Pre - Closing Checklist

Congratulations on your Ratified Contract! Lets go through some steps you need to take before Closing Day!

(A ratified contract is one that has been signed by both the buyer and the seller. It is a legal binding document.)

NEXT STEPS

1. Pay Earnest Money Deposit. You can lose out on the contract if you do not pay your Earnest money deposit in the timeline specified in your contract aka Immediately. - Ideally you should do this within 1 day of contract ratification.

2. Check with your Realtor to see if they opened a Title order. During the days in between contract ratification and closing day, a settlement agent/title company/closing attorney will research the history of Title on your property. They will have to order documents from the city and the turn around time to receive those documents can be 2-3 weeks. This is why you want to make sure your or your Realtor orders the Title work as soon as possible.  Ideally you should do this within 1 day of contract ratification.

3. Apply for Financing. You may have already been Pre-Approved before you wrote your offer. However, now you need to select the lender you are working with and apply for the official mortgage for the property. Your contract will outline how many days you have to do this. If you don't do it by the timeline outlined in the contract, you could lose the property and worse, you could also lose your Earnest Money Deposit. Start as soon as possible. You're lender will ask you for updated documents (e.g. paystubs, bank statements, etc.) Talk to your lender about any other options, like the pros and cons of locking your interest rate or buying down your interest rate. You should also be prepared to get a copy of your Loan Estimate from your lender so you can calculate your estimated monthly payments. Also, ask your lender when you need to start liquidating assets to have your cash to close (ex. if you are selling stocks or pulling out a home equity loans, etc.) Ideally you should reach out to your lender to start this within 1 day of contract ratification. 

4. Schedule Home Inspection -  In the DMV, a home inspection can cost $300 - $700+. This typically depends on the size of the home. It's best to get this date scheduled as soon as possible. You need to coordinate with your realtor so that they can get permission from the Seller/Listing Agent to enter the property on the day and time specific. Do this as soon as possible. After the home inspector comes, they will draft up a written report, usually within a day. From that report, you can estimate repair costs. If you have a home inspection contingency in your contract, pay close attention to when you have to respond to the seller by. 

5. Pay for your Appraisal. Your mortgage bank/lender will order the appraisal from a third party vendor. However, you have to pay for the appraisal out of pocket as an upfront costs. In the DMV, a home appraisal can cost $400 - $600+. Usually this happens within the first 5 days of after contract ratification. 

6. Due Diligence. You should do any additional due diligence or research on the property. Based on the contingencies that you wrote in your offer, you may be able to back out of the offer. Due diligence includes asking the seller for rent roll(s) and a copy of the current lease(s), if the property is currently rented. If it's a multiunit, you may also ask for the T12 - Trailing 12 months of financials to get a feel for the income and expenses of the property from the previous 12 months. A T12 is typically common for commercial multifamily, and not as common for residential multifamily with less than 5 units. Another part of your due diligence is conducting any other inspections that you want to do (ex. roof inspection, termite inspection, radon inspection, structural engineer inspection, contractor quotes, property survey, etc.). 

7. Get Home Insurance. Your lender will require you to get home owner's insurance before you can purchase the home. This protects you and them. You can request multiple quotes. Compare the policies. Then let your lender know who your final home insurance company. They will have to bind the policy. Many times the lender will pay your homeowner's insurance as a part of your escrow fees. In addition, consider liability insurance if you plan to use your home for AirBnB or a rental of any kind. Typically, this happens within a week of 2 of your ratified contract. 

8. Figure out Logistics. Before you close you will want to set aside time to figure out logistics. Reach out to a moving company to get quotes and see if your move in date is available. Talk to your landlord to coordinate your move out date and lease breaking fees/agreement (if necessary). Are you going to use an interior designer to remodel your home. Reach out to the U.S. Post Office to have your mail held or forwarded and do your change of address starting your settlement date. Consider having your mail held a week or so before closing so that you don't keep getting mail at your old address. Talk to your lender if you are liquidating assets (e.g. selling stock, cashing out 401k, transfering large sums of money) in order to get your cash to close. Sometimes it may take 4-5 days for those funds to get liquidited. Then on top of that, it may take another 2 days for your wire transfer to go through to the Title company. You may also want to research Home Warranty companies if you want to get one for your property. Also, you can start putting together a list of plumbers, electricians, hvac technicians, handymen, contractors, maids, etc. that service your area. Are you going to change the locks yourself or hire a locksmith?

9. Title Binder. The title company will do research to make sure that the seller can sell the property to you with a free and clear title. Then they will offer title insurance. Your lender will automatically get title insurance. If you want title insurance as well, as the buyer, you may have to ask for it. 

10. Loan Approval CTC and sign Closing Disclosures. Based on the documents you have submitted to your lender, your lender processed your loan to determine if they can give you a mortgage on the property. They looked at your income, whether or not the property appraised for the list price, and other things. After it goes through the underwriting process (to make sure that they are giving a loan that they feel comfortable with), they are going to clear you to close. Clear to Close = CTC. This means that they will fund your loan. HOORAY!! This happens behind the scenes. You just want to make sure that you get your documents to them. You can always check in with them 4-5 days before closing to see if you are clear to close.  You should also receive your Closing Disclosures for you to sign at least 3 days before your settlement date. You need to sign these immediately, so that you can close on time. 

11. Transfer utilities into your name starting your Settlement Date. This is a good time to transfer utilities into your name to start on the date of your settlement. You can also set up other utility services. Utilities to consider. Ideally you should reach out to the utility company 4-5 days before closing in order to make sure they can start service on the date of your closing. Just call them or go to their online site and tell them you want to "Start Service" on the date of your settlement. 

• Mandatory:

  • Electricity

  • Water

  • Gas - if your property uses Natural gas.

• Options

  • Alarm system 

  • Wireless Internet Services

  • Cable

12. Wire the rest of $$$$ to Title company. Up until now, you have only paid the earnest money deposit (EMD). That is only a portion of your down payment and closing costs. Your lender should be able to tell you the exact amount of your final closing costs and down payment. This is your Cash to Close. Banks close on certain days, and at certain times. So it may be helpful to schedule an appointment with your bank because this is something that needs to be done with a bank representative (not typically the teller). You want to give yourself time to wire that money as soon as possible so that it has deposited in the Title companies account by the settlement date. If they don't receive the funds before settlement, this may push your closing date back. If the seller doesn't agree to push the closing date back, then they could void your contract since you did not meet the settlement deadline. This could cause you to lose your EMD. So give yourself 2-3 days before closing to wire the funds. The Title company will have "specific" instructions for how to send funds. If you wire over the amount that your lender tells you, then they will process a refund check for you. Don't forget to bring your ID, and possible your bank card or a voided check.

13. Pre-Settlement Walk through. Either the morning of closing or the day before closing, your realtor can schedule an appointment for you to do a walk through of the property. This is to make sure that the property is in the same condition that it was in when you saw the house and/or did your home inspection. If you negotiated repairs to be completed according to your home inspection contingency, this is a time to check to make sure all work has been completed. Prior to this, you will also want to get proof that the work was completed by a licensed contractor or tradesperson. Your pre-settlement walk through is a chance to make sure nothing major happened to the house in between the time of the ratified contract and closing. (E.g. no one broke in while the property was vacant, a pipe didn't burst, a tree didn't fall onto the house, etc.)

14. Closing Day = Settlement. On closing day, you will need your drivers license. Sometimes bring 2 forms of identification, just in case. If you sent more than your cash to close, then bring a voided check so that your title company can cut you a check for the refund. You will receive a copy of some of your loan documents before closing. Make sure you double check that the documents on closing day reflect what you've already seen. Feel free to ask questions about each of the documents that you are signing. Signing and reviewing the documents can take 45 minutes to an hour.