So, the most recent offer on your dream home was accepted—congratulations! You’re one step closer to becoming the owner of your new luxury home.
Now comes the tricky part—closing on your new home. On average, this process takes roughly 47 days to complete.
While you might already be getting anxious, it’s important to remain patient and see the closing process through to completion. Here are nine steps that will help you navigate the home closing process properly!
1. Set up an escrow account
During the home closing process, and particularly with a luxury home that you’re paying a significant amount of money for, large sums of money are going to be changing hands.
These transactions have to be made as safely and securely as possible to ensure that neither the buyer nor seller is cheated in the process. So, the best solution is to get a neutral third party involved—such as an attorney or a title company.
By opening an escrow account, both the buyer and seller are afforded the kind of protection needed to move forward comfortably in the closing process. As specific conditions of the sale are met, the third party distributes money from the account.
After an escrow account has been set up, go ahead and make your first deposit. In some states, you’re only allotted a certain amount of time from when the last party signed the contract to when the first deposit is required.
2. Hire an attorney
While hiring a real estate attorney for the closing process is only required in certain states, there’s certainly no harm in hiring one, regardless.
Ideally, you would have hired an attorney before your contract was even executed. But if not, there is still value in hiring a lawyer during the closing stage. Having an extra set of eyes to look over all of your closing documents can help ensure that you’re not being cheated in any way or susceptible to issues down the road.
3. Schedule all inspections
Nearly 9 in 10 buyers hire a professional inspector to assess the state of the home they’re looking to purchase.
Your contract will typically include a timeline for completing inspections. It’s critical that you schedule each one as soon as possible—and towards the beginning of the timeline—so that you allow enough time to negotiate the price of the home with the seller if there are any findings from the inspections.
Hire a licensed home inspector, and depending on the age of the home, determine whether you will need to include a four-point inspection to obtain a loan or homeowners insurance. A pest inspection will also be needed.
4. Renegotiate the price of the home
As long as you haven’t signed a contract that requires you to accept the home “as is”, you should be able to renegotiate the price of your luxury home relative to any issues that were detected during the inspection process.
Be sure to present all issues to the seller promptly, along with all of the costs required to make repairs or renovations. Much of the time, the seller will be willing to lower the price of the home to reflect these costs.
If the seller is unwilling to budge and you feel that you are overpaying for your luxury home, however, you may choose to back out of your contract and get your escrow deposit refunded.
5. Get your mortgage approved
Luxury homes aren’t always bought with cash. In fact, 71% of luxury homes were purchased via traditional financing in 2017.
Now that you negotiated and agreed to the final price for your new luxury home, it’s time to complete your mortgage application and get it approved. If you’ve already been preapproved for a mortgage, the process should be relatively straightforward.
Gather all of the documents needed to complete your application. This will typically include tax returns, bank statements, and more. Your lender will likely give you a comprehensive checklist of what is required, as well as a list of your estimated closing costs.
During this process, your lender will order an appraisal and you will likely be responsible for paying an appraisal fee. If your appraised price is significantly lower than what you’re expecting to pay for the home, you may need to renegotiate with the seller once more.
6. Shop for title and homeowners insurance
Title insurance and homeowners insurance are two types of insurance you’ll need for your new luxury home.
Title insurance provides financial protection for both you and your lender in case there an issue with your home’s title arises. Similarly, homeowners insurance provides financial protection for your home and belongings in the event of a disaster, fire, or another destructive incident.
On average, homeowners insurance costs $1,249 per year, but you should expect to pay a little more to insure a luxury home.
7. Prepare for closing time
Once your mortgage has been approved, your escrow or title agent will contact you to schedule an official closing time. He or she will tell you what you need to bring to the closing and also provide you with a breakdown of all closing costs.
Before closing, it’s wise to review all of this information with either your realtor or your attorney (if you hired one).
8. Perform a final walkthrough
On closing day, before signing your closing documents, it’s important that you perform a final walkthrough of your new home.
Unfortunately, houses can sustain damage or wear and tear between the time of the most recent home inspection and closing day. This is your last opportunity to catch any issues before the keys are officially handed over to you.
As long as everything remains in the condition both parties agreed on, you can proceed with the closing!
9. Sign all closing documents
Finally, it’s time to sign all official closing documents. Particularly when a lender is involved, you can be sure that there will be plenty of paperwork to review and sign. Take your time and make sure there are no final red flags.
Once all documents are signed, you’ll be handed your keys and you’ll be free to start moving into your new luxury home!