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Find out how the important differences between pre-qualification and pre-approval can save your deal.
All cash offers and assumable mortgages are rare in our marketplace so buyers who arrange for mortgage financing will be the norm. Look for buyers who are pre-approved (not just pre-qualified). This one precaution can eliminate the extension of a Closing Date because the "mortgage paperwork isn't ready."
Pre-qualfiication is based on a simple calculating process performed by a lender or real estate agent to provide an affordability guideline for buyers. Since there is no verification, the lender is not bound to make a loan.
Pre-approval, on the other hand, is based on independent verification of the information. The lender has fully documented the buyers' ability to borrow, checked their credit rating and set a maximum based on income, credit and down payment. Serious buyers take the effort to get pre-approved.
Don't assume that because buyers are accompanied by a real estate agent that they are pre-approved. Some real estate agents are reluctant to discuss finances with buyers early in the relationship. An exception to this is Buyer Agents who, because of their agency relationship with buyers, generally provide assistance to buyers in obtaining a free pre-approval from a mortgage lender and top-notch real estate agents who know the importance of having buyers pre-approved in the fast paced marketplace.
It is not unreasonable to ask for proof of qualifications in the form of a pre-approval letter when a buyer shows serious interest in your home. Take advantage of the technology in place today and the lenders' eagerness to serve the buyers well and sell more mortgages.
Home Sellers remember the hour or two they spent going through a stack of forms, doing the final calculations, and listening to the legalese discussed at the Closing table when they bought their home. Now it's their turn to make sure all the paperwork gets done for the sale of their home!
Your first priority to planning for the Closing is to hire an attorney skilled in real estate practice. You will need an advocate to represent your interests in the event of any unforeseen circumstances. If everything goes smoothly, you may wonder if you really needed an attorney but the potential for problems is great with today's complex real estate transactions.
Some of the tasks you may need help with include writing/reviewing the Purchase & Sale Agreement or leases and options, holding earnest money in escrow, qualifying buyers or getting a copy of the lender's pre approval letter, dealing with environmental issues like radon and lead paint, requesting a municipal lien certificate and Smoke Detectors certificate, conducting a title search and remedying any defects in the title, handling any legal matter that could prevent your closing, managing the closing, recording the deed and mortgage at the Registry of Deeds and representing you in any actions you may have to take against a buyer.
Most real estate experts and consumer advocates feel that you should use an attorney. Ask family, friends, coworkers, and real estate professionals for their recommendations of attorneys and don't be shy about discussing fees when you interview the attorneys. Make sure you understand how much it will cost for their services and what services they will perform for you.
Monitoring dates as you `countdown to the close' is very important. Get out your calendar and jot down each deadline date for the home inspection, attorney approval, and mortgage financing contingencies specified by the buyers. If you didn't set aside the time to gather the property records and create a large file for them before you put your home up for sale, don't waste a minute. You will need:
DEED - If you do not have a copy in your safe, safety deposit box or other safe location, take a trip to the Registry of Deeds and get a copy. The legal description will be helpful when the attorney prepares the new deed for the transfer of ownership.
TITLE INSURANCE POLICY & CERTIFICATE OF TITLE - This coverage was issued to you by the title company after completion of the title search done for you when you bought your house. The buyer's attorney will arrange for the new title search to make sure you actually own the property and may properly sell it, check to see if there are any judgments, liens or attachments that need to be taken care of to `clear' the title. After checking on unpaid taxes and assessments (e.g., sidewalks or sewer), the attorney provides a certificate of title to the lender and the buyer.
HOMEOWNER'S INSURANCE POLICY - Although the new owner will have to get a `binder' for new coverage on the home, you will want to make sure you cancel the coverage after the Closing. You will expected to keep the property insured against loss or damage prior to the Closing to protect the new buyer's interests.
MORTGAGE - If you cannot locate your copy of the mortgage contract, there is probably a copy recorded at the Registry of Deeds. Pick up a copy when you go for the copy of the deed. If you lucky enough to have paid off your mortgage, then you will need a copy of your ``satisfaction of mortgage" which is a document that indicates you have paid your mortgage in full.
PRIVATE MORTGAGE INSURANCE (PMI) - Not everyone will have purchased private mortgage insurance. You may have avoided it by putting a certain amount down (e.g., 20%) or built up enough equity to have it canceled. Contact the lender for a refund if you were required to pay the first year's premium upfront.
PROPERTY TAX BILL - Many homeowners forward their property tax bill to their mortgage lender without keeping a copy. Visit your town or city hall and ask for a copy at the Assessor's office. Note the annual and semiannual amounts.
WARRANTIES and SERVICE RECORDS - Home buyers will appreciate these records as they can aid in obtaining satisfaction if a product or service fails within the given time or usage limits. It is also helpful for them to know what service people you have used in the past as they experience, sometimes for the first time, the maintenance of a home (furnace cleaning, snow plowing, plumbers, etc.)
PLOT PLANS and SURVEYS - Find out if you are required to provide an up-to-date survey for the closing. If you have the previous survey, you may be able to save money by having it updated by the same company. A copy of the plot plan can be purchased from the town hall for a nominal fee.
WATER & SEWER BILLS - You will probably be required to have proof of paid bills for the Closing.
TITLE V CERTIFICATION (if applicable) - All new property transfers of homes with septic systems require a Title V certificate. Savvy homeowners are aware of the legendary difficulties and get their system certified before they put their house on the market. Savvy buyers have read all the stories in the paper, too so they are leery of homes that do not have Title V certificate `in hand'.
UTILITIES RECORDS - Arrange for services to be changed the day of or day after your Closing. Check with each service provider to determine how they handle requests and what is required for final readings. The new home buyers will certainly appreciate the name, address, and telephone numbers of the service providers prior to the close so that they can make arrangements for transferring the service to their names.
HOME INSPECTION - If you haven't looked at this report since you moved in, it might be a good time to review it. It is very likely that a home inspection conducted for the buyers will turn up some of the same problems noted by the home inspector you hired before you bought the house. Some home sellers also pay for a new `pre-marketing' inspection to prevent unpleasant surprises.
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