In 2016, 4% of home sales fell through after the sale was pending but before the sale closed.
Considering all of the work that goes into a home sale before the close, failing to close a deal is disheartening, to say the least. But there are steps you can take to help the home buyers along in the process.
Having all your paperwork in order at the time of closing will help close the deal faster. As such, you should be prepared with all the forms for selling a house before your closing meeting.
But what exactly are those closing documents? We’ll explain a bit about the more important ones below.
Residential Sales Contract With Home Buyers
Of all the paperwork in your home sale, the most important is the residential sales contract. Although this piece of paperwork is what initiates closing, it’s worth talking about.
The sales contract contains all the information related to the sale. That includes:
- the purchase price
- the date of purchase
- the down payment amount
- the date of possession
- conditions (i.e. home inspection,financing)
When your purchase offer has been accepted and both you and the home buyers sign the residential sales contract, the contract is legally binding and you’ll enter into the closing phase of your home sale. The closing date is usually 30 to 60 days after the contract has been signed.
In this phase of the sale, your home sale is considered “pending”. During this time you’ll exchange things like the home inspection report and appraisal report. Then, you’ll need to prepare your documents for the closing meeting.
Closing Documents
To finalize your home sale, there will be a closing meeting. This meeting is hosted at a neutral third-party office. Whether the meeting takes place at an escrow company, a title company, or a mortgage lender will depend on the state in which you live.
If you have a sales agent, you may not be required to attend the closing meeting. However, the buyer and the agent are required to attend. There may also be a title company representative, real estate attorney, and loan officer present.
There are five important documents involved at the closing meeting. We’ll explain each in more detail below.
Closing Statement
The seller’s closing statement summarizes the amount of money you’ll receive from the home buyers. This number assesses and itemizes taxes, closing costs, and any other transaction fees. It lists all the fees and credits and tells you exactly how much you’re owed upon closing.
This document is the responsibility of the closing agent or title company. But to speed up the process during the closing meeting, you can ask for an advanced copy. Ask your agent to obtain a copy for you both to review and ensure the information is accurate.
Most Recent Property Tax Receipts
Your tax statement or property tax receipts will help you calculate the amount of taxes owed on your home at the time of the sale. The estate tax schedule of your geographic location will determine whether taxes are owed when you sell your home.
If the tax schedule in your municipality collects tax based on the following year, and your home is sold halfway through the year, you may be entitled to a refund. On the other hand, if the tax schedule in your municipality collects taxes based on the previous year, then you may owe taxes. You have to pay the taxes owed on your home to the point of the sale.
Make sure you have your property tax receipts and a good understanding of the municipal tax schedule where you live. This will help you figure out the taxes to be credited or charged on your closing statement.
1099-S Tax Form
In some cases, you may need to complete a 1099-S Tax Form for the IRS. This tax form indicates that you don’t qualify for a capital gains tax exclusion. The form tells the IRS you owe taxes on the sale of your home when it’s time to do your annual income taxes.
Title Search
The title search confirms the legal ownership of a property. It involves an examination of public records to find out what claims, if any, are on the property. The title search has to be finished before the title on the property can be given to the home buyers.
The title search must show that the seller is the owner of the property. As such, they have the sole right to sell the property to the home buyers. If there are any legal issues, such as a house lien, those will need to be dealt with prior to closing.
The Deed
Although the two are often confused, the deed is quite different from the title. Whereas the title search is a legal concept that defines ownership and, the deed is the physical document that transfers ownership to the home buyers.
The deed will have the names and information of both the seller and the home buyers. It will also have a detailed description of the property being sold. Once the deed is transferred to the home buyers, they legally own the property.
Sell Your Home Faster (And For Cash)
The process of selling your home is a long one that involves a lot of paperwork. After you sign the sales contract with the home buyers, you should start preparing the closing documents.
The closing documents include the closing statement, the title search, as well as the deed. But you’ll also need to prepare tax documents and ensure those are credited or charged on the closing statement. Having these items ready will help you sell your house faster.
And for the fastest kind of home sale, think about selling your home for cash. Contact us to learn more about how it works.
