Low Appraisal Needn't Derail Home Loan
Buyers and sellers have options if the appraised value of a home is lower than expected. The term “low appraisal” doesn't mean an appraiser’s opinion of a home’s value is faulty or incorrect. Rather, it means the valuation of the home was lower than the home seller, buyer, REALTOR® or lender expected it would be. "Low," in this context, is a relative term.

Low appraisal may alter pricing or terms
A low appraisal can mean that the lender won't approve the borrower’s loan. To understand why, suppose a homeowner had a $200,000 first mortgage, believed his home was worth $250,000 and wanted to obtain a $40,000 home equity loan. But then suppose the appraiser valued the home at only $190,000. The lender likely would decline the new loan since the homeowner already owes more than the appraiser believes the home is worth.

In other cases, the lender may approve the loan, but adjust the interest rate or terms. Suppose a home buyer wanted to borrow $140,000 to buy a home she believed was worth $200,000. The lender quoted an interest rate of 6.25 percent on the assumption that the loan-to-value ratio would be 70 percent. But then suppose the appraiser valued the home at only $175,000. The loan might be approved, but the interest rate might be higher to compensate the lender for the additional risk of the 80 percent loan-to-value ratio.

Seller and buyer may renegotiate purchase price
If an appraisal comes in less than the contracted purchase price and the contract contains an appraisal contingency, the buyer can choose not to purchase the home because the contingency gives the buyer the right to exit the contract if the appraisal isn't acceptable to him or her. In this case, the buyer's earnest money deposit typically would be returned to the buyer. Appraisal contingencies usually have a timeframe, so the buyer has only a limited number of days to approve or disapprove the appraisal.

If the contract didn't contain an appraisal contingency, the buyer might be obligated to purchase the home at the contracted price despite the low appraisal. In that case, the lender would base the loan approval on the appraised value, not the purchase price, and buyer would need to pay the additional amount in cash. If the buyer were unable to close the transaction, his or her deposit likely would be forfeited to the seller.

Alternatively, in either situation, the buyer might exit the contract through another contingency or ask the seller to reduce the purchase price. The seller might agree to do so for the sake of closing the transaction, though he or she typically would have no obligation to alter the price once the contract had been signed. When an appraisal comes in low, the contract is often renegotiated to accommodate both the buyer's and seller's needs, although this is not always the case.

Home improvements don’t return full value
Appraisals sometimes fall short of expectations because homeowners tend to assume that home improvements will return a dollar-for-dollar increase in value. That’s rarely the case. Most improvements recoup only 65-85 percent of the cost, on average, which means a $10,000 project might add $6,500 to $8,500 to the value of the home.

Property appraisals aren't scientific, yet state-licensed appraisers are required to make independent judgments that aren't influenced by anyone else’s opinion. If an appraisal appears to be wildly faulty, the lender may be willing to order a second opinion, depending on the specific circumstances.

The Steps to Closing on Your Home
What you need to know about closing on a home. At closing, you take possession -- and responsibility -- of your new home. However, there are many steps along the way. Here’s what to expect:

Purchase Offer
After you’ve looked around and found a house or condo you like, it’s time to make an offer. The question is: how much? Many buyers make one that’s 8 to 10 percent below the asking price. This gives you some room to negotiate with the seller. However, this a general strategy and might not work in high-demand locations. In a seller’s market, you might have to offer closer to the asking price. Just remember not to offer more than you can afford to pay.

Good Faith Deposit
This demonstrates the buyer is making a serious offer to the seller. The amount varies but can be several thousand dollars. Either the real estate agent or the seller’s lawyer holds the deposit in trust until the deal closes. Then the money is credited toward your down payment and your share of the closing costs. Depending on the terms of your contract, you may lose your deposit and be sued for damages if you decide not to close on a deal once your offer has been accepted. Your deposit will be returned if the seller does not accept your offer.

The Contract
If the seller accepts the offer, a contract is drawn up. It is a legal and binding obligation, on the part of the buyer, to purchase the property if the contingencies are met. It outlines transaction details, such as the sale price, the closing date, the possession date, a description of the property and any applicable contingencies.

Contingencies
Certain requirements are specified in a contract that need to be met before the deal can be closed. They usually include buyer’s securing of financing and an acceptable home inspection. Generally, financing contingencies run for 30 days. An inspection contingency usually covers 10 to 14 days from the acceptance of the contract. But in a seller’s market, buyers might be asked to fulfill their contingency requirements more quickly.

Home Inspection
This is for the buyer’s protection. Most people don’t know all the structural problems to look for when inspecting property. A professional can conduct a complete examination of a house or condo to assess its condition. The buyer should make it a contingency in the contract that if the home fails inspection, the offer can be withdrawn.

Settlement Statement or HUD-1
Also called a “closing statement,” this is a document that the Department of Housing and Urban Development (HUD) requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party -- the escrow agent -- to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement. To ready your finances and lessen the chances of any surprises at closing, ask your lender if they can get you a copy of your complete HUD-1 at least 48 hours in advance.

Closing Documentation
There’s more paperwork to be done before you’re finished. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner’s insurance. You must have insurance to get a mortgage.

Closing Costs
Closing costs vary. Your lender will give you a good faith estimate on these costs, but understand that some costs, particularly pre-paid interest, can change before the actual closing date. Some closing costs include:

• A lender’s inspection fee

• The cost of title insurance

• A loan origination fee

• An appraisal fee

• The cost of a credit report

• A mortgage broker fee.

Final Arrangements
You need arrangements to activate utility services, and you must you’re your first mortgage payment before the deal is closed and you take possession of the home.

Settlement
Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.

The role of real estate lawyers
Whether you're buying or selling, a real estate lawyer is an essential part of your team. Here are some of the services he or she should provide.Whether you’re buying or selling a home, your team of expert advisors should include a real estate lawyer as well as a REALTOR®. Your REALTOR® can help you find the right house or the right buyer and negotiate a price and closing date that are right for you. Your lawyer can review any offer you make or receive and make sure that your rights are protected and your duties clearly defined.

If you’re ready to make or accept an offer on a property, and haven’t retained a lawyer yet, make the offer contingent on a lawyer’s review and approval before you sign a binder.

There are non-legal services that claim they can do all the legal work you need. If you’re tempted to save a few bucks this way, remember that lawyers belong to a regulated profession with standards they must meet and insurance to cover damages if they make an error or omission. You don’t necessarily have the same standards or recourse dealing with other advisors. And this isn’t the time to do-it-yourself. Although many legal forms used in real estate are similar, binder or purchase and sale agreement forms vary from state to state.

Further, some title insurance companies and mortgage lenders require you to use a lawyer to ensure that, among other things, the title is good, there are no liens against the property, and that the deal will close as anticipated.

A lawyer’s role can be as broad as you want. And while it is not typical in a real estate transaction, you can ask that your lawyer describe his or her work and fees in writing before you proceed.

If you’re buying a home, your lawyer should:

• Help you understand the purchase contract, including how you will take title on the property.

• Check that there are no covenants, easements, liens, etc. registered against the property that will impede your use of it.

• Prepare and register all the legal documents.

• Clarify the terms of the mortgage and work with your bank, if necessary, to modify them.

• Scrutinize the adjustments, including taxes owing and utilities costs paid, prior to the transaction closing.

• Attend the closing and review all the papers you will be required to sign.

• Arrange title insurance protection to protect you from losses due to title defects.

• Ensure you receive a valid registered ownership subject only to the liabilities you have accepted.

If you’re selling a home, your lawyer should:

• Review the binder and review or prepare the purchase and sale agreement, including negotiating its terms.

• Prepare the deed and power of attorney if necessary.

• Deal with title issues as they arise and help correct them.

• Attend the closing and review all the papers you will be required to sign.

• Arrange for transfer of security deposits.

• Arrange for insurance certificates if needed.

How much does this all cost? Typically, legal fees are higher when you buy than sell because the role of the buyer’s lawyer is more extensive. Most fees range from $500 to $1,500 for an average home whether you’re the buyer or the seller.

Some lawyers charge a flat fee for specific services and others bill by the hour. If you are paying by the hour, make sure you understand what the final cost is likely to be and insist on a regular accounting for charges. Usually, a lawyer can easily estimate costs related to a real estate transaction and his or her fees will only go higher if something goes wrong. Remember, even if your deal does not close, you’ll still owe your lawyer for his or her time.

The next steps after a home offer
So you’ve found the perfect home and made an offer. Now what? Here are the important next steps. So far, so good: You were pre-approved for a mortgage, hired a helpful real estate agent, found a beautiful home and submitted your offer. What comes next? Making an offer is exciting, but it’s only the beginning of the home-buying process. Here are eight important steps that can guide you through to closing:

1. Wait for the response. After your agent submits your offer, the seller has three options: he can accept it, reject it outright, or respond with a counteroffer. If the seller rejects your offer without coming back with one of his own, it may be because your price was too low. It could also be that your offer included certain conditions that were unacceptable to him. Or perhaps he received multiple offers, and one of them was a higher bid. Often, however, sellers will send back a counteroffer, usually asking for a higher price. Or sometimes they’ll request a more favorable closing date or a change in one of your conditions. You must then consider whether or not to accept their counteroffer or make a counteroffer of your own.

2. Hire a settlement agent. Once you and the seller have agreed on an offer, you need to begin the paperwork. A settlement agent (also called a closing agent) can help you through this part. The agent, often a lawyer, can take care of the title search, obtain a property survey, ensure that any prepaid taxes and utility charges are divided fairly and handle any other legal requirements of the sale. If you are selling your current home as well as buying a new one, the settlement agent can also work with your lender to make sure you meet all your mortgage obligations and that all the funds are properly disbursed.

3. Get a home inspection. It’s always a good idea to make your home offer conditional upon a home inspection, if the seller will accept it. A professional inspector can identify trouble spots such as a cracked foundation or a rotting roof. A specialized inspection can also be conducted to detect the presence of termites. You can then request that either such problems be fixed or the price be reduced to compensate.

4. Arrange home insurance. Your mortgage lender will require that you take out a home-insurance policy to protect your home and the lender’s investment. Find out if any special coverage must be included (flood insurance, for example) and shop around for the best deal.

5. Start packing. Even though your moving day may be months away, start boxing up seldom-used items now -- packing takes a lot longer than you may think. If you’re planning to use professional movers, call around and get quotes from two or three companies. The pros can also provide you with boxes and tips for efficient packing.

6. Redirect your mail. In all the chaos of moving, it’s easy to forget basic things such as asking the post office to redirect your mail, or changing your newspaper and magazine subscriptions. Remember to notify your utilities, financial institutions and anyone else who needs to know your new address.

7. Prepare your kids. If you have young children, help them prepare for the move by talking about the changes they’ll experience. Reassure them that they will make new friends and that their current friends can still visit (if that’s realistic). While you’re at it, contact their new school as soon as possible to inquire about registration.

8. Close the deal. Before closing day, be sure to get a copy of the final settlement statement (also called a HUD-1) from your settlement or escrow agent. It will list all of the final closing costs for you to review and give you a chance to make sure there aren’t any discrepancies. Then, all that’s left at closing will be to sign those final documents, pay the outstanding balance and you will get the keys to your new home.

Contract on a home: your next steps
You've signed a contract to purchase a home. Now what? Here are the next steps you need to take. You’ve been searching for the perfect house. At last you’ve found it, and you make an offer. The seller accepts it, and now you have a contract. What happens next?

1. Contact your lender
Once you sign a contract on a house, things can move rather quickly. If you have been pre-approved for a mortgage, you need to make sure all the necessary paperwork has been completed in order for you to obtain final approval. Contact your lender and provide whatever additional information is required.

2. Arrange a home inspection
It’s always wise to have a professional home inspector go through the home to see if there are any problems that need to be addressed. If you have stipulated in your contract that your offer is conditional upon inspection, then you will able to negotiate with the seller regarding any necessary repairs. The seller will then have to make appropriate arrangements to correct those issues.

3. Remember small details
There are numerous small details to take care of once you sign a contract on a home. You must change your address and change over your utility billing for the new home. You need to make moving arrangements. Don’t forget to contact your insurance company to set up homeowner’s insurance. Also, be sure that all of your funds are in order for closing.

4. Take a final walk-through
Prior to closing, make sure to take a final walk-through of the home. This is an important last step. It ensures that any repair issues that were included in your contract, and raised during the home inspection, are taken care of, and also that the house is ready for you to move in.

Remember, there’s always a flurry of activity once you have a contract on a home. Keep a list to help make sure that you have done all that you need to do. This should help your home-buying process go smoothly.

Fees and costs of a home sale
Expect to pay for commissions, inspections, insurance, taxes and other items. Many home buyers and sellers are mystified by the long list of expenses associated with buying or selling a home. Items like title insurance, recording fees and doc stamps may be especially unfamiliar to first-time buyers.

The types and amount of fees vary from one locale to the next. Who pays is determined largely through negotiation between the seller and buyer.

Here, then, is a list of the typical fees and expenses:

• Home inspection: A home inspector examines the visibly accessible areas of the property and prepares a report about the physical condition of the home.

• Pest-control inspection: A pest-control operator examines the property and prepares a report about the presence or absence of termites or other wood-destroying pests and any damage to the home caused by such pests.

• Other inspections: Additional inspections may be obtained to determine whether the home is structurally sound or contains any environmental hazards (e.g., asbestos, lead-based paint, radon or certain types of molds), among other issues.

• Homeowner’s insurance: Homeowner’s insurance protects the property owner from certain losses in the event of fire, theft or other specified casualties. Insurance is typically required to obtain a mortgage since the property is the lender’s security against the loan.

• Specialty insurance: Some homeowners elect to purchase additional insurance to protect against such risks as flooding, earthquake damage or other hazards that aren’t covered by homeowner’s insurance.

• Homeowner association fees: A home that’s located within a planned-unit development (PUD), condominium complex or other area governed by a homeowner association may be subject to dues and assessments for the upkeep and repair of common areas such as parking structures, landscaping, parks, private roads, recreational facilities and the like.

• Closing agent fee: The closing agent makes sure all the documents and monies related to the home sale are properly organized, processed, notarized, handled, accounted for and disbursed. The closing agent may be a real estate attorney, title company or escrow company.

• Title report: A title report is a history of the current and prior ownership of the property and any liens, encumbrances, encroachments or easements. Title reports are prepared from public and title company records.

• Title insurance: Title insurance protects the lender and property owner from claims against the ownership of the property that were not disclosed in the title report. Title policies may contain endorsements to address specific risks.

• Survey: A surveyor identifies the physical boundaries and characteristics of the property, including the location of any structures, wells, fences, utility easements and other items.

• Recording fee: A recorder’s office is a governmental authority that creates, maintains, updates and makes available official public records of property ownership.

• Property tax: Many government authorities collect annual taxes and assessments against real property. These taxes may be a set amount per parcel or based on a percentage of the value of property. Government agencies may also collect fees for trash collection, road maintenance or other services.

• Transfer tax: Some government authorities levy a tax when a property changes ownership. The amount typically is based on the value of the property. This tax may be called "doc stamps," a reference to postage-like stamps affixed to a deed to prove payment of the tax.

• Real estate brokerage commission: This commission is paid to the real estate brokers who arranged the sale of the home. It is usually a percentage of the sales price negotiated between the seller and listing broker.

Closing Costs Checklist
It is important to carefully compare closing costs between lenders before selecting a loan. Closing Cost Descriptions

We recommend that you carefully compare closing costs between lenders before selecting a loan. This task is complicated by the fact that different lenders and brokers use different names for the same item. All lenders and brokers are required to provide you with a Good Faith Estimate detailing the services you may be required to get and pay for in connection with your loan.

This Good Faith Estimate will give you a way to compare loans and see what your closing costs would be. Below you will find a list of coded names that describe the different fees, which may be associated with the services previously mentioned. These codes and names correspond to those found on the HUD-1 Settlement Statement.

Broker Fees
700 - Sales/Broker’s Commission: If you use a real estate agent or broker to buy a house, the seller (not you) of the house will usually pay a fee to the real estate agent/broker. This commission is usually a percentage of the sales price.

Lender Fees

• 801 - Loan Origination Fee: A fee to cover the lender’s costs for obtaining financing and administrative costs, most often expressed as a percentage of the loan amount (1% = 1 point). Can be a flat fee and/or paid by sellers and third parties.

• 802 - Loan Discount Fee Discount Points: Often called "points", is a one-time charge to you from lender to lower the interest rate on your loan. Generally, the more points you pay, the lower your rate. Each point is 1% of the loan amount. For example, if you have a loan amount of $100,000, one point would cost you $1000. Sometimes you will see offers with negative points. Negative points refer to money paid to you that can be used to offset your other closing costs. You will usually see a higher interest rate with negative points.

• 803 - Appraisal Fee: The appraisal fee covers the cost of evaluating your home to estimate the fair market value. The appraised value of your home is used to calculate LTV. See LTV for more information.

• 804 - Credit Report Fee: This fee covers the cost of obtaining a credit report, which shows how you have handled other credit transactions. The lender uses this report in conjunction with information you submitted with your Q-form regarding your income, outstanding bills, and income to determine whether you are an acceptable credit risk, how much the lender can loan you and at what interest rate.

• 805 - Lender Inspection Fee: This covers inspections by the lender or outside inspector of your house/property. Most often associated with new construction.

• 806 - Mortgage Insurance Application Fee: You may be charged this fee to process an application for Mortgage Insurance (MI) if needed.

• 807 - Assumption Fee: The assumption fee is a charge to you, if you take over the existing mortgage on the house you are purchasing. For example, if you are buying an existing house from someone you may have the option to take over the mortgage that the seller is paying.

• 808 - Mortgage Broker Fee: If you use a broker to get a loan, any fees charged by the broker are listed here.

• 809 - Underwriting Fee: A cost to cover the final analysis and approval of the mortgage; often the lender’s cost to the investor who will subsequently purchase the loan.

• 810 - Tax Service Fee: A fee paid to set up a service which identifies the payment due date of local taxes for the servicer of the loan.

• 813 - Processing Fee: A fee charged by the lender to cover costs associated with the processing and closing of a mortgage loan.

• 814 - Application Fee: A fee to reimburse the lender for internal costs associated with initiating the application process.

• 822 - Flood Certification Fee: Since your house is collateral for your loan, the lender wants to be sure the property is not in a flood zone. This fee covers obtaining a report from the Federal Emergency Management Agency (FEMA) that indicates whether or not your property is in a flood zone. If your home is located in a flood zone, you will need to get flood insurance. Most homeowner insurance policies do not cover flood damage. This only covers the report and not the insurance if needed.

Lender Pre-paid Items

• 901 - Interest: Lenders require you to pay the interest due on your mortgage from the close date to the first day of the following month. The interest due is calculated using the loan’s interest rate, the loan amount and the number of days until your first payment. For example, if you close on the 11th of March, you will pay 21 days interest (3/11-3/31) assuming your first payment is May 1st. Mortgage interest is always collected in arrears therefore you will pay the April interest in the May payment using the example above.

• 902 - Mortgage Insurance: Premium Lenders usually require Private mortgage insurance (PMI) when your LTV (loan amount divided by property value) is greater than 80%. The insurance protects the lender in case of loan default.

• 903 - Hazard Insurance: Premium Since the property is collateral for the loan, you will be required to insure your house. At closing, you must pay the first year’s premium or prove that you already have coverage (if refinancing). If you are purchasing a condominium, your association policy will already cover your unit and you will not need to make this payment. Homeowner’s insurance covers you against damage from fire, wind, and other natural hazards. Flood damage is usually not covered by a Homeowner’s Insurance Policy.

Escrow Account Deposits
An escrow account is an account used when the lender will be paying your homeowner’s insurance and property taxes on your behalf. You prepay the amounts and the lender pays the costs as they come due. You will probably have to pay an initial amount to start the reserve account.

• 1001 - Hazard Insurance: This fee represents the amount the lender withholds to ensure you pay your homeowner’s insurance on time. Typically, the lender will require you to pay two months of premiums at closing, and then the remaining payments are included in your monthly payments.

• 1002 - Mortgage Insurance: If you need private mortgage insurance (PMI), you may be required to prepay those premiums. Remember to reference canceling mortgage insurance to see when you can stop paying it.

• 1003 - City Property Tax: If your property is in a jurisdiction where city taxes apply, you will be required to pay a portion of the taxes at closing.

• 1004 - County Property Tax: The amount of property tax you owe can vary dramatically by county and the date you purchase your home.

Title Charges

• 1101 - Settlement or Closing Fee: This fee pays for the services of the escrow holder or settlement service that handles all the financial transfers and payments associated with the closing process. The title company sets these fees.

• 1102-1104 - Title Fee: Title fees may include title search, title examination and title insurance.

• 1105 - Document Abstract Preparation Fee: Lenders or title companies may charge a fee to cover the costs of preparing the final legal documents required for closing.

• 1106 - Notary Fee: This fee covers the cost of a person licensed as a notary public to swear to the fact that the individuals named in the documents are the actual persons that signed them.

• 1107 - Attorney Fee: You may be charged a fee to pay for legal services of a settlement service provider at closing. The lawyer will usually oversee the signing of the documents.

• 1108 - Title Insurance: The total cost of your and lender’s title insurance.

• 1109 - Title Insurance Lender’s Coverage: Protects the lender against loss due to problems or defects in connection with the title. The face amount of coverage is usually written for the amount of the mortgage loan and covers losses due to defects for problems not identified by title search and examination.

• 1110 - Owner’s Title Insurance: This fee covers the part of the title insurance policy that protects the owner against loss due to disputes over ownership of the property. The owner’s policy is not necessary for a refinance transaction as the existing policy remains in full force and effect, if obtained when you purchased your house, for as long as the owner owns the property.

• 1112 - Carrier Fee: A fee paid to an overnight delivery service for delivery of mortgage documentation.

Government Fees

• 1201 - Recording Fee: After you close, your mortgage is recorded at the county office to make record of your mortgage.

• 1202 - City/County Tax/ Stamps: You may be charged tax on your mortgage by the state the property resides in.

• 1203 - State Tax/ Stamps: You may also be charged tax on your mortgage by the state the property resides in.

Additional Settlement Charges

• 1301 - Survey Fee: Your lender may require a surveyor to conduct a survey of your property. A survey determines the exact location of the home and the lot line, as well as, easements and rights of way. This also protects you to ensure you have record of your property boundaries and size.

• 1302 - Pest Inspection Fee: This fee covers the cost of inspections for termites and other pest infestation.

• 1303 -1305 - Lead-Based Paint Inspection Fee: Houses built prior to 1978 may be required to have an inspection for lead-based paint hazards.
  This information is adapted from "U.S. HUD" .

Steps to a Smooth Closing
How to keep everything in order when closing on a home. A home is the biggest purchase most people will make. It can be particularly daunting your first time, and the last thing you want is an unforeseen complication.

So from deciding you want to buy a home to closing day, here’s a list of tips to make sure everything is in order:

• Go mortgage shopping. Do you go to several dealers to get the best price on a new car? People who want to save money do. A mortgage should be no different. Many lenders specialize in certain types of loans, regions or credit histories. Make sure you shop around and compare offers so that you’re working with the lender that best meets your needs. There are numerous things to consider: the type of mortgage, the term, the lender. Get as much information as you can.

• Get pre-approved. Before you get too involved looking for a home, go ahead and get cleared by a lender. By being pre-approved, you know how much you can afford on a new home. You can also present the seller with more attractive terms and negotiate a better price. It also gives you an edge over other buyers who don’t have financing arranged yet.

• Save money for closing costs. You will also need to reserve some funds for closing costs Expect these one-time fees and charges to range from 2 percent to 6 percent of the loan. Your lender will give you a good faith estimate of these fees so you’re not caught by surprise on closing day. Be sure to review it and ask your lender about any fees you don’t understand. These costs must be paid in cash (usually a certified check) at closing and cannot come from borrowed funds.

• Hire a home inspector. You should never agree to buy a home until it passes a top-to-bottom inspection. Often, your real estate agent can suggest a home inspection company. Be sure to get a detailed, written report and attend the inspection so you can ask questions and discuss concerns. Sometimes an inspection will turn up problems that aren’t deal-breakers but are things you might ask the seller to fix.

• Title search. To be sure you’re buying the house from its legal owner, your lawyer should search the title records. This fee is usually paid at closing. Your lawyer also needs to confirm during the search that there are no liens (claims on the property as security for money owed), overdue special assessments or other claims or outstanding restrictive covenants filed on record.

• Get home insurance. Before closing, your lender will require proof of a valid homeowner’s insurance policy. As with your loan, shop around for the best value. If your new home is low-lying and near a body of water, check into separate flood insurance too.

• Set a move-in date. When you sign a purchase agreement, you and the seller need to decide when you will take possession of the home and when you will move in. Put the agreement in writing. If you plan on hiring a professional mover, compare rates and services. Get recommendations from previous customers.

• Get a copy of the settlement statement. Before closing, make sure your lender gives you a copy of the settlement statement (also known as a HUD-1). It indicates the total amount of money you will need at closing to cover the balance owed on the property and other disbursements. It also gives you a chance to iron out any discrepancies. You will then be prepared at settlement to pay the outstanding balance so the title can be transferred over into your name.

Checklist: Contract Terms and Clauses
We all know far to well that the idea of combing through a contract may be unappealing, there are numerous key points all of us should be familiar with and understand. When a purchase contract is set before us, many of us may find our eyes glazing over. While the prospect of combing through a contract may be unappealing, there are key points everyone should be sure to understand. Here are some common terms and clauses in a purchase contract. Clarify with your REALTOR® if there is anything you don’t understand.

• Name of buyer(s) and seller(s). It seems obvious, doesn’t it? If you are the buyer, make sure to fill in your name as you would like it to appear on the deed. If there is more than one buyer, list the names of all co-buyers.

• Legal description of the property. Make sure the description is specific, particularly regarding city limits, school districts and rural properties, and includes any relevant zoning information, as well.

• Down payment or deposit information. Often, a buyer will offer a deposit (usually $1,000 or one percent of the purchase price) with an offer. This amount should be held in escrow (by an attorney or a REALTOR®’s trust account) until all conditions of the contract have been met.

• Purchase price. Both parties will negotiate the amount until an agreement is reached. The contract should list the final agreed-upon price, as well as the exact terms of sale.

• Closing date. This is the date the deed will change hands. If you are the buyer, it is the date the home will officially become yours. If you are the seller, you will need to move out by this date.

• Personal property included in the sale. This includes any appliances, furniture or other items included in the contract. Include a detailed description of all personal property items, including the make and model of any appliances.

• Disclosure of defects and lead paint disclosure. Some states, such as California and Maine, require the seller to disclose any known defects about the property in writing. If the house was built before 1978, the seller is required to include a lead-based paint disclosure as part of the contract. If the property was built after 1978, this disclosure becomes optional.

• Contingencies. If the sale is dependent on the buyer’s mortgage financing, the details of the financing should be included in the contract. The buyer can even list things such as expected interest rate and mortgage terms.

• Inspections. An acceptable property inspection should be a condition of sale. If there are other, specialized inspections to be conducted (such as a termite inspection), they should be listed here as well. Include a clause that indicates who takes on the cost of repairing problems found during the inspection process -- the seller usually assumes the cost of major repairs.

• Home warranties. If a home warranty has been purchased, information should be included in the contract.

• Title insurance. Information about title insurance should be listed in the contract. There should also be a clause identifying how to handle potential problems that arise during the title search.

• Commission information. The contract should stipulate who pays the agent’s commission and how much gets paid.

• General contingency clauses. Some contracts include a general clause that allows the buyer a few days to review the agreement with an attorney or other professional.

• Signature. This is the famous dotted line. Both the buyer and seller should sign only when they are comfortable with all terms in the contract.