Offer Accepted, Time to Close
Alright! We put in an offer and it was accepted! Pretty happy about that, but now what? Now, we start the closing process. Fortunately, we had a rockstar realtor who was great at walking us through the process. Here is some of the things you should expect during the closing process.
Closing Process: Disclosures
The first thing you should be reviewing are the numerous disclosures provided by the sellers. This includes any potential conflict of interest disclosures, agency disclosures, and, most importantly, the sellers disclosure about the property. This disclosure will tell you if there are any repairs that need to happen and the condition of the property to the best of their knowledge. The seller’s disclosure is legally binding, so lying on this form can get you into legal trouble. Review this disclosure very carefully. I talked about some of the mistakes I made in buying real estate, and not being thorough on this disclosure is one of them.
Closing Process: Inspections
The best thing to do when you are in the closing process is to get eyes on, if not by you, by a professional. A home inspector is a professional that’s purpose is to look at many different aspects of a property to point out needed repairs, or code violations. Your realtor will line one up for you, and usually one that they know and trust. I must warn you, they’re not perfect and they are not legally liable to be perfect. So, just be mindful that they might miss something. This is why, I recommend having your general contractor (GC) our there with the inspector to get multiple views on the property at the same time. If anything, it will help the GC understand what repairs need to happen. Also, keep in mind, the inspector only hits the basic stuff. Check to see if you need someone special for rodents, specialized equipment (like water softeners), or stuff like that.
One thing inspections wont tell you is if the disclosure are truthful. I have been stung by a couple of things that you should inspect yourself. First, go to the county website to validate the square footage. I lost 300 square feet on a property some how. Also, check to see if there is anything that looks newer than the rest of the house to see if there was a building permit for that modification. I had this happen with a deck. They said there was no unpermitted work done on the property, but the deck was built without one.
Post Inspection Negotiations
After you have inspected the property and you have a laundry list of needed repairs (which you will have). This is where you can go back to the sellers and request repairs prior to closing. Or, in the case of our BRRRR, we asked for money back from the sellers. The reason we did this was the repairs we were already planning would have coincided with the needed repair and we could have done it cheaper ourselves. For example, we wanted an electrician to make a repair in the kitchen. But, since we were having one come out to run cable to the garage, we could incorporate the small repair job in for cheaper than doing them separately.
In the end, we went back and forth with the sellers and received $3,000 back from the sellers. This helped us cut the closing costs, though it comes back in the repairs.
Closing Process: Appraisal
While you’re going through the process with your realtor to get inspections done and the necessary repairs, your lender is working the finance piece. In the Closing Cost Details on your loan estimate, you will find services that you cannot shop for. These are dictated by the lender to make sure they are making a good financial decision. One of these items is an appraisal. The lender will hire an appraiser to inspect the property and give their opinion on the value. This value will determine how much the lender is willing to lend. For this property, we offered $140,000 with 20% down. Fortunately, the appraisal came in above the $140,000 mark, so the lender was ok with the 80% loan.
Closing Process Can Be Easy
Going through the closing process can be incredibly intimidating and scary, especially if it’s your first time. If you have a great realtor and broker, you will have guides for the entire process. It will be painless and you’ll be able to get going on building your wealth! And, if you’re doing a BRRRR, this is the first stage followed closely by the rehab.
Disclaimer
Once again, I am not a financial advisor. These tips are some things I have validated with my own personal experiences. If you feel you need more personal advice, please consult a professional financial advisor. Dont forget to check out the Book List for published authors on this topic!
