How Long Does It Really Take to Close on a House?

On September 5, 2016   /   Closing  
Tags: , , ,
house clock

By: Margaret Heidenry

You’ve turned on (and hopefully off) at least 20 water faucets and peered into about 50 closets (oh, the things you’ve seen!). And now, at long last, you’ve found the perfect home. So you make an offer, which is accepted. Congrats. Now, exactly how long does it take to close on a house?

Read on to get the gist of your closing timeline, plus what can slow things down—or speed things up.

Average home closing time frame

One recent study found that closing times are getting longer—on average it now takes 50 days. And while that may seem like an eternity to eager buyers or sellers, there’s good reason this doesn’t happen lickety-split. For one, buyers who require mortgages must finish the loan process and property appraisal.

Home buyers should also use this time to complete their due diligence by reviewing the property title and completing a home inspection, says Todd Huettner of Huettner Capitol. This chunk of time also gives both the seller and buyer time to plan their move.

What can slow down a closing?

Even though a property is under contract, the occasional hitch can make closing time go from warp speed to a ultra-slo-mo. Here are the typical hiccups.

  • Funds: Yes, you guessed it. The most common reason for a delayed closing is usually related to buyer financing, says Jerry Koller of California’s International Home. The leading issue: getting a loan approved. Buyers can avoid this time drain by obtaining a mortgage pre-approval letter, something many sellers require along with an offer. And remember, even with a pre-approval, it can take 30 days for the lender to complete its due diligence once an offer is made, so plan accordingly. Cash buyers save a significant amount of time by avoiding the mortgage process.
  • Appraisal disparities: In order for a mortgage to be approved, the bank needs to appraise the home. But if the appraisal comes in low, it will take time to renegotiate the price.
  • No insurance: Failing to secure homeowners insurance until the last minute slows down a closing since it’s often required before you move in, says Paul Moore, a real estate agent and broker in Virginia.
  • Contingencies: “If a buyer needs to sell their existing home and/or a seller needs to buy a new home, this could also delay the expected closing date,” says Colin T. McDonald at Re/Max Capital in Albany, NY.

How to speed up a closing

If you want to ensure your closing reaches the finish line in record time, here are things you can do to help.

  • Resolve title issues: Sellers should resolve any problems—such as a tax lien—regarding the title to the property, says Susan Naftulin, president of Rehab Financial Group. Provide the title company with copies of the satisfactions before the title search to avoid any red flags. If you haven’t satisfied the lien, informing the title company that you want it paid out of closing proceeds will keep the process moving along.

How Long Does It Take to Close on a House?

  • Address repairs: A home inspection usually generates a laundry list of repairs that need to be resolved before closing. While sellers can make the repairs, in general it’s much faster for them to just reduce the price or give the buyers a tax credit so they can make their repairs on their own time.
  • Communicate: Jack Matos, director of escrow operations at Palatine, IL–based Proper Title, says buyers with questions about the closing documents or walk-through concerns need to immediately inform their Realtor® or attorneys. “Any significant changes at this late hour will require new forms and review periods,” he says. All that said, don’t feel pressured to just rush through things without fully understanding them. When in doubt, don’t be afraid to take a breather and discuss whatever’s nagging you until you’re confident you can sign on the dotted line.
Back to Top

Should Sellers Hire a Home Inspector, Too? The Pros and Cons of Pre-inspection

On August 29, 2016   /   Home Inspection  
Tags: , ,
home inspector

By: Lisa Kaplan Gordon

Every home buyer knows hiring a home inspector to check out a property before closing is a good idea. In fact, a home inspection is often a requirement for a mortgage. The trickier question is this: Should home sellers also hire a home inspector to conduct a pre-inspection? That’s where you have an inspector scrutinize your property for problems before it’s even listed.

Is a pre-inspection worthwhile? Let’s take a look at the pros and cons.

Pro: A pre-inspection means fewer surprises

Regardless of who’s doing the hiring, a certified home inspector evaluates about 1,600 items that make up the property’s foundation, structure, electrical, plumbing, and HVAC systems. The purpose is to uncover hidden and potentially expensive problems that could affect the value of the home.

For buyers, the results of a home inspection contingency in a sales contract can empower them to request repairs, reopen price negotiations, or abandon the deal without forfeiting their earnest money.

For sellers, the benefits of a pre-inspection are less clear-cut. At the very least, it offers some peace of mind: Identifying problems, or lack thereof, can soften the suspense of waiting to hear back from the buyer’s home inspector about possibly pricey repairs that might be deemed necessary.

Con: A pre-inspection costs money

Still, only 10% of home inspectors are hired by sellers, says Claude McGavic, executive director of the National Association of Home Inspectors. And one reason for this may be simply money.

On average, a home inspection will cost about $200 to $500. Because pre-inspections aren’t required, that’s cash you could put toward other things such as home improvements or repairs that you know will help sell your home.

Pro: A pre-inspection gives you time to fix problems

However, pre-inspections give sellers the ability to fix problems ahead of time—and present buyers with a clean bill of health on the property.

“If the seller knows what an inspector thinks is wrong with the house, they can fix it before the buyer’s inspector shows up,” says McGavic. This also presents a strong first impression to buyers, who may see your house in a more positive light and boost their offer.

Con: A pre-inspection doesn’t mean you’re in the clear

Just because you hired a home inspector doesn’t mean the buyers won’t hire their own—and their results won’t necessarily be the same.

“If you had 10 different inspectors out to the home, you would very likely get 10 completely different reports,” says Atlanta real estate agent Bill Golden. “Some of the issues that the seller addressed may not have come up at all. All in all, I think it’s a waste of time and money.”

In other words, even if you spring for a pre-inspection and address the issues that come up, the buyer’s inspector might have overlooked those problems—instead identifying new problems that require more repairs. And because buyers will typically trust their inspector more than yours, they may demand that these other issues get fixed, too.

Con: A pre-inspection could obligate you to disclose these problems

Another downside to pre-inspections is that once home sellers are aware of a problem, they may be required by law to disclose them to buyers. These laws vary by state, so ask your listing agent for more specifics. Generally, bad history—flooding, sewage backups—must be disclosed if you know about it. And because this could perhaps scare off buyers or complicate negotiations, it’s no wonder that some sellers may prefer to stay blissfully ignorant.

“Not that you want to hide anything,” Golden says, “but you may be shining a light on things that may not have ever become issues if you hadn’t hired an inspector. It creates mountains out of molehills and prolongs the process.”

That said, McGavic thinks a seller has a “moral if not legal” obligation “to find out if there’s anything wrong with their house.”

In other words, it might be the right thing to do. So, is a pre-inspection right for you? There is no right or wrong answer, so it pretty much boils down to whether you prefer to nip potential problems in the bud, or wait and see if they develop.

Back to Top

7 Things Your Home Inspector Wishes You Knew

On August 12, 2015   /   Home Inspection  
Tags: , , ,
home inspector

By: Jamie Wiebe

No matter whether you’re buying or selling, the home inspection process can be somewhat terrifying: For sellers, it’s a stark reminder of the nagging issues you might have turned a blind eye to over the years. And for buyers, it’s a recipe for pure heartbreak—falling in love with a home that might just end up making no sense to buy.

But don’t let the inspection stress you out. And remember, that’s not what your inspector wants either—all he or she wants is a comprehensive to-do list and a happy client.

So form a team with your home inspector to make the process easier and more effective. Knowledge is key! Here are seven essential things you keep in mind.

For sellers

1. Move your pets

We know your puppy is adorable—but even if your home inspector loves dogs or cats, pets running underfoot makes the job much more difficult.

Inspections often require opening exterior doors again and again, offering pets far too many opportunities to dash to freedom. When you leave the premises for the inspection—and many inspectors ask sellers to do so—take your pets with you. Please.

With animals out of the way, “every time I walk in or out, I don’t have to worry about losing a cat or a dog,” says Alan Singer of Sterling Home Inspections in Armonk, NY.

2. Don’t forget to clean

Whether you plan on being there for the inspection or not, make sure to clean up beforehand. No, you don’t need to scrub—an inspector won’t ding you because your stove’s grimy. But all that clutter? Yeah, that’s all got to go.

“It makes a huge difference when I walk into a house where everything’s put away,” Singer says. “It’s a game changer not just for me, but for the home buyer.”

Often, the inspection is the first time the buyers are (almost) alone in the house for an extended period of time.

“If it doesn’t feel like how it did before—if we’re trying to dig through items—it can sour their experience,” Singer says.

For buyers

1. Your potential home will have problems

Your home inspector will likely come up with a seemingly endless list of problems after the walk-through. Don’t panic!

“I’m on their side, but still, I’m judging the house fairly,” Singer says. “Even my home has problems, issues, maintenance things.”

Yeah, there are times when you should worry (we’ll get to those a bit later). But not every issue is mission-critical, and your inspector will know which problems you should tackle first.

2. Almost anything can be fixed

There are a few starkly frightening home inspection terms that seem to be in everyone’s vocabulary: mold, radon, and asbestos.

And yes, they’re scary—but no scarier than a roof that needs replacing, home inspectors say.

“People who write articles tend to scare homeowners about mold or radon,” Singer says.

So let us—your humble (and rather defensive) writers—take a moment to correct that assumption: Don’t worry so much about mold and radon!

Singer, who started his career in homebuilding, says, “everything is upgradable, fixable, or replaceable. You just need to have a list of what those things are.”

Not convinced yet? Check out this Washington Post article about a couple who got a discount on a four-bedroom Colonial because they weren’t terrified by mold.

3. One thing you should worry about is water

Here’s one problem we give you permission to stress out about (just a little): water. No, it’s not a deal breaker (remember that part where we wrote almost anything can be fixed?). But it’s important to address any water-related issues before the deal closes—or at least immediately afterward.

Make a note of issues such as puddles and leaky ceilings. And give special attention to the basement. Addressing water problems in the basement can be an expensive and difficult proposition, Singer says. “A wet basement can be hard to fix.”

4. Home inspectors can’t predict the future

You might want to know how many more years the roof will hold up—and while your inspector might be able to give you a rough estimate, he can’t give you a precise timeline.

“People think that we as inspectors have a crystal ball,” Singer says. “Or that we have X-ray vision” to see through walls or examine the inner circuitry of your kitchen stove.

Sorry, folks: They don’t, and they can’t.

“We can’t tell you how long it will last,” Singer says. “We can just tell you if it’s in good shape.”

5. Find the balance between your heart and brain

It’s easy to forget your love for the home when you’re counting the dollar signs and hours you might have to spend on repairs. But just remember to take a deep breath, think rationally, and consider whether it’s a smart investment in your future.

Singer empathizes: “The justification can sometimes be a horrible process, because our brains are all about money and time and (asking) ‘What kind of mistake am I making?’”

Barring any major renovations needed—such as a new roof or mold removal—your inspector’s visit will simply provide a to-do list. But not everything needs fixing immediately, so don’t let a long list dampen your love for the home. Just take things one at a time.

 

Back to Top

My Offer Was Accepted—Now What?

On March 15, 2015   /   Home Buying  
Tags: , , , , ,
offer accepted

By: Craig Donofrio

Having your offer accepted feels great—but for most home buyers, it’s just the beginning. There is still a lot more to be done before you’re over the front threshold. Here’s a rundown of what comes next.

1. Apply for a loan

Unless you’re paying in cash, you’ll need to apply for a mortgage loan (if you’re already pre-approved, good for you). If you’re not pre-approved, meet with at least two or three lenders and compare their loan options. Be prepared to ask questions, and be completely open with the lenders about your finances.

2. Home appraisal and inspection

The next step is getting your home appraised and inspected.

Your lender will require your house be appraised by a professional, who is usually provided by the lender. The appraisal gives you a detailed report on the value of the home. If the home’s appraised value is less than the purchase price, you will need to either make a greater down payment or negotiate with the seller to lower the price. A lender won’t give you a loan for more than the appraised value.

A home inspection tells you if the home has any issues. Inspections aren’t always required, but you should absolutely get one even if you’re not getting a loan. Go over the inspection report in detail with the inspector to make sure you’re familiar with any problems, their severity, and the estimated cost to fix them. Additionally, you may also want to get your home checked for radon and pests, which are additional costs.

If the inspector finds problems, you may be able to get the seller to pay for necessary repairs or lower the price to adjust for the cost.

3. Get your funds ready

Make sure the funds you need for closing and in reserves are both accessible. If you need to pull money from an investment, do it right away. Keep the paperwork for the transaction to show your lender you liquidated funds to get your down payment.

4. Find homeowners insurance

In most cases, buyers are expected to pay for homeowners insurance upfront, before closing. Depending on where you live, you might need extra insurance, like flood coverage. Shop around at several different insurance companies for the best rate. Your lender will need proof of insurance before approving your mortgage. 

5. Final walk-through

You will be allowed to do a final walk-through of your new home 48 hours before closing.

This allows you to make sure any items that should be there, as per your contract, remain. It also lets you check the condition of the home to make sure no extra damages have occurred. If you find anything different from what you agreed upon, you may postpone the closing to give the seller time to fix the problem.

It’s important that you catch every issue during the final walk-through. If you spot them after closing, they’re going to be your problem.

6. Closing

This is the day when you sign the mortgage documents and officially gain ownership of the property. Most likely your Realtor® will be there, as well as the seller, the seller’s Realtor, the closing officer, and perhaps the mortgage broker.

You will need to bring ID and a cashier’s check to pay closing costs, which you will know in advance (and if they look different, don’t be afraid to walk away). Your spouse will also need photo ID. (In some states, spouses are required to attend and sign papers even if they aren’t on the mortgage.) Check with your Realtor about the details of your closing.

Updated from an earlier version by Laura Sherman

Back to Top

Buying a Home That Was a Rental

On March 2, 2015   /   Home Buying  
Tags: , ,
purchasing a rental

By: Anne Miller

A home that used to house tenants can be a great deal for a home buyer—they often sell for less than owner-occupied homes. But there are reasons why these homes may command less than top dollar.

There are several things to weigh when considering buying a home that the owner didn’t occupy.

Why sell, why now
The reasons may be fairly innocuous, such as the owner became burned out from managing the property as a rental, dealing with the off-hour phone calls, and responding to tenant demands.

The owner might be moving or perhaps the market has risen, and now seems like the right time to cash in.

Sometimes the issue is cash flow. If a tenant hasn’t paid the rent, the owner may struggle to cover the mortgage. Sometimes the owner cannot afford to make the repairs the house requires.

If the owner has rented out the house for many years, he or she might not have any depreciation left for a tax deduction and could be eager to do a 1031 Exchange for another property. Taking its name from Section 1031 of the Internal Revenue Code, a 1031 allows a taxpayer to sell income, investment, or business property and replace it with a “like-kind” property, without having to pay capital gains taxes.

Why does the reasoning matter? Because it could indicate how well the property was cared for and whether or not the owner is motivated and willing to negotiate.

A cash-strapped owner may be less inclined to maintain the property. And since the owner hasn’t lived there, he or she may not even be aware of any problems.

Wear and tear
Even if the owner has done regular maintenance and made frequent visits to the property, the tenants may not have cared for the property like an owner would. You’ll want to make sure you complete a thorough property inspection. You should request past inspection reports, too.

You’ll likely want to investigate any history of insurance claims. Talk to your insurance agent or discuss a CLUE (Comprehensive Loss Underwriting Exchange) report with your Realtor, for a five-year claim history on the property.

If the house shows signs of extra wear and tear, factor fixes into your budget. Ask the seller for repairs or credit you money toward closing costs. It’s not a deal if you’ll have to spend more on repairs than you’d pay for another, similar home in better shape.

Vet the neighborhood
Drive through the area at various times of day. Speak with the neighbors and learn more about the other houses on the street.

Some factors to consider:

Are there families in the area?
Are there multirental units with student renters?
What’s the average selling price?
Have home prices decreased or increased lately?
These factors may affect the resale value of the property, especially when it comes to the overall curb appeal of a neighborhood, when other rental properties may not be kept up as well as yours.

This also plays to your own peace of mind. If you have young children, a busy street with a large apartment complex may raise safety concerns. If you have to park on the street, this too could make life troublesome sometimes.

Look alone
Make sure you tour the house without the tenants present. If they still live in the house, they may not like the idea of being ousted from their home and could try to sabotage the sale by exaggerating minor issues or making up problems with the house. Or, they may discourage you from opening closets or looking in cabinets.

As a potential buyer, you should be able to ask a Realtor questions, discuss what you see, and make your own observations without pressure from tenants or the owner. This is why homeowners are usually scarce during open houses. Buying a rental home should be no different in this regard.

Based on an original story by Cina Coren

Back to Top