As part of Wealth's housing week, Thomas & Webber managing attorney Tiffany Webber joins host Brad Smith to share expert insights on the final closing stage, which includes critical inspections every homebuyer needs to do.
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It's housing week on wealth, and we have the home buyers playbook with everything that you need to know about every step of the home buying process from the planning stages to the closing to the first year of your home ownership. So today, we're walking you through that closing process. Joining me now, we've got Tiffany Weber, Thomas and Weber Managing Attorney. Let's start with inspections here. What type of inspections should home buyers be getting?
The thing to know about inspections and appraisals is that most home buyers are only going to purchase a home two, maybe three times in their lives. So this is not the time to skimp out. So budgeting for all of the relevant inspections are extremely important, and those inspection reports can do some important things for you, like helping you negotiate repairs. And if a seller doesn't agree to pay for repairs, at least you know what to plan for for repairs that you may need to make later. Now when it comes to the types of inspections, the most obvious one is a general home inspection, and this is something that, you know, a home inspector will come and take a good look at the property, make sure that it's structurally sound, that it's safe, and that the main systems are in working order, things like your heating and air, electrical systems. Those are the things that a home inspector is looking at. But depending on the property type, you may need some other things. You might need a septic inspection or a well inspection if you're not on city water and sewer. Um, depending on the area that you live in, radon is something that you have to look at. There could be pest, termite inspections that either are things that you decide to do, or depending on the type of loan, your lender may require that you get that type of inspection, and a property survey is a huge one, making sure that you know exactly where the boundary lines are on the property.
Oh yeah, no, that's an important one. We talked about that in my real estate law class. So extremely important point to remember in the inspection process. Walk us through what buyers need to know about closing costs.
Yes. This is something that buyers often think they need three or five percent if they're a first-time home buyer of the purchase price, and that's all they need. But they're forgetting about the other fees and costs that have to be paid at the closing table. And if you're getting a loan, your lender provides you with a cost estimate very early in the process. So I encourage buyers to look at that as soon as they get it, because it will be pretty dang close to what they'll actually pay at the closing table. And you have to consider this when you're budgeting for the amount that you can pay for a home, because if you might be pre-qualified for a $600,000 house, but you only have exactly 3% of that and you can't afford the other fees and costs, then you can't close. So it helps you make sure that you're setting expectations properly when you're reviewing which houses you want to look at and ultimately what you buy. And that list, the lender's estimate is so helpful. Um things that people forget about loan origination fees, the real estate commissions, if a buyer has to pay a portion of the commissions. Lenders have to get all kinds of information, and it's not free to get like your tax transcripts, your credit scores, finding out if you're in a flood zone, you have settlement fees to pay, you're paying title insurance as well, and don't forget about funding your escrow account and prepaid interest on the loan, as well as a whole year of homeowners insurance. So those are easily forgotten, and we don't like for buyers to be surprised at the closing table that they have to pay these items.
Eesh, not at all. So what are some common problems that come up during the closing process?
Usually the biggest one is failure to provide information in a timely manner. Think about a real estate closing as a team sport. So you've got real estate agents, lenders, inspectors, attorneys, or if you're in a settlement state, a title company doing your closing, and all of those people need information. And I like to tell people that if you didn't tell me yourself, assume that I don't know, we would much rather get information twice than not at all, but failure to deliver information is a huge cause of closing delays. Another thing is, you know, not getting the surveys. It can lead to finding out that there are title issues or encroachments that need to be resolved. So making sure that the inspections are done and done in a timely manner really helps.
So what are some tips for home buyers to avoid issues during the closing process?
My favorite one starts even before you're under contract, and it's to review the restrictions on the property. Um in the United States, most properties have some type of restriction. It's extremely rare that there's something completely free of restrictions. So reviewing those restrictions before you're even under contract to make sure you can use the property the way you want. There could be restrictions against certain breeds of animals, and if you've got your beloved pet and you can't move into the house with that pet, that property is not for you. The other thing is communication like I mentioned earlier and the title searches. This is something that as a buyer, if you're concerned that there may be an issue with title, title searches are public record. Title searches can be completed prior to going under contract, or extremely early in the closing process, so that you can get ahead of potential issues and have the seller resolve them before you're running into delays or losing your interest rate lock.
Tiffany, thanks so much. Really appreciate it.
Thanks.