Closing On Your Home

There are a lot of expenses involved with buying a home in addition to the purchase price. Consider these expenses before signing your contract.

Good-faith deposit:

A deposit placed on a home to prove you intend to purchase the home and to prevent buyers from placing a bid on multiple houses with the intention of buying only one. See Phase 3: Good-Faith Deposit for more details.

Utility fees:

Will you have to pay a deposit or transfer fees? Check with your utility service and cable/Internet provider.

Home maintenance needs:

Do you need rakes? A lawnmower? A ladder? Add these expenses to your budget.

New furniture:

Did you gain square footage? Will you need rugs, a sofa, a guest bed, etc.? Remember, you can always spread these purchases out over time so that you don’t overspend.

Fire alarms and security systems:

Make sure the fire alarms are current and working. Consider a home security system for added protection against theft, fire and water damage, and for possible insurance discounts.

Property taxes:

Talk with your lender to find out if you are paying your property taxes in escrow—that is, as a part of your monthly mortgage payments. If not, you should expect to pay these taxes all at once. Florida Property Taxes are due April 1, and there is a discount for paying before they are due. Your lender can help you find out the estimated tax for a given year.

Don’t forget to register your home for the Florida property tax homestead exemption if the home you are purchasing will be your or your dependent’s primary residence. You may qualify for reduced property taxes beginning the first year that you owned the home on January 1—for example, if you buy the house in July of 2016, you may be eligible for the exemption in 2017 because you owned the home on January 1, 2017. Check with your county Property Appraiser for details and the documents required, as these vary by county.

Homeowners’ insurance:

Since the home is the collateral for the loan, a lender will not give you a loan unless you have fire and casualty insurance. If you carry auto or other types of insurance, ask your agent for rates on home insurance. Insurance companies often give better rates if you have more than one type of policy with the company.

Homeowners’ or Condominium Association fees or dues:

Find out if the home or condominium you are considering purchasing is part of a Homeowners’ Association (HOA) or Condominium Association. There are often dues or fees associated with these kinds of associations that may help pay for the upkeep of community assets or the exteriors of the buildings. Additionally, these associations may have bylaws that govern certain aspects of the neighborhood, such as yard maintenance, types of animals allowed or additions to the home or property. These fees can range from a few dollars a year to several hundred a month, depending on the benefits of the association.

Closing costs:

There are a lot of expenses and fees associated with closing costs. See Phase 5: Closing Costs for details.

The Contract:

Once you've found a home, made an offer and the seller has accepted your offer, the seller's agent draws up a contract specifying the terms and a closing date. When you sign this contract, you have officially agreed to purchase the home and the terms outlined in the contract. Prior to signing, have a real estate attorney, or the licensed real estate agent representing you, thoroughly review your contract. There are many small details that could make the difference between a good deal and a bad deal. An experienced professional can help ensure you're getting a good deal.

Negotiating Closing Costs:

Before you sign the contract, see if you can negotiate to have the seller pay for some or all of the closing costs. Some sellers are willing to pay some or all of the closing costs in order to sell the house; as they are receiving a payment for the home, these costs can be less burdensome on the seller than on the buyer, depending on the seller’s circumstances. You may not be able to negotiate more than is customary in your area, and there may be limitations as to how much they are legally able to pay. Your real estate agent will be able to assist in determining what’s appropriate.

Contingencies:

The contract almost always specifies contingencies. That means the contract is valid only if certain requirements are met. For example, if you are not able to secure financing, you aren't required to purchase the home. Contingencies also cover home inspection (defined under Phase 4: Inspection), termite inspection, title search (defined under Phase 5: Closing Costs) and several other possibilities that would nullify the deal.

When you make an offer on a house, you'll have to put down a good-faith deposit, also known as an earnest money deposit. This is to prove you intend to purchase the home and to prevent buyers from placing a bid on multiple houses with the intention of buying only one. The amount of a good-faith deposit can range from several hundred to several thousand dollars or a percentage of the purchase price. As no laws mandate a good-faith deposit, the amount will largely be based on the traditions and customs of your local market. Your real estate agent will be able to help you determine what is customary in your area.

If the deal falls through, the money will be returned to you unless you have broken your end of the contract; for example, if you decide not to proceed with the purchase of the home even though the home has met all of the contingencies, you could forfeit this money. If the deal goes through, the deposit goes toward your down payment and your share of closing costs.

Don't skip the home inspection. It is one of the most important parts of the home buying process. There are many big problems with a home that can't be detected with an untrained eye. A licensed home inspector will go through the entire home to make sure there are no problems that will either affect the value of the home or cause major problems in the future. If the home inspector finds any major problems not disclosed before you signed the sales contract, you can use the inspection contingency to walk away from the deal or to renegotiate the price.

The cost of closing on a home can be thousands of dollars. You should have some money set aside for these costs, which are in addition to your down payment.

Closing costs in Florida include fees charged by the lender, fees charged by the attorney or settlement agent—that is, a real estate professional or title company professional who helps ensure that the title is transferred legally and smoothly during the closing process--and third-party fees that cover items like the appraisal, survey fee, title search fees, title insurance and postage required for processing your paperwork over the course of your home purchase.

• Appraisal: Your lender will order a home appraisal to be sure they are not lending you more money than the property is worth.


• Survey: A survey defines the boundaries of your property.


• Title Search: A title search ensures that the seller is the owner of the house and that there are no liens against it. A lien is a claim to the property rights of the home that is tied to a debt; if the debt is not repaid, the home could be repossessed. Your lender will order the title search through the title insurance company, which will be secured by your lender to help protect your ownership rights.
  
  This search is an important part of the process. Any lien on a home will need to be paid by the seller before closing. Otherwise, you will be at risk of losing the home if the previous owner does not settle his/her debt, or you do not settle it for them. If you are paying cash for a property and therefore bypassing a lender, you’ll want to seek out a title insurance company, which will perform the title search and protect you should there be any problems with the title.
  
  There are various ways you can perform a title search on your own. For example, you can visit your county Property Appraiser’s website or physical location and perform a public records search. There are also websites that now offer to perform a title search on your behalf for a fee. However, to ensure the accuracy of the information and protect yourself from risk, it is best to use a title insurance company for this search.


• Title Insurance: Your lender will purchase title insurance on your behalf. The title insurance company will perform a title search for you to uncover any liens or problems with the title. However, sometimes a title problem can still arise after you’ve purchased the home. For example, someone could claim that they have legal rights to the home or property due to an unclaimed inheritance or a spousal dispute with a previous owner. Additionally, fraud that may have occurred in the past may not come to light until after you’ve purchased the home. If the home was once sold by an impersonator, or a falsified deed was filed with the county, your ownership rights could be at risk.
  
  If there is a problem with ownership, including fraud and forgery, the legal fees associated with those costs of dealing with those problems will be covered. Without title insurance, if there is a problem with the title after you’ve purchased the home, it could prevent you from occupying or selling the home, or from using it as collateral for a loan. The title insurance will cover the legal costs associated with sorting out any problems with the title, should they arise.

Your real estate agent and lender will handle most of these processes, and your settlement agent or attorney will handle the legal paperwork. Your lender should be able to offer an estimate of total closing costs and what you’ll owe (if the seller is paying any of the closing costs) before you get to closing. Ask for this estimate if they don’t provide it.

When it’s finally closing day, bring a pen and be prepared to sign! Your real estate agent or representative and your attorney or settlement agent will both attend this meeting, as well as any people who are to be listed on the mortgage or deed. The seller’s agent may also attend this meeting. You’ll sign all the final paperwork (there’s a lot of it!) and write a check for the closing costs and another for the down payment. Don’t be afraid to ask questions about what you don’t understand. When it’s all said and done, you’ll have the keys to your new home!