How the Closing Process Works for Sellers
What happens after accepting an offer?
At first glance, the closing process for someone selling their house in our area may appear to be much easier and less complicated than for the buyer. For sellers, it can be boiled down to the following steps:
- Packing Up
- Inspections, Surveys & Appraisals
- Repair Requests
- Document Signing
- Walkthroughs, Moving Out & Handing Over Keys
But while selling may seem easier than buying, the reality is that there are plenty of details that sellers should know about well before the closing process begins.
Let’s go over what sellers should expect during the closing process, and how to prepare when you’re selling your house in Northern Michigan.
Step #1: Packing Up
Not everyone will want to believe that this is actually part of the seller’s closing process.
But early preparation pays off for sellers during the closing process.
Closing on the sale of your house sometimes can be an anxious time for some sellers. This is especially true when there’s a lot of waiting involved.
This is exactly why it’s a good time to start the often long process of organizing and packing.
The benefits of starting early
Starting the packing process early has the benefit of keeping you occupied, productive and looking forward. And when the time has come to move out, you’ll be ready to go at a moment’s notice with plenty of time to spare. All good things!
Another consideration for getting ready to move early is the time of year and the weather. In the Harbor Springs and Petoskey areas, movers, moving trucks and storage units can be relatively hard to find or fully booked many months in advance.
During summer, our area’s population swells and our services are strained due to increased demand. Then during the fall and winter months, everything from hunting season, cold weather, snow, and vacations play big roles in service availability.
So take it from my wife: planning ahead and getting an early start will help prevent most unanticipated or last minute delays.
Step #2: Inspections, Surveys & Appraisals
You and the buyer have by now signed a purchase agreement, and they have deposited their earnest money into escrow.
Now starts the buyer’s due diligence period followed closely by the underwriting period (if the buyer is getting financing). If you haven’t already, it’s time for you to prepare for their inspections.
Prepare for buyer inspections
As part of your purchase agreement with the buyer, a period of time will have been set aside for them to get a closer look at your home and property. They will send in property inspectors and perhaps other professionals to give them an honest assessment.
Hopefully, your agent would have advised you to get a pre-inspection to identify items that need repairs or replacing well before the buyer’s team has had a chance to find them. This would have given you a head start and ensured that your house passes the buyer’s inspection with flying colors. But whether they did or not, you will want to get started fine-toothing your house and property as best you can.
Remember, an inspection is going to happen and you will have to lay your cards on the table sooner or later. So from here on out your goal should be to eliminate any possible causes for your deal not to go through.
A good way to start is by going through the house with another person while making a list of anything that needs fixing. Again, this really should have been done well in advance and if I were your agent, I would have long ago stressed its importance.
Focus on the following (within reason):
- Anything that was identified in your pre-inspection (if applicable).
- Electrical outlets and switches should all be working correctly; wall plates should be undamaged.
- Replace any missing or burned out lights.
- Air filters should be clean and/or changed.
- Get your furnace cleaned or professionally maintenanced.
- Make sure the air conditioning is working.
- Plumbing: check that all faucets, tubs, showers and toilets function properly; fix any leaks and clogs.
- Clean out exhaust vents from your dryer.
- Fireplaces should be functioning and clean.
Appearances do matter for inspectors (and certainly for buyers). So take some time to dust, wipe down and clean up your mechanical room and all other equipment.
Now all you have to do is await the results of the buyer’s inspections. But having done all you could to mitigate any potential problems ahead of time, you’ll be in a better position than most.
Buyer surveys and lender appraisals
Also during this time, you’re likely to have a surveyor visit your property and stake its boundaries. The survey is ordered by the buyer to make sure there are no problems with lot lines, setbacks, etc.
Finally, if your buyer is getting financing, the lending institution will order an appraisal. It’s important to remember two things about the lender’s appraisal:
Neither you nor the buyer really have any “control” over this.
Everyone wants the appraisal to go well.
The appraisal will tell the buyer’s lender whether the property is worth the amount of the loan requested by the buyer to purchase it.
As the seller, you won’t hear much about the appraisal unless it’s results confound the buyer’s ability to close the deal. But hearing that the appraisal came back supporting the loan amount is always good news.
Step #3: Repair Requests
This stage of closing is vitally important. And a really good agent will have taken the time to prepare you for what’s possibly to come.
Having cleaned and fixed any major issues prior to the buyer’s inspections, you’ll be much less likely to encounter a long or potentially expensive list of valid repair requests coming from the buyer after their inspections.
But when there are repair requests, you will have your choice of at least three ways to deal with them.
Agreeing to fix the problems
When repair requests are reasonable, agreeing to the fixes is usually a good idea. This is a really good way to avoid causing unnecessary problems that could negatively effect your deal.
Fixing most if not all reasonable repair requests keeps your buyer happy and further demonstrates your good faith commitment to your purchase agreement. And this may come in handy later if needed.
But what if the repair requests are unreasonable? That’s when it’s time to consider your next two options.
Instead of fixing items from a buyer’s repair request, some sellers may wish to negotiate the cost for the repairs out of the purchase price.
This is understandable, as many sellers may not wish to get involved with time consuming repairs especially if they’re for large or complex items like a water heater, furnace or roof.
In this case, your next step is to consult with your agent and at times trades service to find a fair price for the repair. From there, it’s up to your agent to carefully negotiate with the buyer. This is where an agent with clever nuance and superior negotiating skills comes in handy.
But it’s also important to remember that this message usually gets to the buyer through heir agent, not yours. This again underscores the importance of having a sharp and capable agent on your side.
Negotiating with the buyer during this stage of closing is pretty common, especially in a market that doesn’t not favor the seller (as it did from 2021 to 2022).
Our advice for sellers is to understand that every deal and every buyer is different. Always negotiate in good faith, never take anything personally, and keep your eye on finish line.
Refusing the buyer’s repair requests
While not always the best approach, refusing to fix some or all of the requested repairs is always an option for sellers.
There are many reasons sellers may not be receptive to a buyer’s requests for repairs. These might include that it’s a seller’s market and there are plenty of other buyers with interest in your property. Or, a seller may not have the time or money to spend on a repair, and are unable to do it themselves. Of course, some repair requests just may be unreasonable.
Whatever the reason, sellers taking this option should always be advised that if the requests they are refusing to fix are reasonable, they run the risk of upsetting or blowing their deal altogether. It’s up to you to decide whether that’s worth it or not.
The best option
Often, the best solution is to carefully consider each request from the buyer and compromise where you can. Then use your agent’s negotiation skills to work out the rest. If your agent is competent and the buyer’s agent is at least somewhat cooperative, you should see the best of outcomes.
Any agreements made pertaining to repairs will become part of your already signed purchase agreement via an addendum.
Step #4: Document Signing
You’re in the home stretch!
By now, the buyer and their lender (if applicable) are satisfied with the condition and value of your property. Any repairs and negotiations also have been addressed.
Now it’s time to review and sign some final documents.
Meet the closing agent
Usually a few days before the closing date, you’ll be contacted by the closing agent. In Northern Michigan, this is usually, but not always, an officer at the title company.
It’s important to remember that the closing agent is a neutral third party in your transaction. This means that they neither represent the buyer nor you (that’s your agent and lawyer’s job).
The closing agent coordinates the transaction by preparing documents, and recording the title changes, and helping you and the buyer through the process.
Date and location of closing
Quite often, closing for sellers and buyers takes place at different times and/or on different days.
As the seller, you will make an in-person document signing appointment or receive the documents via email to sign and return. Either way, you will get the final documents to review in advance.
What happens at closing?
During closing, all the closing costs are deducted from the purchase price. Each and every fee, tax, commission and credit will be specified in the settlement statement.
Any existing liens on your property will be paid off, including the balance of any mortgage loan. Other deductions (debits) you may see include property taxes owed to the date of closing, HOA dues, agent commissions, escrow fees, and transfer tax. The rest is yours to keep.
Some of the common documents sellers may sign for closing include:
- Settlement Statement
- Closing Disclosure
- Warranty Deed
- Real Estate Transfer Tax Valuation Affidavit
- Certificate of Title
- Loan Payoff
- Bill of Sale
- Closing Agreement
- Acknowledgement of Property Transfer Affidavit and Homestead Exemption
You’ll especially want to review the Settlement Statement to make sure all the amounts listed as debits and credits are correct. But depending on the terms of your transaction, various other documents may require your review and signature.
The closing agent is usually the best professional for requesting more information and asking questions pertaining to any of the documents you’ll be required to sign.
Remember, everyone involved in your closing will understand that it isn’t an everyday event for you. My advice is that there are no such things as dumb questions. If you’re unsure about something, just ask.
Step #5: Walkthroughs, Moving Out & Handing Over KeysIf you’ve followed my advise in the previous steps, this day should be full of joy and excitement for the future. There are just a few more things to expect in these final days.
Remember your mail and address changeIf you haven’t already, you will want to have all your mail forwarded to your new address, a temporary address, or held at the post office. You also will want to change the address for all of your subscriptions, credit cards, and inform all of your friends and family.
UtilitiesAny utilities in your name should be canceled as of your actual closing date, as well as any home services may have had.
Buyer’s final walkthroughAlso at this time, the buyers or their representative will want to take one final walkthrough your house. This is perfectly normal and should be expected. The buyers will simply want to be sure that nothing has changed or been damaged since their last inspection. Do your best to accommodate them.
One last checkDepending on your particular situation, you should be fully packed by now and ready to move, or already moved out altogether. But before you leave your house for the last time, you’ll want to make sure that the water is turned off, the heat or air conditioning is set at moderate levels, windows and doors and shut. You should also take some time to do a final walkthrough yourself. Check every room, drawer, cupboard, closet, nook and cranny for personal items that you may have forgotten.
Make it easy for the new ownersRemember that the new owners might feel a little lost at first when taking possession. To help them out, collect all the keys, remotes and any access codes. Label everything with clear instructions for the convenience of the new owner. It’s also customary to leave out any manuals or guides for things like alarms, sprinklers and appliances. Sellers may also put together a list the includes the garbage/recycle days, and the names of any services used at the house for lawn and snow. Place everything into a large ziplock bag and leave in an obvious spot for the new owners.
Send us your questions
Accepting a buyer’s offer is an exciting time when you’re selling your house.
But as we learned about above, there are a lot of things to do before receiving funds and handing over the keys.
So when you have any questions about how selling works, contact us and we’ll be happy to provide you with answers you need.