Process from Offer to Closing, help!

Simon,

I hope I got all this straight and answer you appropriately. 

I’m a little confused on the agent thing, but if you want to put an offer in on the property shown to you on Saturday by the selling agent, you will probably have to submit that through her. Did she ask if you had an agent? If she did, and you told her you didn’t then she will assume representation for both you and the seller. If she didn’t ask that question, then I would suggest using your own agent. Rule of thumb, if you are looking at listed properties, have your own agent so you can have access to the property and have your own representation.
The $500 is to bind the offer. Earnest money is for that purpose. Don’t include a cashiers check. You can write a check out, make a copy of the check and submit the copy of the check with your offer. When your offer is accepted you can give them the check at that time.

I JUST WROTE AN ENTIRE MESSAGE ABOUT JEN GRAY. ON THE LAST LINE OF THIS BOX IT DISAPPEARED. DID IT GO TO THIS D.G. POSTING AREA OR WAS IT LOST?? PLEASE ANSWER. josanders48@****

If the property is listed by a licensed agent and is in the Multiple Listing Service, then offers need to be submitted on the form used by the local board. If you actually have your own agent (little unclear in your post about that), then you should sit down with him or her and put the offer together.

Your EMD can and should be paid with a personal check. Your down payment amount is relevant to your loan not to the seller.

thanks for the response and sorry for such a delay. Been quite busy these few days.

Well I have already made an offer and the seller already counteroffered.

I have more questions now that it is probably moving forward.

I am using the listing agent.

I still need to hire a real estate attorney, right? Roughly how much is the rate?

For the closing cost, who usually pays for that? (I know it's negotiable, but by default who pays?)
How much is escrow fees?

I am going to get conventional loan.

I am going to put about $7000 downpayment, how much would I be paying at closing?

Will the closing and escrow come about $5000 more?

So on the day of closing, I need $12,000 in cash?

Sorry, as you can see I am a total newbie on the whole process since I never done a deal before or even bought a house.

Hi Simon,

Don't worry with the questions. In response:

- Closing attorney / title company to close: depends on your state. Either way, they provide the same function: title search, prepare closing docs, and any questions you have. Typically $700 - 1000 including the title search.

- Closing costs: should already be outlined in your P&S contract. For the last few years you as the buyer could ask for the seller to pay closing costs, or ask for a $2-3k seller concession. This year as the market is heating up that's going away. If not specified otherwise, you pay your own closing costs. Figure $2k or so total, including the title / attorney fees above.

- How much do you need at closing: ask for a preliminary HUD as the closing date approaches. That will outline everything. Beyond the fees above, you'll have prepaid taxes, insurance and items like that. They're not fees, but prepaid expenses, usually to get the escrow account for taxes and insurance funded to a big enough level.

- You'll have to wire the funds or bring a cashier's check to closing.

Hope that helps and good luck!

- Tom

@TDS, thanks for the quick response.

The prepaid taxes, insurance and such are all prorated?

The property is located in Pennsylvania.

If I were to pay for the closing costs, would I be able to put that with the mortgage?

I tried to find a step by step from the most detailed on the internet, but they seem to be all scrambled and left out the costs and stuff. So I decided to start this tread maybe helping others just like me who are new.

You're welcome. Yes, the prepaid taxes, insurance and items like that are prorated, but no, they typically aren't covered by the mortgage, they're cash out of pocket. Other items like points can be rolled into the mortgage (depends on the lender). Bottom line is if you're doing a conventional financing, expect roughly $2-4k out of pocket, if the seller isn't contributing toward your closing costs (that's my experience, and I've bought and sold a number of houses over the years).

If you're buying rental property with tenants already in it, the cash outlay will be offset by the security deposits that will transfer over, plus the rent. A good strategy is to close at the end of the month, so you'll get the security deposit that day, then the rent the next day, and your first mortgage payment typically won't be due for a month.

- Tom

Actually, your property insurance will not be pro-rated. You will need to get a policy that starts the day of the closing. Typically the year premium is paid as part of the closing costs. Then it is common for banks to make you escrow payments for the next insurance premium as well as the upcoming taxes.

The property taxes and/or other assessments will be pro-rated as will any on site utilities like propane.

The seller should pay for title insurance. Some lenders allow closing costs (recording fees, transfer taxes, appraisals etc) to be included in your loan. These costs will affect your down payment. For example if you are putting 20% down (and will not have to pay mortgage insurance) on a $100,000 house but then include $4,000 of closing costs, your down payment of $20,000 is now only 19.2%.

thank you.

Let me give the actual figures, that might be more helpful

Listing Price: $40,000
Tenant Rents: $800/month
Insurance (roughly): $400/year

I lowballed the offer and the seller came back with $35,000 (which I am actually fine with)

However, I told the agent to tell him that if I take up on the $35K offer, I want him to pay for closing cost and escrow fees.

Now I am not sure if I did that properly because the agent responded back to me with

Now you guys are saying that I should roughly pay out of pocket with additional $2K-$4K?

Thank you for your replies.

Edit:

Maybe you guys can answer this?

What closing cost and escrow fees must I pay?

I found a list and not sure which ones I must pay that will be rolled over to the mortgage

http://i.imgur.com/TXKte9K.png (it's a snapshot of what I found)

Simon - to keep it simple, here's the way I phrased it in my last offer:

"Seller to pay buyer's reasonable and customary costs, in the area of obtaining financing and/or closing, not to exceed $2,500"

Hope that helps,

- Tom

Hi Tom,

I wished I saw your reply earlier.
I emailed the agent with

"Ask the seller if he would take $33,000 and he will pay 50% of the buyer's closing costs."

Agent responded with

"I still do not know which of the closing costs you are talking about. As I asked you before are you talking transfer tax, pro ration of real estate taxes, points on a mortgage, title insurance, mortgage application fees. You have to remember I already told him of you offer of 31400. I need to know which closing costs you are talking about or do you just want to ask for a dollar amount towards closing which is easier for everybody to figure on."

Not sure exactly how to reply from there. See how new I am to this? I feel like he's playing with me or maybe I simply just too novice at this?

Not sure if you responded to the agent already, but yes, I would ask for a set dollar amount toward closing costs, as the agent mentioned near of the end of his quote. I usually start around $2,500 to $3,000, and settle for around $1,500 to $2,000 toward closing costs if they come back with a counter offer.

Good luck and let us know how it goes!

- Tom

Thanks. But I am pretty much lowballing on this one and removing the seller concession.

The seller is still stuck at his price.

The thing about this property is that it has a Cap Rate of 18$-23% depending on the purchase price. The tenant is paying $800 rent and they pay for utilities. Owner pays trash and insurance which comes out with a low operating expense to income ratio.

This is a single family. I am still looking for a property that is 2-4 units.

Question, if it's a 4-unit house and I want to get FHA loan (I intend to occupy 1 of the units) can I have the low down payment, or they will demand me to put up 20-25%?

So a quick update and a quick question so looking for a quick answer

I am still negotiating, the tenant is getting evicted. If my offer falls through I will look for my own tenant during the process of closing.

I said my Earnest Money Deposit will be $250. The agent asked if I am going to put more than that into escrow. I am a bit confused on this process.

I said I will put 20% down payment. When do I actually put this down payment? Do I also put this in the escrow as well?

Who do I make the check payable to?

thanks

Hi Simon,

If you're putting down a 20% downpayment, that amount is typically paid at closing. The bank would provide the other 80% in a typical loan and send it at closing as well. So for a $100k purchase for example:

Bank = $80k (80%)
You = $20k (20%)

You'll get a credit for the $250 earnest money deposit you've already paid (that would be in escrow, and usually you write it out to the title company doing the closing).

You'll have to bring to the closing table your $20K, plus closing costs ($2k-4k)

Finally, you'll get credits for the sellers paying anything toward closing costs, plus a credit for the tenants deposit, if it's available.

Again, ask for a preliminary HUD form the title company prior to closing, it will outline everything.

Good luck!

- Tom

Tom, as always you are quick to answer my questions!

Thanks!!!

I was going through multiple books on buying a home for first-timers and couldn't find the information on when the 20% is put in.