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Real Estate Closings FAQ’s

What can I do to ensure a smooth closing?

If you are the seller:

  • Have your attorney review the purchase and sales agreement prior to signing to advise

    you on details in the contract

  • Notify your realtor which attorney you will be using to assist with the closing

  • Send your attorney the fully signed purchase and sales agreement and any disclosures

    you may have signed as soon as it is completed by all parties

  • If you are notified that repairs are required based upon an inspection of the premises,

    contact your attorney as to how to proceed with these suggested repairs. Remember, most contracts have time limits on when you must respond to repair requests; get this information to your attorney as soon as possible

  • Notify your attorney if you have a mortgage(s) or liens on the property and provide your attorney with the most current mortgage statement

  • Inform your attorney as to whether your home has the following: oil or gas heat, current receipt for oil or gas, city sewer and water or well and septic, smoke detectors and carbon monoxide detectors on the premises

  • If you cannot attend the closing notify your attorney as soon as you are aware of this possibility

    If you are the buyer:

    • Have your attorney review the purchase and sales agreement prior to signing to advise

      you on details in the contract

    • Notify your realtor and your lender which attorney you will be using to assist with the


    • Send your attorney the fully signed purchase and sales agreement as soon as it is

      completed by all parties

    • Keep your attorney apprised of appraisal and inspection results so that your attorney may

      assist you with this process. Remember, most contracts have time limits on when you

      must initiate repair requests; get this information to your attorney as soon as possible

    • Respond to all requests for information from both your lender and attorney as soon as


    • If you cannot attend the closing notify your lender and attorney as soon as you are aware

      of this possibility; please note that your lender may require your presence at the closing.

What you need to know about casualty insurance?

This type of insurance commonly referred to as a homeowner’s policy, protects you, the insured, against loss that could be sustained in the future as a result of fire, theft or other mishaps. Because a serious loss could reduce the value of the property below the amount owed to the lender, the lender has the right to be added to your homeowner’s policy as a party who may be entitled to receive a portion of the proceeds in the event of a loss (“loss payee”).

What is flood insurance?

This is a special type of insurance that covers future losses due to flooding, which is not covered by most homeowners policies. If your property is located in an area requiring the purchase of flood hazard insurance, the lender will ask that you demonstrate that you have this insurance and that you have added its name as a loss payee as part of the terms of the financing. As with homeowners insurance, flood insurance covers the risk of any loss due to flooding that may occur during the year for which the premium has been paid. A premium is payable each year.

What is the process of selling a house and buying a new one?

Ideally, sellers sell their homes in the morning and purchase their new home with the proceeds from the sale later that same day. An attorney working with the client will make sure that this happens in this sequence. Typically, a seller gives occupancy to the buyer at the time of closing. However, in some instances, the seller cannot give occupancy to the buyer (because their new home may not be ready for them to move in to). Under those circumstances, a use and occupancy agreement is entered into between the buyer and the seller at the time of closing whereby a firm date is established for the seller to move out of their new home while paying a per diem rent typically based on the carrying charges of the buyer. In a typical use and occupancy agreement, there is an escrow provided and a penalty provided in the event the seller does not vacate the home at the agreed-upon date.

What is private mortgage insurance and do I need it?

This type of insurance protects the lender against a lawsuit due to default by the borrower. This is generally required whenever the loan amount exceeds 80 percent of the fair market value of the property being purchased. It may also be required in other instances. The requirement for this insurance is usually waived after the loan has been reduced to a specific level, but typically there is a mandatory three-year requirement even when the loan-to-value ratio is less than 80 percent. It may last for 10 years.

What expenses should the buyer expect?

Bank expenses fees including but not limited to processing fees, application fees, credit reports, tax service fees, document preparation fees, etc., are less than $1,000 in a typical transaction. Above and beyond that, there may be points. A point equals 1 percent of the mortgage loan amount. This may well be the biggest expense of the buyer. A buyer typically pays a title search fee that is approximately $100 to $275. Title insurance costs approximately $4 per $1,000 of coverage. Attorney fees for representing a bank and the buyer are typically in the $500 to $1200 range and for personal representation $100 to $250 range. Recording fees are typically less than $1,000.

In addition, many banks now require that there be an escrow for taxes and fire insurance, and this typically can be as much as five months’ worth of taxes, depending on when the transaction occurs. In addition to the tax escrow, the buyer reimburses the seller for the taxes prepaid by the seller. It generally works out that between the tax reserve and the amount reimbursable to the seller, a buyer pays seven months of taxes at the time of closing.

The buyer also reimburses the seller at closing for fuel oil, and most fuel oil in the tank the day of closing. The tank is usually topped off at the time of closing, and the buyer reimburses the seller for a full tank of oil. Last, but not least, if required by the lender, the buyer may have to pay for private mortgage insurance, which is sometimes paid for one year in advance. The amount of mortgage insurance varies.

What expenses are typical for the seller?

The seller’s largest expense is usually a real estate broker’s fee, which is usually 5 percent to 6 percent of the sales price. Rates cannot exceed 6 percent for residential closings and are negotiable at the time a seller enters into a listing agreement with a real estate agent. The seller also has to pay a conveyance tax to the state of Connecticut equal to .5 percent (except when the property is worth more than $800,000 or when it is a commercial type of real estate). There is also a town tax equal to $1.10 for every $1,000 of sales prices. Typically attorney fees range from $400 to $900. There will be small recording fees. Also unpaid taxes, sewer and water assessments must be paid at closing.

What is APR?

APR stands for annual percentage rate. It is intended to educate consumers, i.e. borrowers, as to the true cost of a loan. The annual percentage rate takes into account all the finance charges imposed by a bank so that borrowers can compare which rate is a better rate for them. For example, is the contract rate of 7 percent plus two points a better deal than a contract rate of 7.25 percent plus no points? The answer lies with the APR. Every lender must inform a borrower what the APR of the transaction is. Once that is done, a borrower can compare the APR from one lender with the APR of the other lender, and the lower APR is the better and cheaper rate.

What is the purpose of title insurance and is it required?

Title insurance protects against problems in the title to your property. Mortgage lenders now require all borrowers to buy “mortgagee” title insurance that protects the bank for the full amount of the mortgage in case of title problems (such as Indian claims, unreleased mortgages, forgeries, etc.). An “owners” title policy protects the owner’s equity. Premiums are set by the insurance department and vary depending upon the amount of coverage required. It is paid at closing and is paid only once. However, upon refinancing, the new lender will again require a new mortgagee policy (to be sure there have been no intervening encumbrances). Discounts for the new mortgagee policy at refinancing may be available, depending on when the original title insurance policy was issued. Learn more about title insurance by clicking here.

Do I have to personally attend the closing of my new property?

It is usually expected that all parties attend the closing so that any problems that may occur are appropriately addressed. Some sellers choose not to attend and typically pre-sign the closing documents, giving a power of attorney to the lawyer representing them. However, it is uncommon for buyers not to attend the closing since many lenders require a borrower to attend a closing. Exceptions can be made but only if a lender gives prior permission and the lender approves the form of the power of attorney required to close in absentia. If there is no lender, then it is usually acceptable.