House Settlements- what really happens and how to prepare for it

House settlements are stressful. Knowing what to expect before, during and after your house settlement will make it less stressful. Count on signing many papers. We tell you what the important ones are. House settlements are stressful because there are many people and large sums of money are being exchanged. This is the information age, but in real estate paper reigns supreme. This article spells out your role and can make it less stressful. Prior to House Settlement The week before settlement is a busy one for both sellers and buyers. Unless other arrangements have been made and are a part of the real estate sales contract, we're going to assume you (the buyer) will move into your new home. We recommend that you read this article and also download this summary of the details of Mortgage Settlement Costs. Here's a list of things that you have to take care of well before settlement takes place:
  • Make plans to move your furnishings. At a minimum, use the Getting Ready to Move Checklist to stay focused or scan our list of moving articles.
  • You will have to purchase and pay for an entire year of Home Owners Insurance or what is called hazard insurance. Start by calling the insurance company that you have car or home insurance with. By all means shop around and get several quotes. Don't forget to get a paid receipt and bring it and the insurance policy to settlement,
  • You will have to telephone the settlement agent or attorney and obtain the exact amount (usually in certified funds) to bring to settlement,
  • On the morning or the night before settlement, you have to have a final walk through of the house and property. The walk through is not a home inspection that you had before. You have to make sure that the home you are buying and signed a contract on is essentially in the same condition,
  • Your Realtor will usually have a list of items to check off and you can also stipulate things that are not satisfactory. Here's another list of what a buyer expect. Here's a list:
1. The house is broom clean and is empty unless arrangements have been made with you to leave things behind, 2. The appliances and fixtures that were mentioned in the contract are still there and in working order, 3. Any work that the Seller promised to perform as a condition of the sale or your home inspection was completed, and 4. You should write down any items that shouldn't be there (that old lumber stored in the garage), furniture, etc. It costs money and takes effort to move these so if you don't want them then the seller must move them. Generally you'll want to obtain the receipts from the home owner attesting to the repair of large items that the seller agreed to fix, such as new roof or a repair of a furnace, etc. When you leave the house, your Realtor will ask you to sign the form. You can sign it or make some stipulations. If things are not as the Sellers promised you, then put these in the contract or place money in escrow to have things repaired or completed. For example, if the Sellers agreed in the contract to install a new roof and it was not done, have the settlement agent or attorney hold some money in escrow so that the work is completed. Even less important things can be written in. If the seller promises to remove furniture or old boxes, but doesn't do so, then place money in escrow to have a mover or junk disposal company come in and remove the stuff. It will be a lot easier on you. If the seller says no to these items, then don’t go forward, unless you really need to complete the transaction. Remember though that you are more likely to win if you hold your ground. Always remember that in real estate, everything has to be in writing. If it is, then it must be complied with. At a House Settlement Settlement is the beginning of the end of the real estate transaction. We say “beginning”, because not everything is accomplished at settlement. Settlement really sets things in motion. You will also receive what is called a HUD-1 Settlement Statement, which details all of your costs. If you don't understand a charge, you should question it. The real estate attorney or settlement company is directed to register the new deed or title with the county clerk, and is also to payoff the existing loan and taxes, etc. Here are the details:
  • The Seller transfers the title to the Buyers,
  • The buyers sign a promissory note (mortgage) to finance all or part of the purchase. Make sure you double check the interest rate, whether it is fixed rate or adjustable and how many years (the term) the mortgage is for. Also remember to sign up for an automatic mortgage payment service or one that will allow you to pay down the mortgage faster. They are called Accelerated Equity Programs,
  • The buyers bring a certified check for the balance of the purchase,
  • The settlement company or real estate attorney uses a sheet to show both the buyer and the seller what the costs of the transaction are to each of them, and
  • The settlement sheet also identifies who gets paid and how much, and
  • The seller turns over the keys to the property to the buyers.
Usually the buyers and sellers, their attorneys if appropriate, Realtors, and the person conducting the settlement are present at settlement. That’s about it. We don’t advise that you take your kids, favorite pets or talkative aunt to settlement. You'll need little or no distractions at this point. Believe us, the blizzard of paperwork that you will be faced with, especially if you are a buyer is well, what can we say, "absolutely amazing” and there’s little sign that things will improve in the future, despite the fact that technology is used to calculate relevant costs. The entire process usually takes about an hour to an hour and one half. This is dictated by the amount of paper there is to sign and whether there are any problems discovered. Don’t be afraid to question any charges and take your time. In some states, it’s customary for both the buyer and the seller to have their own attorneys. In other states like Maryland or Virginia, the settlement company is selected by the buyer and the settlement company or attorney will represent both buyer and seller. Irrespective of the state, if you want your own attorney, by all means you can have it. You’ll just have to foot the bill. For complicated transactions or where custom dictates, have your own attorney. After House Settlement Unless other arrangements have been made, the buyers have possession of the house and all expenses and associated utilities are their responsibility. The sellers are long gone and busy trying to figure out how to invest it or spend their new proceeds. Moving into the house is your next step unless you are going to renovate it first, refinish the hardwood floors or paint it. See our extensive list of home remodeling and landscaping articles for tips to help you through this. By all means, enjoy your new home.