HOW DO I CLOSE ON MY SMITH MOUNTAIN LAKE PROPERTY?
So you’ve struck a deal on the perfect, once-in-a-lifetime waterfront property! How do you go from there to getting the deed in hand? What will it cost to close on your Smith Mountain Lake property? By now you know the first thing I am going to say: Let your real estate professional guide you from this point as he has through the entire process.
There are a number of inspections to be performed in the process of transferring a home here. The seller is typically required to fund and conduct three inspections within less than 30 days of closing. The first is a termite inspection. The seller will hire an inspector to examine the home for evidence of wood boring insects. The seller is also responsible to conduct a test of the well water. This is a simple test to check for bacteria in the water, not an extensive test of water quality. The seller will also conduct an inspection to ensure the proper operation of the septic system. Often the same inspector will conduct all three tests. If evidence of any problem from these inspections is discovered, the seller, unless otherwise agreed upon in the contract, is responsible to correct this situation in order to proceed to closing.
As I mentioned earlier, you as a purchaser may also choose to have a home inspection and a radon inspection. In addition, you may choose to request a more extensive water report and septic inspection. I have had purchasers ask for each of these. The septic inspection may include a visual inspection of the tank using a special camera. Sometimes an older tank may become corroded and need to be repaired or replaced. The basic required inspection will not find this defect, but it would need to be repaired if you are going to rent your home in Bedford County. A more extensive water test may include testing the water for other less harmful substances that you may choose to have filtered out of your water. If you plan to consider asking the seller to pay for repairs from these two inspections, or if you would consider calling off the purchase for bad results, be sure to delineate these terms carefully in the contract upfront.
The Closing Agent
In Virginia, the purchaser has the right to select the closing agent. Closings are typically conducted by a closing attorney or a title company. This agent coordinates the various elements of the closing including the title examination, deed preparation, prior mortgage (deed of trust) payoff, the new mortgage, title insurance, allocation for property taxes and homeowner dues, recording of the deed and mortgage, payment of recording fees, transfer tax payments, and the payment of any fees for services including realty commissions and inspections or other liens not paid previously. The closing agent summarizes all of these charges and allocations on the closing statement, otherwise known as a HUD-1, which is a legal form developed by the federal government for this purpose. You should request an advance copy of the HUD-1 prior to closing to ask any questions, look for any errors, and to avoid needless delays on closing day.
It is extremely important for you to examine your deed when purchasing property anywhere. The deed is the ownership title for the property and the definitive document for many rights and encumbrances of the property. These may include power company easements, easements previously granted to neighbors, rights for common areas such as boat launches, requirements to adhere to neighborhood restrictions, and much more.
We worked with a seller who was using a deed that detailed the rules for constructing a dock in that neighborhood, which is unusual. Upon examining the deed, the buyer discovered that the current owner had built his dock too far into the cove. That meant that the seller was faced with obtaining a variance on his existing dock from the neighborhood property owners association before he could sell his home. By examining the deed, the purchaser saved himself from inheriting this potentially nasty problem.
Talk to your closing attorney about examining your deed before purchasing your new property.
Closing Long Distance
These days, many closings are handled long distance without either party coming to town on the day of closing. If this is best for you, the closing attorney and realty agents can use email, fax, overnight mail, and wire transfer. This will save you a drive to the lake, although the main downside is that you may not have the opportunity to do a walk-through of the property just prior to closing. Talk to your realty agent about how to best manage this situation.
Though each situation is different, the following is a list of typical closing costs for a transaction in this region of Virginia at the time of this writing.
Purchaser Closing Costs
Title Examination $100
Closing Attorney Fees $350 to $450
Deed Recording Fee (transfer tax) 0.33% x price
Mortgage (Deed of Trust) Recording Fee 0.317% x loan amt
Mortgage Points and Other Charges Variable
Property Taxes* Pro-rated
Homeowner Association Dues* Pro-rated if any
Title Insurance** Up to 0.4% x price
Deed Recording Fee $33
Mortgage (Deed of Trust) Recording Fee $46
Realty Commissions $0***
* Property tax and homeowner association dues may be owed to you by the seller or owed by you to the seller depending on who is paying the actual bill and when.
**Note that title insurance is not legally required for cash purchases in Virginia but is highly recommended. Mortgage companies always require you to purchase title insurance to cover their interests. Talk to your closing agent for more information.
*** While it is common for purchasers here to pay nothing in realty commissions, it is illegal for multiple companies in a market to jointly establish realty commission rates. Commission rates here average about the same as other markets in the United States. Talk to your realty professional for more information.
Seller Closing Costs
Deed preparation $100
Grantor (transfer) tax 0.1% x price
Property Taxes* Pro-rated
Homeowner Association Dues Pro-rated if any
Realty Commissions** As Negotiated
* Property tax and homeowner association dues may be owed to you by the purchaser or owed by you to the purchaser depending on who is paying the actual bill and when.
** It is illegal for multiple companies in a market to jointly establish realty commission rates. Commission rates here average about the same as other markets in the United States. Talk to your realty professional for more information.
One final note: As a home seller or purchaser, you may wish to purchase a home warranty. This will warrant a large number of home elements for the purchaser for at least a year after closing. This may allay the purchasers fears of problems and could help avoid tensions between the parties after closing. These warranties typically cost between $300 and $450 for one year.