As part of the "Your For Sale By Owner Coach" video series, this "Understanding Contracts and Paperwork" video will give you a solid understanding of the contracts and paperwork you can expect to encounter when selling your home.
Before You Put Your House on the Market
Remember that different states have different regulations covering residential real estate transactions. What you did in one state may not be applicable in another state.
Make three copies of each of these documents:
Survey that shows property boundaries
Receipts for all work done on the house
Warranties for appliances and systems (such as the roof and furnace)
Plans and permits for all additions and upgrades
Certificates of occupancy, which signal the compliance with municipal building codes
Loan documents, including the mortgage, second mortgage, and home equity line of credit
Latest utility bills
Latest property tax bill
Complete a disclosure statement. Required by most states, the disclosure outlines key defects or dangers about the property. This might include, but is not limited to, radon, structural problems, flooding, mold, lead paint, asbestos and other potentially problematic conditions.
It’s only fair that the buyer knows about such problems before making an offer. At the same time, a thorough and truthful disclosure statement protects you from post-sale claims by the buyer that he didn’t know about defects in the house.
The contract between the buyer and seller outlines the terms of the agreement:
The property and its characteristics (type of property: condo, single family home, multi-unit, address, lot size, parking, property identification number, etc.)
The identity of the parties involved (the buyer and seller)
The fixtures/personal property included in the purchase price
The purchase price
The amount of the earnest money and terms of the borrower’s financing
The closing date
The contingencies (attorney review and inspection provisions, may also include a home sale/close contingency)
The prorations for taxes, assessments, utilities, etc.
The particulars of what type of title clearance the Seller is obligated to provide
The particulars of which party bears the responsibility of paying for closing costs
Representations by the seller
Legalese regarding notice, default, etc.
Any miscellaneous provisions the parties agree on
Escrow is a special bank account that holds the buyer’s earnest money while the transaction is in process. This protects the buyer’s financial pledge in case something goes wrong with the deal. What’s a title search?
A title search investigates the chain of ownership of the property. It is intended to validate the current title, so the buyer can be confident that, in fact, the seller owns the property and has the right to sell it. The title search also looks for complications to the title -- such as an easement, or the someone else’s right to cross or access the property. Finally, the title search is intended to flush out liens and claims against the property, such as liens placed by unpaid home improvement contractors. What do you need to know about the closing?
At closing the deal is ….closed. All the outstanding paperwork is tidied up and confirmed. Last-minute bills, such as the prorated property insurance, are calculated and settled. The money changes hands, along with the title. The house changes ownership from the seller to the buyer.
Often a title company handles the closing. Title company agents specialize in gathering the papers and approvals required to successfully close the deal. These documents usually include:
Bill of Sale (i.e., the receipt)
Transfer taxes levied by municipalities and the state
Escrow documents, to free the transfer of the funds held in escrow