SplitRock Real Estate Info for buyers: Preparing for Closing

HOMEOWNER'S INSURANCE

You need homeowner's insurance and SplitRock Real Estate will help you find an insurance company to protect your investment after you take possession at the closing. At least ten days before the closing you will need to get a copy of the bank appraisal to the insurer you have selected.

You need to get insurance set up for your new Martha's Vineyard home a couple of days before you go to closing. Since the insurance company requires a couple of days to secure the policy, you should take care of this at least a week before closing. At that time, you arrange for an appraisal to be sent to the insurance company. You can either bring it in yourself or have your loan officer do it. However, keep in mind that it's ultimately your responsibility, so make sure that it happens.

On what will the cost of insurance be based? On the age of the home and its construction, its appraised value, and whatever choices you make in terms of deductibles and other choices that will be offered to you. Needless to say, you should shop around for the best homeowner's insurance deal!

After you and the insurance agent have defined the terms you want for your policy, like the deductible, they will evaluate the appraisal (i.e. age, condition, construction, appraised value) and present you with a quote for the insurance. If acceptable, you will sign an application and write a check covering the policy amount in full for the first year. This expense will be listed on the HUD-1 form as a buyer's P.O.C. (paid outside of closing) expense. It is important that you are given a declaration page that lists your policy number, the amount, type of coverage that you have, who owns the property, the address and the annual premium along with a receipt showing that you paid for the policy. These are all documents you need to bring to the closing. Ask the insurer to send a copy of these two documents to the lender and/or your attorney.

The seller should have been advised not to cancel his homeowner's insurance until the title has been transferred and your title recorded at the Registry of Deeds. Recording usually takes place within 12 to 24 hours after the closing. Your homeowner's insurance should go into effect simultaneously.

NOTE: I strongly recommend that the seller review his policy to make sure his homeowner's insurance coverage would cover the current replacement value of the home.

Once the insurer has the appraisal in hand and has set up a policy for you, you'll need to go in with a check for the amount for the first year. Your policy will be written so as to become effective on the closing date. You hand over your check and sign an application, and the company gives you a declaration page (showing your policy number, the coverage that you have, who owns the house, the address, how much it costs for the year) and a receipt showing that you paid. These are items that you need to bring to closing. The insurance company also generally faxes a copy of these two documents to the loan officer or settlement attorney.

THE WALK-THROUGH

The closing ususally takes place 30 - 45 days after a Purchase and Sale agreement has been executed; however, it is common with real estate on Martha's Vineyard for a closing to take as long as 90 days because, for example, there are rental contracts in place and the owner is responsible for servicing those contracts. Since the property is being used by numerous rental tenants during that time it will be important to confirm that the property is in the same condition at the time of closing as when the Purchase and Sale agreement was struck. SplitRock Real Estate will accompany the buyer during the walk-through, either the morning of the closing or, the day before the closing. In some cases, we may want to have the home inspector accompany the buyer and review the original inspection report to ensure that all agreed upon repairs have been made and there are no new problem areas. All the major systems of the house such as the heating system, plumbing and appliances (if included in the sale) have to be in proper working order, and this means according to the manufacturer's specifications. Take your time and do a thorough inspection of the premises. If a new problem is discovered, the owner is responsible for making the correction and monies can be held in escrow to cover the expense.

Otherwise it is the seller's responsibility to get them up to scratch. You've already had the home inspection, of course, so there should be no major surprises here. However, that does not mean there won't be. So take your time on the walk-through, even though you'll feel a natural urge to get this thing out of the way so you can take possession of your new home on Martha's Vineyard.

If it's summertime, turn on that air conditioner and make sure that the air that comes out is cold. And yes, even it's summer time, turn on the heat. Make sure the air is hot. Likewise in winter. Make a special point of this: Test out the systems that you would not normally use during the current season. You'll regret not doing that come January, when your teeth are chattering and icicles are forming on the end of your nose.

Just so you know, a potential snag can occur with the phrase "in working order." What exactly does that mean? If the air conditioning doesn't feel cold enough to you, but it does to the seller, then who's right?

The answer, for you, is: YOU. You're right. If anything isn't working, you need to bring it up right away with the seller. Say what you think. Don't let someone persuade you that the 90-degree air coming out of the duct is really cool. If this is going to result in a dispute with the seller, so be it. The two of you will either work it out, or you won't. But at least you won't be kicking yourself for having been bullied.

THE BIG CHECK You've written a number of checks since you started on your new Martha's Vineyard home adventure but this is the one that gets you the keys to the castle. It is going to be a cashier's bank check so make sure you know exactly what the bottom line number is and how the seller wants the check made out. The amount will be on the HUD-1 form (item 603 - Cash To Seller), and you should have a copy of the HUD by now. The amount covers the closing costs less any deductions including the earnest money you already put down.

A Fat Check

No, we're not going to talk about your weight --- or mine.

We're talking about a cashiers check, and it's going to be a whopper. It will comprise the down payment on your loan, plus closing costs (including attorney's fees, courier's fees, and so on, all broken down on the settlement sheet). The earnest money deposit will be subtracted from this amount, since you've already ponied up that cash. Well, it's time for the closing so hold on to your hat, open up your wallet and don't faint.