Mark Wozniak: So now we’re at the point in the contract process where, of course, we have a ratified contract, all the contingencies have been released and we are in those final days right before settlement. Probably from a homeowner’s perspective the next important thing that they’re going to see is a document that is mandatory in all settlements that is mandated by the Department of Housing and Urban Development. It's called a HUD 1. So let’s discuss that.
Leigh Anne Monk: Sure, and that particular document will outline all of the fees and all of the numbers you’ve seen prior during the contract to close process but it really important that we review those to make sure that they are accurate. For example you will see the selling price on the HUD 1. You will also see your loan pay off amounts. As you’ve gone through the process the title company has contacted your mortgage company. They’ve actually received from the mortgage company those final pay off fees. That will be listed on there.
And if you agreed to a seller subsidy, which is simply an amount of money that you’ve agreed to pay to the buyer to help with their closing costs, that will also be outlined on the HUD 1. That will appear on the front of the HUD 1 as a credit to the buyer to help cover the closing costs involved with the purchase of your home.
In addition, there is also what they call the proration fees and those are primarily in the area of homeowners association fees. So say, for example, you're closing mid-month and your homeowner association requires you to pay a month in advance, you will get back the portion of that fee from the date of settlement to the end of the month because you are not going to pay for that any longer than you have to.
At the same time the buyer has to begin to pay those fees as soon as they own the property. So things like homeowner’s fees - that’s the primary one that we see prorated. We will also see from time to time some real estate taxes as well based on the time of year you’re actually settling in.
Mark Wozniak: Right and condo fees…
Leigh Anne Monk: Condo fees as well, exactly. It is extremely accurate so the day of settlement you will have only have paid all those fees up until the day you own it. The day after it is completely owned by the buyer they now take on that responsibility. So all that is covered in the actual HUD 1 itself. Of course, there will be some settlement fees that will be listed on there that are part of your responsibility.
There are real estate commissions and, of course, there are taxes. There are actually taxes involved with the process of selling your home. Uncle Sam likes to collect some what they call grantors taxes and those will be outlined as well on the actual HUD 1. Now we do our best as your agent to get that HUD 1 document to you just as soon as possible, but quite frankly it typically comes in last 24 hours prior to settlement.
But as soon as we have it, we actually get that to you and we are actually willing to meet with you over the phone or in person so you actually have no surprises on settlement day. We want settlement day to be relaxing, to be very exciting, to be very much in the "everything is done" type of mode. We don’t want any surprises so we want to make sure you see that document ahead of time.
Mark Wozniak: Right and it’s sort of funny because as much as that is always our goal it’s just true in our industry that on settlement day it always seems like it is going to be chaotic because it's just the way the industry works. The lender’s work is that a lot of the paperwork is all coming together right at the end. It doesn’t matter if you had a settlement that was scheduled 180 days out it always kind of comes together in that last 24 hours. So again it if often seems like there is a lot of chaos and it looks like things might fall apart its amazing how it comes together.
And sometimes it comes together as we’re sitting at the table, but it definitely comes together. So let’s talk about what happens on settlement day. One thing is that whether it is on settlement day or a maybe a day or so before - the buyers will typically have an opportunity to do what is known as a final walkthrough. So this is where they have the chance to go through your home and make sure that all of the major systems of the home are still in working order that all of the inspection items that may have come up have been repaired.
And that basically the home is in the same state that it was on the day that they put the contract in and there hasn’t been any major structural damage or anything of that nature. So they’ll do a final walkthrough and then it actually will come to the settlement itself. And settlements can either be known as a joint settlement where you as the home seller and the buyer are literally in the same settlement room at the same table signing papers together or it can be what is called a split settlement which is where the buyers have gone with one settlement company and you’ve selected to use another.
That’s something that’s determined back when the contract is being negotiated and ratified but either way works okay. I’d say that joint settlements are what most people end up using. It’s kind of a more standard settlement but either one is fine. Now in terms of what you are going to be bringing to settlement, well, of course, you are going to bring the things that will give the buyer entry in your home such as the keys to all the doors, the keys to the mailboxes, garage door openers, those types of things.
Another thing that is pretty important is we are going to need a photo ID for each of the sellers and also we’re going to need a voided check and the reason for that is the proceeds can be sent to you and usually the settlement company is going to need a routing number so they can electronically send the proceeds to you.
Now it’s very possible that on settlement day if there are multiple homeowners or sellers or even if there is just one seller and you’re not able to attend on that day, you can get what’s called a power of attorney. So if you do have a power of attorney where someone else is either representing you or one of the other homeowners, you just need to bring all the power of attorney documents and obviously have your person serving as your power of attorney there in the room.
So in terms of what to expect and what actually happens at the settlement itself, one of the first things you do is review the final HUD 1 that Leigh Anne was talking about earlier. She was talking about the draft HUD 1 that comes out a day or two in advance. This is the final one that everyone signs. It has all the numbers of the transaction that everyone agrees to.
Some other paperwork that you as the homeowner will be signing is signing over the deed and again there are other loan release forms and things that get signed but trust me your stack of paperwork as the homeowner is significantly less the buyer’s stack. Assuming that their having a lender and are not paying cash for the home, their stack is like this versus yours.
So you as the homeowners have the much easier job and often times the settlement for the homeowner is done within the hour. Another thing at the settlement, if it is indeed a joint settlement, is that you will meet the buyer so you will have an opportunity to talk to the buyers. They’ll often have questions about when the trash comes, how various things in the neighborhood work, where various stores are. So that is kind of a time where you can share a little bit of your knowledge about the home and the neighborhood and that pretty much ends the settlement process itself.
Now there are some things that happen after settlement. Probably the one that is most near and dear to your heart is to have your sales proceeds sent to you. So that does happen after settlements and again those can typically be wired straight into your bank. Often it will happen within 24 to 48 hours after settlement that those show up at your bank. It really just depends on the time of day, whether they miss the wiring cut off or not. Another thing that happens usually the day after settlement is that the new deed is recorded at the courthouse and that does have to take place to officially end the settlement.
And then there’s also escrows from your lender that get returned post settlement and those can usually come a couple weeks to thirty days later, but these are the escrows that you have been paying into over time that don’t get returned on settlement day, but do get paid back to you afterwards. So at the end that’s it, that's the end of the sales process. So congratulations at that point you have sold your home!
Leigh Anne Monk: Well, this completes our series of videos in how to sell your home and we certainly hope they have been helpful to you. When the time is right for you to sell, please contact us. You can call us or email us or simply fill out the form on our website. We’d be delighted to help you.