This month we will focus on what to expect if you are selling your home.
If you are using a real estate broker, you will likely be asked to sign a listing agreement giving the broker the exclusive right to list and sell your home for a specified period of time. It is probably best not to exceed three months. Once a purchaser is found, the next document you will have to sign is an offer form. This form sets forth the basic terms of the sale including price, deposit to be made, financing contingency and date of closing, among other things. It is important you are comfortable with the terms set out in the offer as they will be the same terms as in the more comprehensive purchase and sale agreement to be subsequently signed. In the past, these documents have been prepared by the real estate broker and reviewed by attorneys for the respective parties. However, it is becoming more frequent that brokers do not want to prepare the purchase and sale agreement and that job is left to the attorneys.
When the agreement is signed, there is relatively little for the seller to do. It is the seller’s responsibility to prepare a deed transferring legal title of the property to the buyer. If the property is held in a trust, there will be one or two additional documents that will be needed. These are all generally done by seller’s attorney. The seller must also obtain a smoke and carbon monoxide certificate from the local fire department and, as the closing date nears, obtain, and pay, if possible, a final water and sewer bill from the town or city. It is good to be able to have receipted bills at the closing or just prior to it. If the property is heated by oil, the seller should also have their oil company take a reading of the amount of oil in the tank and provide a statement of its value. This is so seller can receive a credit at closing. If a real estate broker is involved, he or she will generally obtain these things but seller should verify that it will be done. If the property is a condominium, the seller will also have to provide a 6d certificate which is a statement from the governing body of the condominium indicating that all condo fees have been paid.
If the buyer is obtaining financing to assist in the purchase, the purchase and sale agreement will contain a mortgage contingency clause. This clause will establish the date by which the buyer must have a written commitment from a financial institution committing to provide financing for the purchase. When that date arrives, one of three things will happen. If seller hears nothing it is usually an indication that a written commitment has been obtained and the transaction will proceed as planned. Buyer may contact seller indicating that a verbal commitment has been made but it will take a few days for the lender to generate a written commitment and buyer would like an extension of the mortgage contingency date. Seller’s options at this point are to grant an extension or refuse. If the latter, buyer can withdraw from the agreement on the basis that financing cannot be secured and all deposits paid will have to be returned and a new buyer found. Finally, the buyer can notify seller that they have been unable to secure financing and have to back out of the deal. Providing buyer has documentary evidence of being denied financing, the deal is terminated and all deposits refunded.
Assuming all goes smoothly and financing is secured, the lender’s attorney will conduct a title examination of the property, to be sure there are no encumbrances on the title, obtain a municipal lien certificate from the city or town to confirm that all real estate taxes and betterment assessments have been paid, and have a plot plan done to confirm that the property is in compliance with zoning restrictions and that it is not in a flood zone. If problems surface as result of this research, it is the seller’s responsibility to clear up any problems found. Usually there are no problems that cannot be easily resolved. As the closing date approaches, the closing attorney will produce a settlement statement reflecting the credits and charges relating to the sale. This should be obtained and reviewed at least a day before the closing.
Once everyone is comfortable with the settlement statement, the closing attorney will schedule and conduct a closing. Distribution of proceeds will be delayed until the new deed is actually recorded at the registry of deeds. This usually happens the same day but can be deferred to the following day if the closing is held late in the day. Although sellers usually attend closings, it is not necessary they do so. If you do not want to attend, or cannot attend, you can sign the deed in advance along with a limited power of attorney giving someone (most often your attorney) the power to sign other documents for you at the closing.
Proceeds from the sale will either come in the form of a client’s account check from lender’s attorney or, if you prefer, they can be wired to your account by the lender’s attorney. There are some attorneys who do not wire funds, however, so this should be addressed well before the closing.
As far as costs are concerned, the greatest expense a seller will have is the real estate broker’s commission, this is usually 5% of the selling price. The second highest expense for the seller is the transfer tax. This is based on the value of the property transferred, at $4.56 per $1,000.00 in value transferred. A house selling for $550,000.00 will incur a tax of $2,508.00. There may be other costs such a recording fees for a mortgage discharge, but these should be minor.