You’re ready to sell your home, while your buyer is even more eager for you to hand over the keys so they can move in. But first, paperwork – and there’s a mountain of it. Procuring all of the important documents you need is a crucial step in the home-selling process that’s involved in almost every step of the way.
Home sellers may be digging out a deed and crafting a listing. And homebuyers could be waiting with bated breath for both a mortgage pre-approval and a positive home inspection report.
By closing, homebuyers and home-sellers alike will have reviewed and signed a mountain of documents to legitimize the sale. To help you get familiarize with what’s in store, here’s a look at the 10 key documents you’ll come across during the home-selling process. Each document sheds light on various aspects of your home ensuring you, as the homeowner, are well acquainted with every detail of your property and terms of your purchase.
Mortgage Pre-Approval Letter
Homebuyers often rely on a mortgage to get onto the property ladder, so you’ll need a pre-approval letter from your lender that clearly states the amount they will allow you to borrow.
It’s one of the first documents you’ll need to start house hunting. It helps you gain insight into how much you can spend on your home and it shows homeowners you’re serious about house-hunting. Finally, it’s proof that lenders are willing to offer you a mortgage to back up your offer. To be clear, your pre-approval letter isn’t a guarantee you have actually secured a mortgage. Borrowers may encounter some financial issues that could potentially derail the mortgage. For instance, if you suddenly quit your job or take on more debt, your lender may rescind the offer.
You can also secure a pre-qualification letter. It doesn’t hold as much clout, as it can typically be done online by providing your credit score, income, debts and assets. Pre-approval letters, on the other hand, require your lender to confirm the majority of your financial information through a full underwrite or a soft credit pull.
In both instances, your pre-approval and pre-qualification gives you a rough estimate of how much house you can realistically .
Before lenders dole out a mortgage loan, they must do their due diligence with a home appraisal. The home appraisal zeroes in on the property’s value in the current real estate market to give lenders an idea of how much they can responsibly loan.
Because it’s for the lender’s peace of mind, it’s typically arranged by the lender through their go-to third-party home appraisal services. In addition to walking through the residence, an appraiser conducts research on the home’s location, its condition and does a comparison analysis to determine how much similar homes sold for in the neighborhood.
Within a week, they’ll send your lender a final report with their estimation on the home’s value. Traditionally, if you’ve priced your home adequately, there aren’t any issues. If it turns out the home received a low appraisal, buyers could ask to renegotiate on the deal or walk away altogether.
Some homeowners hang onto the appraisal they received when they first bought the home and can compare that with any subsequent ones. If homeowners live in custom-made homes, they’ll even secure a pre-appraisal before deciding on how to price their home.
While a home appraisal focuses on the market value of your home, an inspection ensures your property is in good condition, from the home’s structure, to the roof, electrical system, plumbing and the exterior.
During a home inspection, an inspector will carefully examine your home – or the home you’ve put an offer on – and check for defective, hazardous or mechanical issues throughout the property. They’re also checking for termites and pests.
After their assessment, they’ll produce another report documenting what they inspected, what they have flagged as a potential issue, and what requires repair. Just like an appraisal, a successful home inspection could be worked into your contract’s list of contingencies. This means that if your inspector is unhappy with your home’s foundation, for example, buyers can pull out of the deal.
Homeowners should hang onto the home inspection they received when they purchased their property. They can always refer back to it when sprucing up the space or when they’re ready to sell.
If you’d like to be proactive, you may want to consider booking a pre-listing home inspection in the early stages of the process so you will know what to expect and address any issues in advance.
Your Home’s Listing
This is what entices buyers to book a visit or pop by during an open house. If you’re the buyer, it may be what drew you in to what’s now the biggest purchase of your life.
If you’re a buyer, it’s important to hang onto the listing so you have a hard copy of what was on offer when you put in your bid. The listing outlines all the specs of the home too, including a floor plan, measurements for each room, appliances that will be included, and other key defining features. This all comes in handy when you’re figuring out what to buy for your new home, what furnishings will fit in the new space, and whether the listing matches up with what you see in person.
Make sure the listing lines up with the fittings and contents form, which outlines every detail of what is included in the sale of your home. The form will list the minutest of details, including plants, trees and any decorations thrown into the deal.
Hang onto your seller’s disclosure, too; sellers are required by law to state, upfront, any problems they encountered with the home that could affect the home’s value, such as pest infestations, and lead-based paint. If it turns out, you come across major problems after you move in, you can refer to the disclosure. This will be extremely beneficial in case you need to hold your seller accountable for any overlooked issues.
Homebuyers and home-sellers alike need to retain the purchase agreement for the duration of the process. The purchase agreement is a document signed by both parties; it formalizes the purchase, and documents all of the nitty gritty terms and conditions in the contract.
The agreement lists identification details for both parties, the property’s description and condition, the rights and obligations of both parties, and a deposit made in good faith. There are three key components to this document:
- the agreed price for the home,
- the terms of possession, closing date and closing costs itemizing who is paying for what, and
- the contingencies and conditions for the sale.
This is where both parties can protect their backs with the home – buyers can add that the sale is contingent upon the sale of their current home, their ability to finance the property or on a successful appraisal and home inspection. Homeowners can add a “kick-out clause” allowing them to keep showing their home and accept another offer with fewer caveats.
Whatever you agree to in the purchase agreement, it’s this contract that both parties will refer to and follow to a tee right up to closing.
A home energy audit, also known as a home energy assessment, provides a clear snapshot of your home’s energy usage. It’s a thorough assessment that details how much energy your house uses each month. It can reveal whether the energy usage is efficient and what problem areas may be sapping away valuable – and expensive – resources in heating, cooling, and lighting your family’s home.
If you’re buying an older home, for example, you may ask the current homeowners for the energy assessment to better understand what your heating bills may look like in the winter. If you’re moving into a brand new home, it’s worth an energy audit once you’ve settled in to make sure your home’s energy efficiency is at its peak.
The U.S. Department of Energy estimates that home energy audits could cut energy bills by 20 to 35 percent, unlocking up to $627 in annual savings. This reduction in bills comes from even the simplest home improvements identified in the audit – tweaks like swapping air conditioners to sealing up air leaks. Ultimately, you will save money, live in a more comfortable home, and enjoy better air quality.
Your energy audit should accompany other documents, such as your utility bills from the past year so you can compare expenses. Pay attention to when bills spike, such as in the summer or winter months.
Home Insurance Documents
To secure your mortgage, you’ll need to show your lender that your purchase is fully insured with homeowner’s insurance. You can check this off of your to-do list with a homeowners’ insurance declaration page, which summarizes your coverage.
This covers your lender’s bases – if you default on your loan, after all, the property ends up in their hands, so they need to have the house adequately insured.
Not only should you keep a copy of your home insurance policy in a safe place, but you should also understand its conditions and premiums – and make sure you’re satisfied with the coverage.
Home warranty documents, including policy numbers and contact details of providers, need to be provided to your buyers so they’re in the know on renovations such as a roof repairs, a new deck or an upgrade in appliances.
With that in mind, receipts for home improvements are worth keeping, as well. They’re proof you made investments into the home to increase its value and can help to justify your sale price.
If you’ve just had a custom-made kitchen installed, fitted with energy efficient appliances that come with a 20-year warranty, for example, you’ll want all of these upgrades and their warranties documented to sweeten the deal for your buyer.
Whether you’re buying or selling your home, you’re likely recruiting the efforts of a real estate agent, a title company, a mortgage broker or a lawyer – all of whom are drafting, reviewing or filing all of these documents on your behalf.
Keep a copy of the agreement contract between you and these professionals; these contracts will outline your relationship with each party, the length of the agreement, the services provided, the fees incurred, and how these fees will be paid. For example, your agreement may state that your title company will take funds from the sale of your home to pay for your attorney and agent.
These contracts keep both parties accountable and set expectations for you. They could come into play if you face any issues and need to refer back to your agreement.
To seal the deal on your mortgage, your lender will provide you with a closing disclosure form just days before your closing. It states the final terms and conditions of your mortgage, including the loan amount, the interest rate (fixed or adjustable), and the term (usually 15 or 30 years).
It’s important that you scrutinize this document to make sure the paperwork correctly outlines your mortgage.
Your closing disclosure will also include an itemized list of all of the costs incurred with closing. File it with your tax documents, as you’ll need to refer to these figures again when you file your income taxes.
When it comes to real estate transfer documents, your deed is your golden ticket to proving your homeownership. You will need to keep a certified copy of this documentation, safely stowed away with other key documents. Lenders or lawyers typically hold onto the original, but this is becoming less common.
The title deed transfers the property from the seller to the buyer, and is used by your region’s record’s office to document in public records. In a nutshell, it is proof that you now officially own the property. It includes the name of the seller, along with the property’s legal description.
The transfer of the title deed usually comes along with the affidavit of title – or the seller’s affidavit – which is a notarized statement from the seller confirming they held ownership of the property they’re now handing over to the buyer.
Carmen Chai is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. For NewHomeSource, Carmen covers a variety of topics, including insurance, mortgages, and more.