We often explain to clients that it is important to have a trusted team of professionals assisting you in all aspects of life, and real estate closings are no exception. In order to find and purchase a home, you need a solid real estate closing team on your side.
Whether you are a seller or a buyer, the realtor is likely the first professional you hire for your closing team. If you are a seller, the realtor is the person with whom you sign a “listing agreement,” which sets forth the commission that you agree to pay when the house sells.
How Much Is The Realtor’s Comission?
In Connecticut, the norm is that the seller pays a real estate commission of between 5-6% of the sale price. The listing agreement generally states that the realtor will split this commission with the realtor who brings the buyer to the closing.
Who Pays The Realtor?
So effectively the seller pays both realtors, even though one agent is representing the buyer. These commissions are paid out of the closing proceeds so there is usually nothing owed to the realtors unless and until the transaction closes.
Can You Renegotiate the Realtor’s Fees?
The listing agreement also states for how long the seller agrees to have the realtor market the home. Usually, the agreements are set for 6-month periods, after which if the house has not sold, the seller can renew the agreement or choose another realtor.
What Does The Realtor Do for Sellers?
The realtor is the person who helps the seller determine the best price to list the home and assists the seller with completing the necessary preliminary documentation, including the Property Condition Disclosure Report.
The realtor also markets the home, provides advice on how to stage the home, and coordinates showings of the home with the agents’ of prospective buyers and through open houses.
What Does The Realtor Do for Buyers?
For buyers, the realtor is the professional who writes the offer. In all counties in Connecticut, except Fairfield County, this offer is written on the Purchase & Sale Agreement, which is a form document produced by the local area real estate associations.
Once the seller signs the offer, it becomes a legally binding contract. Most form contracts include an optional provision that a buyer can check that requires an attorney review of the document once it becomes a legal contract.
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Who Prepares The Real Estate Contract?
While most experienced realtors (and even those who may be new but have the backing of a reputable broker or agency to support them) can prepare a perfectly good contract, adding a legal review is not a bad idea.
Without it, you may be stuck in a contract that is unfavorable if you do not give yourself the right to withdraw if your attorney determines the contract is not favorable.
In Fairfield County, when the offer is signed by the seller, it becomes a binder that then goes to the seller’s attorney to draft in the form of a legally-binding contract.
Who Schedules The Home Inspection?
The realtor is also the professional who helps the buyer schedule the inspection of the property after the offer is signed by the seller. Often the agent may even meet with the inspector and the agent of the seller may be the person to let the inspector into the property.
After the inspection, if there are any requests or agreements based on the buyer’s findings, the realtor may be the professional who prepares the written addendum to the contract. Often the real estate attorney is already involved at this point and will be asked to prepare the inspection addendum.
Who Requests Extensions for Contingencies?
The realtor is also the professional who will request necessary extensions of the contingencies contained in the contract, like the inspection contingency or the mortgage contingency.
These terms are set forth in the original offer and sometimes the dates included in the offer need to be extended. These extensions have to be done in writing because the transaction includes real property.
Who Does The Final Walkthrough?
On the day of the closing, the realtor is the party that generally accompanies the buyer to the property to do a final walkthrough to make sure there is no damage since the buyer’s inspection or other newly-discovered problems with the property.
Many offers include a provision that allows the buyer to have the property inspected within a certain period of time.
SIDE BAR: Even when a property is listed to be sold “AS-IS”, the buyer’s offer could still contain an inspection contingency. And if the seller signs that offer without removing the inspection contingency, then the buyer has the right to inspect the property.
The buyer even has the right to ask for repairs, credits or price reductions based on their inspection findings. The seller does not have to entertain any of those requests, but if the buyer is within the timeframe of the inspection contingency as written in the offer, then the buyer could back out of the contract and get the full return of their deposit money.
When Should You Schedule The Inspection?
So back to the inspector. The contingencies generally range from 10-14 days after the seller accepts the offer, so it is a very quick timeframe and the buyer should be prepared to schedule an inspector when they make an offer.
Does One Inspector Checks Everything?
For many Connecticut properties, you will need multiple inspectors because the professionals who inspect properties, in general, do not often inspect septic systems, water, or pools. Your real estate agent can be a great resource for finding trustworthy inspectors and can even help to schedule their inspections.
What Does The Inspection Include?
The inspector’s report on the overall condition of the property will provide information on all systems within the house and it will highlight the areas that the inspector feels need repairs.
For the water and radon tests, the inspector will usually work with an outside company to do the testing and those reports will be separate.
Who Pays For The Inspection?
For a property with a septic system, the septic tank has to be cleaned out to be inspected, which can be done by the same company that inspects it, although it is generally the seller’s expense to pay for the cleanout, while the rest of the inspection expenses are the buyer’s responsibility.
What if the Inspection Reveals More Expenses?
The inspection report often leads the buyer to want the seller to make repairs or give a credit or reduction to the price so the buyer can use the funds to make the repairs themselves or because they feel the discovery makes the property worth less.
As discussed earlier, these negotiations are often handled by the real estate agent. The written addendum documenting the agreement between the parties can be prepared by the real estate agent or the attorney.
When Should You Look Into Getting a Mortgage?
If the buyer is going to obtain a mortgage to purchase a property, a mortgage broker or lender is part of the process. Often a buyer will contact a lender before they start their search because they want to have a professional opinion on how much they can afford. In that process, the lender can also provide the buyer with a “pre-approval” letter.
SIDE BAR: While many sellers want to see a buyer’s pre-approval letter when reviewing their offer, the pre-approval letter is not a guarantee that the buyer will obtain a mortgage. That is why the mortgage contingency is also an important part of the offer.
The pre-approval letter is based on very basic information, usually provided on the word of the buyer. An actual mortgage commitment and the even more definite “clear to close” takes at least 4-6 weeks and requires more in-depth due diligence by the lender, including reviewing bank records, tax returns, credit reports, and paystubs, having the property appraised, and ensuring that the seller can pass clean title.
What Does a Loan Originator Do?
The mortgage broker or lender will work with the buyer to collect the necessary financial documentation needed to qualify the buyer for a mortgage. The main point of contact is usually called the loan originator.
What Does an Underwriter Do?
This is the person who usually connects with the buyer and manages the coordination of information. When the loan originator has all of the information they need, the file usually passes to an underwriter who will review the documents for the lender.
When the underwriter’s review is complete and determines that the buyer’s finances meet the requirements of the loan, the matter is transferred to the closer, who coordinates the gathering of the final documentation.
Attorney & Real Estate Paralegal
Do You Need an Attorney For The Closing?
Connecticut law requires that an attorney be involved in real estate closings. Further, the attorney cannot represent both the buyer and the seller, so each party will have its own attorney.
What Does a Closing Attorney Do?
If there are no realtors involved or if the property is in Fairfield County, the attorneys will be involved in preparing the Purchase & Sales Agreement. The attorneys may also be involved in preparing and/or reviewing addendums to the contract, like the inspection addendums and the contingency extensions.
The attorney’s office, either the closing attorney or the real estate paralegal, is the professional that handles the title work.
What Is a Title Search?
The title search is a review of the land records to make sure that the seller actually owns the property and has full authority to sell it and to make sure that if there are any liens on the property, they will be paid off at the closing.
Who Orders the Title Search?
The buyer’s attorney will be an agent to a title insurance company and will perform or order and review the title search.
The buyer’s attorney’s office will work with the buyer’s lender to make sure the lender has a review of the title. They will also be in close contact with the lender to coordinate the scheduling of the closing and obtain the lender’s package of documents.
If the lender is obtaining a mortgage, there is generally a substantial number of documents that require review and execution by the buyer at the closing. The attorney is the party who reviews and explains these documents to the buyer.
At the same time, the buyer’s attorney’s office provides the seller’s attorney with the title search, so the seller’s attorney can prepare the proper transfer documents for the seller to sign, as well as to obtain payoff statements for any and all liens that are lodged against the property.
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Closing Attorney Tasks For The Closing
Toward the end of the closing process, approximately one week prior to the closing, the attorney offices work together to agree to adjustments and other financial figures related to the closing.
On the day of the closing, there will be tax adjustments to ensure that the real estate taxes are paid by each party for only the days they each own the property. There are also adjustments for any oil and propane left at the property.
If there are any issues that arise at the final walkthrough, the attorneys for the parties generally handle the negotiations and written documentation to memorialize the final agreements between the parties.
Finally, the attorney’s office is the party that ensures that the deeds and releases are properly filed on the land records and all funds are properly distributed, including paying off any mortgages and other liens of the seller and cutting checks for the conveyance taxes that are due because of the transaction.
Disclaimer: The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only.
Joan Reed Wilson Esq. – Managing Partner
Practices in the areas of estate planning, elder law, Medicaid planning, conservatorships, probate and trust administration, and real estate. Admitted to practice in the States of Connecticut and California, she is the President-elect of the CT Chapter of the National Academy of Elder Law Attorneys (NAELA), an active member of the Elder Law Section of the Connecticut Bar Association, accredited with the PLAN of CT for Pooled Trusts, with the Veteran’s Administration to assist clients with obtaining Aid & Attendance benefits for long-term care needs and with the Agency on Aging’s CareLink Network.
It’s great that you went into detail about how, on the day of closing, the buyer is typically accompanied by the realtor to the property for a final walkthrough to ensure there hasn’t been any damage since the buyer’s inspection or other problems with the property that have come to light. One of the friends of my husband is considering renting an apartment in Indiana sometime in the coming year. Okay, I should probably show her this article so she can find the best agent for her deal.