5 Myths About the Closing Process
If you’ve never purchased a home before (and even if you have), the closing process can feel a bit overwhelming. Many people will buy or sell every 10 to 15 years, and some people will only buy a home once or twice in a lifetime!
There are many terms and details that are part of any real estate transaction, and it’s easy to see why there could be confusion. Today, we’re dispelling five simple real estate myths about closing on a home.
Myth #1: A home must ‘pass’ inspection to be sold.
Fact: Home inspections are part of most real estate transitions, especially if you’re purchasing a home with a mortgage. When a home goes under contract, most agreements allow for a licensed inspector to provide a full report of the home’s structure and systems. When something is found on the home inspection, it’s a matter of negotiation between buyers and sellers to determine if the problem will be fixed and who will pay for the repairs. While some specific criteria must be met with certain types of mortgages, the point of the inspection is to ensure the buyer is aware of the home’s condition and finds the agreed upon sales price acceptable.
Myth #2: Closing costs are the buyer’s responsibility.
Fact: In an ideal situation for sellers, the buyers would pay all the closing costs associated with the sale. But in tighter markets, the buyers can ask the seller to pay a portion or all of the closing costs, or fees incurred with a home purchase. The sales price is sometimes adjusted higher to account for the amount the seller will pay. The bottom line is that this is a negotiable part of any real estate transaction and depends on the terms of your individual mortgage loan.
Myth #3: Commission is paid directly to the home’s listing agent.
Fact: While REALTORs® are typically paid by the sellers, their fees are usually subtracted from the proceeds of the home sale. A listing agent’s commission is determined by the cost of the home and an agreed upon percentage of that final sales price. This fee is split between the listing agent, their brokerage firm, and the buyer’s agent and their brokerage firm and is dispersed by the title company overseeing the sale.
Myth #4: Personal checks can be used to pay transaction costs.
Fact: Unless it’s a very small amount, lenders typically require all closing expenses to be paid by wire transfer or certified check. Personal checks often take three days to clear the account, which could slow the process of the sale. A wire transfer or certified check guarantees that the money you need to complete the purchase is immediately available.
Myth #5: Final sales documents are reviewed at the closing table.
Fact: Although small changes to documentation may be made in the days leading up to the closing, this shouldn’t be the first time you sit down to review them. All transaction documents are standard, subject to regulation and can be researched in advance. You don’t want surprises when purchasing a home, so it’s critical to request advance copies, review them thoroughly, and ask your REALTOR® , mortgage lender or title company representative for clarification, if needed.
Have questions about the home buying experience and closing process?
It’s very important to find an experienced REALTOR® and a knowledgeable mortgage lender who can explain the process and answer your questions.