attorney. This too can be negotiated if you have an attorney you wish to handle the closing, and then stipulated on the Purchase and Sale Agreement. Know that sellers are not “represented” by a buyer’s closing attorney, but the buyer’s attorney must give you the straight facts and has an obligation to correctly list all costs for both the buyer(s) and seller(s). Sellers always have the option to hire their own attorney, but for simple closings, it is more common than not to have the buyer’s attorney handle the entire closing. As a Realtor®, I know that if things get dicey and red flags pop up, I always recommend that a seller engage an attorney to represent them in the transaction.
Next week, we will discuss what to expect at closing. Stay tuned!