FAQ’s
Here are answers to commonly asked questions:
Q. Do I have to be completely moved out of my house before closing day?
A. In most instances, YES. The seller is required to move out of the house, and have it in the same or better condition than when the buyer submitted the contract. Prior to closing, the buyer’s agent will take the buyer through the property to do a “final walkthrough” to be certain that they are getting what the seller had agreed to (no missing fixtures, holes in walls, etc). The buyer will be signing an acceptance at closing stating that they have viewed the property prior to closing and are satisfied.
It IS possible for the seller to do what’s called a “Post-Occupancy Agreement” which allows the seller to remain in the home for a pre-determined length of time, after the closing, with the seller paying the buyer a daily rent until they vacate. This would have to be agreed upon DURING negotiations of the contract, and not after the fact.
However, the seller needs to be aware that this cannot be a long period of time, because the buyer’s homeowner’s insurance will not cover them, and the insurance company may require the buyer to switch it to “renter’s” insurance if the time is lengthy.
In the event that the buyer agrees to let the seller stay in the house after closing, it is recommended that a “security deposit” be held in escrow by the closing attorney that will not be released until the buyer has inspected the property after the seller has moved out. Again, this is an amount that is negotiated between the two parties.
Be aware that MOST buyers are not going to be agreeable to this type of arrangement, and will want to take possession of the property at closing.
Q. What happens if my house doesn’t appraise at or above the contract price?
A. Written within most contracts, there is verbiage that states that the property must appraise at or above the purchase price, or the contract will be null and void.
Should an appraiser value the property at a lower amount than what the buyer and seller have agreed upon, the buyer will now have the option to move forward with the sale (if they are paying cash), or cancel the contract. If the buyer is depending on financing from a financial institution, their institution will only lend them what the appraisal value is. If the buyer chooses to move forward, they would have to come up with the difference in order to make it work, or they will have to cancel the contract.
The seller does have the ability to accept the price of the appraisal, renegotiating with the buyer, BUT the buyer must still accept the property at that price, and may decide that the house wasn’t the value they thought it was, and can decide to not continue with the contract.
Q. How much Earnest Money is required to put down on the property when making an offer?
A. This amount will depend on the area that you are purchasing property in. In Pearl River County it is common to have a $500 earnest money deposit for properties under $100,000. $1,000 would be the common earnest money for a house between $100,000 to $300,000, and then the amount can go up substantially the higher the price of the home is.
Please keep in mind that there is no set amount, and this amount can be negotiated in the contract. Sometimes, if the seller is being asked to move rather quickly for a quick closing, the buyer may be asked to put down more than the “traditional” amount to give the seller peace of mind that they will follow through with the contract.
Q. What happens to the Earnest Money if the contract falls through?
A. If the contract becomes null and void for any reason spelled out in the contract (ie Home Inspection issues, Financing issues, insurance rates, zoning issues, etc) then the buyer will have the right to receive their earnest money back.
Should the contract be breached by the buyer (they decided after all inspection periods that they don’t really want the house, etc), the seller would have the right to demand that the earnest money be forfeited.
However, Sellers need to understand that they are NOT entitled to ALL of the earnest money, should the buyer breach the contract. Only half of the earnest money is given to the seller. The remaining half is split between the Brokers involved in the sale.
Q. Can I move in prior to the closing date?
A. This would have to be negotiated with the seller. It is possible, by completing a “Pre-occupancy Agreement”, but realize that this might not be favorable to the seller because they are still responsible for the house until closing, and their insurance may not allow them to do that. Should the seller agree, the buyer would have to be aware that their belongings will not be covered by the seller’s home-owner’s insurance.
Q. What happens if a deficiency is found during a home inspection that the seller was not aware of?
A. Many times a Home Inspection will uncover things that are needing attention that the seller was not aware of. If there are any deficiencies discovered that were not previously disclosed on the “Property Disclosure Statement”, the buyer has the right to ask the seller to repair/correct the issue, or they can cancel the contract, and receive their earnest money back. If the buyer still wants the house and the seller is agreeable with making the repairs, then they move forward with the contract.
Q. What are the typical closing costs for a Seller in Pearl River County, MS?
A. Typically the seller pays for the Deed Preparation, Wood Destroying Insect Report (WDIR), Well Inspection, Septic Inspection (if applicable), Home Warranty, Survey (if required) and Courier Fees related to the release of their mortgage, and Recording fees.
In the event that the buyer is getting FHA or VA financing, there may be what’s called “junk fees” related to these loans that the lender will not allow the buyer to pay for, so these types of financing can create additional fees for the seller. The amounts would have to be received from the lender, because every loan varies.
Q. Can the Seller pay closing costs for the buyer?
A. This will all depend on the lender’s requirements, but typically the buyer CAN ask the seller to contribute funds to cover the buyer’s closing costs, pre-paids (ie Homeowner’s Insurance, Lender Fees, Taxes, etc), and attorney’s fees. Most lenders will only allow the sellers to pay up to a certain % of the loan value (around 3%).
Keep in mind that when you are making an offer on a property and need to ask the seller to pay for these fees, you need to consider making a good offer. This amount will be subtracted from the seller’s proceeds, and they are in effect taking less for the house than the purchase price shows (because of their contribution to the buyers). If the amount that the seller agrees to pay, puts the offer above what the appraisal value is, then the contract will be null and void, and the buyer may have to come up with additional funds at closing.
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If you have any questions that are not covered above, please contact Michelle Fradella at michelle(at)prchomes.com
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