Congratulations – you accepted an offer on your home! Now what?
Before you do anything, take a moment to savor that signed purchase agreement. It typically means all the energy you spent marketing your home has led to the right offer. It’s a major milestone – but it also means you have a new set of tasks ahead of you. If you’re selling your home on your own, use this for-sale-by-owner closing checklist to make sure you’re on the way to a successful sale!
You may have heard that you should hire a real estate attorney when you sell your home. But do you really need one? Legally speaking, it depends on where you live. Some states (and in some cases, certain regions within states) require that an attorney prepare certain legal documents or oversee the closing of a home sale. You might need to do a little digging to find the requirements in your area.
Even if you don’t need to hire an attorney, it still might be a good idea. An attorney will make sure your paperwork is in order and that your rights are protected. Sometimes transactions get complicated – especially when there are questions of title, property distress, judgments or liens – so having an attorney to sort through all the red tape can be a lifesaver.
If you decide to hire an attorney, try to do so immediately after the purchase agreement has been signed. That way, your attorney can review the contract right away and negotiate any repairs or adjustments to the terms.
A home buyer and seller can negotiate who hires a title company and pays associated fees. In most cases, the home seller pays for the owner’s title insurance policy while the buyer pays for the lender’s policy. If you’re the one responsible for ordering title, be sure to have everything sorted out before closing day.
When it comes to escrow, you can typically use your title company as an escrow agent at no extra charge. Your escrow agent will order the title, property tax information, loan balances and other necessary paperwork.
The escrow agent will also serve as a third party who holds money in trust until a property sale closes. Say you received an earnest money deposit from the home buyer or have contracts that need safe keeping. Deposit these with your escrow agent, who will ensure smooth transfer of all money and documents after closing.
Two of the biggest steps to closing on a house are the appraisal and the inspection.
An appraisal is an estimate of the fair market value of home, typically ordered by a buyer’s lender during the mortgage loan process. This means a licensed professional will evaluate your home’s value based on things like age, condition, upgrades, location and the surrounding housing market. The purpose is to let a lender know the proper loan amount to provide. If an appraisal comes in below the sale price, a buyer and seller may be forced to renegotiate to cover the difference.
Similar to an appraisal, a home inspection is ordered by the home buyer to evaluate the structure and systems of a home, from the roof to the foundation. It covers things like the home’s heating system, air conditioning, plumbing, electrical systems, windows, doors, ceilings and floors. The main purpose is to find out if any major repairs are needed, in which case you may need to cover the cost.
So, how do you prepare for these home evaluations? Ensure that there’s easy access to all areas of your home and take care of the little things that could raise bigger questions. Replace burnt light bulbs, which could point to electrical problems. Eliminate slow drains with any of your sinks to remove doubts about the plumbing. Change your furnace air filters and be sure your smoke and carbon monoxide alarms are working. Basically, get your home in the best shape possible to pave the way for a smooth appraisal and inspection.
If there’s an inspection contingency in your purchase agreement, that means the buyer can negotiate repairs based on the findings of their home inspector or cancel the contract.
The purpose of a home inspection is to identify major defects that would require a major investment of time or money – not to come up with a list of minor repairs for you take care of so the home is in flawless condition. Keep that in mind when the home buyer comes to you with their list of issues.
You’ll most likely need to do some haggling. Resist agreeing to fix all cosmetic issues like cracked tiles or loose doorknobs, as these are minor inconveniences that a buyer could have easily seen when touring the home. Major defects you should address include mold, electrical issues, lead paint or leaking roofs – the types of issues that will require major investments of time or money.
No matter the extent of the repairs you agree to address, it’s wise to provide inspection credits as opposed to taking care of the repairs yourself. The buyer will likely be far more critical about the work done than you will be. Providing cash value for repairs upfront will likely spare you and the buyer from tension down the road.
You’ve already filled out one of the most important forms to sell your home – the purchase agreement. As you move through the closing process, you’ll also need to produce additional paperwork to reach the finish line. Here are some of the most common documents you’ll need.
Title. This proves that you are entitled to transfer ownership of the home. You’ll also need to have the deed if you own the home outright.
Property taxes. Have your most recent tax statement ready, which will give the buyer an idea of what they’ll need to pay after purchasing your home.
Loan documents. Gather paperwork on your first mortgage – and second mortgage or home equity lines of credit if applicable.
Property survey. This is usually ordered by the buyer. It shows the boundaries of your property and where fences, driveways and other structures are located. You probably received this when you bought your home. If not, try checking with your lender or title company who may have a copy. If all else fails, you might need to contact a local engineering firm to produce a new one.
Plans and permits. If you’ve done any work on your home like additions or upgrades, you’ll probably need to show documentation that proves everything was above board.
Homeowner’s insurance information. Make sure you have the documents that detail your current policy for the home – and be sure not to cancel your policy until after closing.
For more on the documentation you’ll need to sell your home, check out our blog on The Paperwork Every FSBO Home Seller Needs to Organize.
You’ve gathered the documents you need, and now you should receive one more. After the terms of your purchase agreement have been met and all the loan paperwork is ready, your escrow agent will fill out and deliver a HUD-1 settlement statement. This form details all transfers of money. It’s important for you and your buyer to review this statement before your closing day when you’ll sign all the final documents.
On the day of your for-sale-by-owner closing, gather up all your paperwork and make sure you have a photo ID and your checkbook on you. When you meet with the buyer (and their real estate agent, if they have one), you’ll sign all the paperwork required to transfer ownership of your home.
You’ll typically need to make a few payments, such as your mortgage balance, the buyer’s agent commission (if applicable), escrow or attorney fees, title fees and any pending property taxes or bills. If you’re making a profit after all expenses are paid off, you should receive a check for the balance. If not, you should have a cashier’s check ready to square your end of the bargain.
After you get through the closing, you’re almost home free.
You might feel like you’ve been tying up loose ends for a month by now, but chances are there a few more to go. Here are some common to-dos to get through before you exit your home for the final time.
• Start packing and hire a moving company if you need one
• Submit a change of address form to the post office
• Contact your mortgage company and make final payoff arrangements
• Call your homeowner’s insurance agent, as you may receive a refund for any prepaid premiums
• Close accounts for things like utilities and newspaper subscriptions
• Gather the house keys, gate keys, remotes, etc. in a kitchen drawer
• Stack up appliance manuals, receipts, warranties, security alarm codes, etc. on the counter
• Close all the curtains and blinds, turn off all the lights and lock all the doors on your way out
Once you lock up and head out, your home closing checklist should be complete. And that means you’re ready to start the next chapter of your life – free and clear!
Selling your home on your own is no easy feat. It’s an accomplishment worth celebrating, and chances are you saved yourself some money in the process. Plus, with all this experience under your belt, selling your next home should go even smoother!
If you need any help buying from someone who’s selling on their own, we’ve got you covered there too. Check out our blog on How to Buy a Home Directly from the Owner.
