BUYER'S CHECKLIST - SELLER'S CHECKLIST
YOUR LOAN APPLICATION PROPER IDENTIFICATION
GOOD FUNDS REQUIREMENT HOMEOWNER'S INSURANCE
SELLER CREDITS WHAT ARE YOU BUYING
HOME INSPECTIONS BETTERMENTS
FINAL WALK THROUGH CLOSING THE DEAL
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BUYER'S CHECKLIST
1.) YOUR LOAN APPLICATION: Maintain contact with your lender or loan officer. Be prepared to respond to their requests for documents quickly. The following Items should all be readily available:
- driver's licenses;
- most recent 2 months of bank statements;
- most recent 2 years W-2's;
- most recent 2 years tax returns;
- most recent quarterly statements for all retirement or investment accounts;
- paystubs covering the most recent 30 days and showing year to date gross income;
- mortgage statements, property tax and insurance bills for any other properties you own;
- gift letters with account statements showing the gift money leaving the account of the person
who is giving you the gift and arriving in your account;
- be prepared to obtain a copy of the terms and conditions associated with any employer
retirement plans such as IRA's or 401(k) plans since the lender may want to confirm how and
when you can have access to these funds.
Be thorough with your responses. Just the front page of your checking account statement will not be enough. Every page - both front and back - of your account statements will need to be copied or scanned. Incomplete documents will be rejected by the underwriter and your file will fall back to the bottom of the pile costing you the valuable time you need to meet your mortgage contingency and perhaps your rate lock commitment. You may not need all of these documents and in some cases you may need more. But having at least those mentioned above ready beforehand will put you one step ahead of most borrowers.
2.) PROPER IDENTIFICATION: Be sure to bring proper identification to the closing. Two forms of identification are required and at least one must have your picture on it.
3.) GOOD FUNDS REQUIREMENT: At the closing the Buyer will usually have to come up with a sum of money in order to complete the purchase. This sum is approximately the difference between the loan amount + deposit and the purchase price + closing costs. The closing attorney will calculate the exact amount for you. It is important to remember that the Good Funds Law in Massachusetts is now strictly enforced. This means that the closing attorney must have funds that are actually available in the attorney's conveyancing account before the attorney can record the deed and mortgage. Since the closing attorney cannot give checks to anyone until the deed and mortgage are recorded it is very important that the Buyer make arrangements to have the necessary funds wired into the conveyancing account of the closing attorney so that funds are available and in the attorney's account on the day of the closing.
The closing attorney's office will contact the you with wire instructions and the amount of the wire necessary to be deposited into their account usually no later than 24 hours prior to the closing. If you are using money from several accounts it is imperative that you contact your depository institutions to be sure you will be able to do this in time for the closing.
NOTE: Other arrangements can be made, such as electronic transfer or Certified/Bank checks. However, even Certified/Bank Checks may not become available funds until the next business day following the deposit of those checks. Contact the closing attorney for the lender and discuss how you will make arrangements for any necessary deposits.
4.) HOMEOWNER'S INSURANCE: *Obtain your homeowner's insurance policy with full replacement cost coverage and one full year's premium paid in full. Be sure the policy names the lender you are using to obtain your mortgage. This is called the "mortgagee clause". Have your insurance agent contact us and we will give them the necessary information for this clause.
FLOOD INSURANCE NOTE: If you are paying cash for the property then Flood Insurance is optional. If you are financing the purchase then your lender will require that you obtain Flood Insurance if the property is in certain Flood Zones. If Flood Insurance is required, you must also provide a paid receipt and binder for the Flood Insurance.
*CONDOMINIUM PURCHASES: If you are buying a condominium, the homeowner's insurance for your unit should already be in place and paid for as part of your monthly condominium fees. However, you will still need to get a Certificate of Insurance from the management company for the condominium association. Again, the Certificate must name the lender you are using to obtain your mortgage. This is called the "mortgagee clause". Have the condominium management company or insurance agent contact us and we will give them the necessary information for this clause.
If you are not paying cash for your unit, the lender will require that you get an additional insurance policy for the interior contents of your unit with coverage equal to at least 20% of the appraised value of the unit. This is called an HO-6 policy and you will have to get this yourself from your own insurance agent. Though not required, it is also a good idea to get coverage for your personal property as part of your HO-6 policy.
Note: The lender will waive the HO-6 policy requirement if your condominium master policy carries the required coverage. Have the condominium management company or insurance agent contact us and we will work with them to determine if you can get your HO-6 policy waived. Again, even if the HO-6 is waived it is still a good idea to get coverage for your personal property.
5.) SELLER CREDITS: If you are receiving a credit for closing costs from the Seller(s), be sure to confirm with your loan officer that the lender will allow the full extent of the credit at the closing. Closing cost credits can be restricted based on the down payment or particular loan program chosen by the Buyer(s). If the credit is more than enough to pay for closing costs, you also want to confirm that the lender will allow the surplus credit to be applied to prepaid interest and escrows for property taxes and insurance. MortgageSafe will assist you with all of your Seller Credit questions.
6.) WHAT ARE YOU BUYING: Be clear about what you expect to be included as part of the sale. If there are any items that are included such as the washer, dryer and refrigerator, consult with an attorney to be sure those items are listed as such in the Purchase and Sale Agreement.
7.) HOME INSPECTIONS: Before you sign the Purchase and Sale Agreement you should have an inspection done by a licensed home inspector. Because this is your last chance to discover any major defects or understand what repairs may be coming in the near future, it is one of the most important elements of the transaction. Be sure to do your research and find a good home inspector. You should attend the home inspection personally so that you will have a better understanding of any issues that the home inspector finds. This will also help both you and the Seller(s) reach a specific agreement as to how to resolve any issue(s) that may be found.
8.) BETTERMENTS: *Betterments or Assessments are liens placed on real estate for improvements benefiting the real estate such as road or sidewalk widening/paving, or water/sewer line repairs or hookups. Find out if there are any betterments or assessments on the property currently due or that will become due in the future. Some assessments or betterments are paid over a period of time by including the payment as part of the property tax bills. Some are due and payable in one lump sum. Either way, you must know if you will be assuming responsibility for the bill or whether the Seller will be paying this off at closing.
NOTE: Because betterment assessments are liens on the property filed at the registry of deeds by the town or city it is important to inform the closing attorney as soon as possible that a betterment lien exists rather than waiting for the attorney to discover it on their own as part of their title search. This will allow the attorney, title insurer and lender to gather the necessary assurances that will be required in order to clear the title from the betterment lien in time for the closing.
*CONDOMINIUM PURCHASES: This also applies to condominiums. However, assessments for improvements are usually issued by the condominium association and can be paid as part of your monthly condominium fees or they may be due in one lump sum. Review the condominium budget carefully and inquire about any existing or pending assessments on your unit.
9.) FINAL WALK THROUGH: Before the closing, you and your realtor will conduct a final 'walk through' the property to be sure the house is in 'broom clean' condition and to be sure that any necessary repairs have been done properly. You will also want to check that any items to be included as part of the sale remain on the property. If you have been mindful about items 4 - 8 there should be no surprises waiting for you at the house or at the closing.
10.) WHEW!: Now, relax and get ready to sign your name a few times and .. CONGRATULATIONS!
You have purchased your home at a time of historically low interest rates, and strict underwriting guidelines. It is an unusual combination of timing and diligence that should serve you well in the years to come.
PROPER IDENTIFICATION GOOD FUNDS REQUIREMENT
LEAD PAINT TITLE V INSPECTIONS
TITLE DEFECTS STRUCTURAL DEFECTS
WHAT ARE YOU SELLING DEEDS
HOME EQUITY LINES OF CREDIT HEATING OIL
BETTERMENTS CONDOMINIUM SALES
BROOM CLEAN CONDITION NEW CONSTRUCTION
PRIVATE MORTGAGES HOMEOWNER'S ASSOCIATIONS
RIGHTS OF FIRST REFUSAL WETLANDS/CONSERVATION
In the process of selling your home appraisers, surveyors, home inspectors and Title V inspection companies will need access to your property. Carbon Monoxide, Radon and Smoke Inspections will need to be done. Contract timelines will have to be followed. Final water, sewer, electric, oil, and utility readings will have to be scheduled. Add to this list the possibility of repairs that must be completed and you can easily see that selling your home can be an all consuming process. However, your realtor will be an essential partner in this regard by becoming the 'go to' person on your behalf for many of these items.
The checklist below summarizes some of the other issues germane to all transactions that are often overlooked by Sellers before they get to the closing table. Please note that transactions involving real estate located on 'registered land' or transactions involving estates, divorce, property held in trusts, foreclosures, REO property and short sales all have their own laundry list of issues. As such, this is is not an exhaustive list and you should consult with your attorney with regard to all of the following items. But we hope the checklist will serve as a reminder and help you avoid some of the more common missteps.
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1.) PROPER IDENTIFICATION: Be sure to bring proper identification to the closing. Two forms of identification are required and at least one must have your picture on it.
2.) GOOD FUNDS REQUIRED: The Good Funds Law in Massachusetts is strictly enforced. It requires funds to be actually available in the attorney's conveyancing account before the attorney can record the deed and mortgage. Buyers and their lenders are therefore required to wire or transfer funds in time for the closing. For Sellers, the impact of the Good Funds Law is that the closing attorney cannot give checks to anyone until the deed and mortgage are recorded. When the closing takes place at the Registry of Deeds there is usually little impact on the Seller(s) since checks can be handed to the Seller(s) right after the documents are recorded. However, it is not unusual for banks and lenders to require multiple document faxes or e-mails from the closing table before they will authorize release of the funds to the Buyer(s). Therefore, it is often advisable and more convenient for all parties to meet at the closing attorney's office to conduct the closing. Once the closing is completed a courier will immediately be sent from the closing attorney's office to the Registry of Deeds to present the documents for recording. Once the documents are recorded all checks can be disbursed.
Note: In transactions where the Seller is not receiving any proceeds from the sale and will instead need to provide a sum of money in order to complete the transaction then the impact of the Good Funds Law is similar to that of a Buyer. Read item No. 3 in the Buyer Checklist for more information on how to proceed.
3.) LEAD PAINT NOTICES: Make sure these are delivered to the Buyer(s) and signed as soon as possible so that the Buyer(s) can exercise their inspection period in time for the closing. Your realtor will usually take care of this for you but you want to confirm this has been done well before the closing.
4.) TITLE V INSPECTIONS: If your property uses a septic system you will have to have a Title V inspection done within 2 years of the property transfer. Some towns require that the inspection be done within 1 year of the property transfer. Check with your Town Board of Health to be sure you are within their required time frame for Title V inspections.
The Title V inspection report must show that the system passes and is sufficient to serve the number of bedrooms in your home - or represented to the Buyer as being in your home. The Title V inspection report must also be submitted to the Board of Health in your town.
5.) DEFECTS IN THE TITLE TO YOUR PROPERTY: The attorney for the lender providing mortgage financing to your Buyer(s) (i.e. the "closing attorney") is required to research the title to your property by examining county and probate records for at least the last 50 years and by also examining a mortgage plot plan survey that is paid for by the Buyer(s). This research may uncover defects that could challenge the ownership to all or a part of your property. If this happens the closing attorney will notify you or your attorney and you will have to determine whether you can resolve the defect(s) in a manner that will satisfy the lender, the title insurance company and the Buyers. If you are fortunate enough to have purchased Owner's Title Insurance then you or your attorney can contact the Title Insurance Company and have them resolve any defects that are covered under the policy. Even if the defect cannot be resolved in time for the closing, the Insurance Company that provided the Owner's Title Policy to you will often step in and agree to indemnify the Buyers against any harm caused by the defect. Depending upon the nature of the defect this may allow you to sell your home in time to meet the contract date and leave the defect in the hands of the Title Insurance Company to resolve.
NOTE: Whether or not you have Owner's Title Insurance you should respond to the closing attorney's notice of title defects as soon as possible. No attorney wants to find title defects in your property, but if they do they are bound to make sure the defect is resolved by the Seller so that the lender and the buyers do not inherit the defect as part of the sale. Remember, everyone involved is trying to help you sell your house. Although the title defect is your responsibility, real estate attorneys are usually respectful of what you are going through and therefore eager to help. Work with them and you can be sure they will work with you and your attorney to help resolve whatever issue has been uncovered.
6.) STRUCTURAL DEFECTS IN YOUR PROPERTY: In addition to the home inspection performed on behalf of the Buyer, the lender will also send an appraiser to your house to determine the fair market value of your property. The appraiser will look to sales of comparable properties in proximity to your neighborhood to make this determination. In addition to assessing fair market value the appraiser may also be required to determine if there are certain structural defects present in your home. If these defects are found to be present then the closing will be delayed until the defects are remedied.
7.) WHAT ARE YOU SELLING: Be clear about what you expect to be included as part of the sale. If there are any items that are not included such as custom bookshelves, window shades, draperies, lighting, washer, dryer or refrigerators make sure those items are listed as such in the Purchase and Sale Agreement. This also applies to landscaping and trees. (i.e. 'Birthday trees' cannot be removed from the property unless all parties have agreed to it.)
8.) DEEDS: Deeds are the crucial centerpiece at the closing table. Therefore, deeds from the Sellers to the Buyers must be approved by the closing attorney prior to scheduling the closing. Remember, the Deed conveying the property from the Sellers to the Buyers must be signed by all Sellers personally in front of a Notary Public. Deeds signed under a Power of Attorney are not allowed without prior review and authorization by the closing attorney and the title insurance company insuring title for the lender. Deeds coming from a corporation, partnership or trust must be signed by the person specifically authorized to execute deeds conveying real estate.
NOTE: If you are a trust, partnership, corporation or are contemplating signing a deed under a Power of Attorney you should contact the closing attorney and discuss how the deed should be drafted and executed. If you are represented by an attorney, have your attorney contact the closing attorney to go over these issues. The sooner this is done the better so that you can be sure all parties that may be necessary to sign the deed are available.
9.) HOME EQUITY LINES OF CREDIT: In addition to providing lender's attorney with the necessary authorization and information to obtain written payoff statements for all mortgages and liens on the property, you will also need to close and freeze all Home Equity Lines of Credit you may have on the subject property. This will have to be done in writing by you with your bank/lender well in advance of the closing so that the closing attorney can obtain accurate payoff statements from your lender(s).
10.) HEATING OIL: If your home is heated with oil you will be given a credit at the closing for the amount of oil in your tank. This credit will be based on the price/gallon paid by you on the last delivery of oil. Present a copy of the last oil bill to your realtor and determine how much oil is left in the tank on the day of closing so that the proper credit can be calculated for you.
11.) BETTERMENTS: *Betterments or Assessments are liens placed on real estate for improvements benefiting the real estate such as road or sidewalk widening/paving, or water/sewer line repairs or hookups. If you currently have a betterment assessment on your property or a betterment that you know is going to be assessed in the future, you need to discuss this with your attorney and realtor before you enter into a contract or you may find yourself bound to a bargain you did not contemplate. This is easily avoided by open communication and negotiation among the parties prior to signing the contract. Some assessments or betterments are paid over a period of time by including the payment as part of the property tax bills. Some are due and payable in one lump sum. Either way, you must know in advance if the Buyer(s) will be assuming responsibility for the bill or whether you will be paying this off at closing.
NOTE: Because betterment assessments are liens on the property filed at the registry of deeds by the town or city it is important to inform the closing attorney as soon as possible that a betterment lien exists rather than waiting for the attorney to discover it on their own as part of their title search. This will allow the attorney, title insurer and lender to gather the necessary assurances that will be required in order to clear the title from the betterment lien in time for the closing.
*CONDOMINIUM SALES: This also applies to condominiums. However, assessments for improvements are usually done by the association and can be paid as part of the monthly condo fees or they may be due in one lump sum.
12.) *CONDOMINIUM SALES ONLY: If you are selling a condominium you will need to provide a "6(d) certificate" stating that there are no unpaid condominium fees, dues or assessments on the unit. The 6(d) certificate must be delivered to the bank attorney prior to the closing and it must be signed by all person(s) whose names appear in the Registry of Deeds as having authority to sign the certificate. There is no way to correct this at the closing. Work with your attorney to be sure that the certificate is executed properly well in advance of the scheduled closing.
NOTE: If there are unpaid condominium fees, dues or assessments on the unit then the 6(d) certificate must show the amount due with a payoff date good through three (3) business days following the closing. The certificate must also state that upon receipt of the amount due a new 6(d) certificate will be delivered to the bank attorney showing there are no unpaid condominium fees, dues or assessments on the unit.
13.) BROOM CLEAN CONDITION: The Purchase and Sale Agreement will require that the property be delivered to the Buyer(s) in broom clean condition. Moving day can be quite hectic and despite your best intentions the property may not meet this standard when you leave it. This is a common and sometimes expensive source of conflict at the closing table. Work with your realtor to proactively manage this task and avoid any last minute problems.
14.) NEW CONSTRUCTION: For newly built homes a fully executed and final Certificate of Use and Occupancy signed by all of the requisite municipal inspection departments must be delivered to the Lender's or Buyer's attorney prior to the closing. Some lenders now require that this be delivered 3 business days (or more) prior to scheduling the closing.
15.) PRIVATE MORTGAGES: If a mortgage on your property is held by a person or entity that is not an institutional lender you will be required to provide both a signed payoff statement and fully executed and notarized discharge of that mortgage prior to the closing. The discharge will need to be notarized or witnessed by your attorney or the person or entity will need to meet with the bank attorney in person to execute the discharge.
16.) HOMEOWNERS ASSOCIATIONS: If you are part of a Homeowner's Association and pay dues to that association then you will be required to deliver a signed "Certificate of No Assessments Due". Many times these associations are informal and the officers authorized to sign these Certificates may be on vacation or live in another state during the winter months. You should therefore contact your association and request this certificate well in advance of the closing.
17.) RIGHTS OF FIRST REFUSAL: Some properties have restrictions which include a right of first refusal given to a person or homeowner's association. They are often overlooked as they are usually waived by the holder(s) of the right. But not always. Again, the person(s) or entities who hold the right of first refusal may be on vacation or live in another state during the winter months. If your property is encumbered with a Right of First Refusal you will want to begin working with your attorney immediately to make sure the terms of the Right of First Refusal are followed so that you can get it released in time for the closing.
18.) CONSERVATION COMMISSIONS-WETLANDS PROTECTION ACT: If your home was built near a water body or wetland (a/k/a a 'resource area') you or a previous owner may have received an Order of Conditions on your property from your local Conservation Commission. Many times these conditions have been complied with but no one has bothered to contact the Conservation Commission to inspect the property and then issue a Certificate of Compliance. This Certificate of Compliance must be recorded at the Registry of Deeds. If it has not been recorded, you or your attorney will get a call from the closing attorney not too long before the scheduled closing requesting that the Certificate of Compliance be produced.
You will have to contact the Conservation Commission to set up an inspection and then hopefully have them issue the Certificate of Compliance in time for the closing. However, in the unlikely event that you could get an inspection done immediately, your local Conservation Commission may not meet again for another month or more. Therefore, if your home is located on or near a resource area you should begin working with your attorney immediately to determine if you will need a Certificate of Compliance for your property.
