Like most big events, preparation is the key to success. If you have gone through all of the pre-closing items (see prior section) then your closing will likely be a very smooth and enjoyable experience.
• Most closings in Vermont take place at an attorney's office. The office is usually that of the bank's attorney. In Vermont, attorneys are allowed to represent both the buyer and the bank in the same transaction so it is likely that the bank's attorney is also the buyer's attorney.
• Some bank's prefer to have the closing at the bank rather than an attorney's office so bank offices are the second most common place for a closing.
• There is no legal requirement for the parties to attend the closing. However, most closings will be attended by the buyer, seller, buyer's agent, seller's agent and the closing attorney. In some cases, the seller's attorney and a representative of the lender may be present but this is becoming more and more rare in Vermont.
• The closing is conducted by the closing attorney. Their office collects the money from the buyer and the bank so the funds become centralized in one location.
• Most closings start with the closing attorney having the buyer sign the documents from the buyer's bank. This is usually the longest segment of a closing. While a buyer has a legal right to read all of the documents, few do. The documents are usually non-negotiable. Thus, if the buyer wants to purchase the property they will need to sign the documents put in front of them. For most residential transactions, the documents are made to conform to Fannie Mae's requirements so they tend to be identical from lender to lender.
• Once the buyer finishes signing the bank's documents, the closing attorney will have the seller sign the deed and other seller documents. One of the documents the seller will sign is the Property Transfer Tax Return. In Vermont it is customary--unless stated otherwise in the contract--for the buyer to pay the property transfer tax.
The tax is 1.25% of the purchase price. However, if the home is going to be the primary residence of the buyer, they pay $500 for the first $100,000 in value and 1.25% on the balance. If the property was a $200,000 primary residence the tax would be $1,750 ($500 for the initial $100,000 and 1.25% or $1,250 for the other $100,000).
• In addition to the transfer tax, the buyer will incur other charges at closing. Here are the most common charges a buyer pays at closing:
- Recording Fees: These are the fees the town charges for filing the deed, mortgage and other documents in the town's land records.
- Title Insurance: In most transactions the bank will require the buyer to purchase a title insurance policy. The insurance is issued by the closing attorney. The attorney will likely receive 70% of the total premium. A buyer can purchase their own insurance policy for the title for a small additional charge. We recommend that you ask the attorney to explain the benefits of title insurance and whether in their opinion it is worth the cost in your case.
- Prorations: There are charges due at closing that have been paid in advance by the seller which the buyer must reimburse. The most common is property tax. For instance, in Burlington the tax payment that is due annually on August 12th is for the period of July, August and September. If you were to close on September 1st, then the seller would have paid your taxes through September 30th. Thus you would have to reimburse them at closing for the 29 days that they've already paid.
- Agent Fees: The real estate agent fees are deducted directly at closing. While many consider the agent fees a seller charge, in a way they are a buyer charge because the seller can't pay the agent until they get the money from the buyer.
- Escrow: Most banks require the buyer to put aside money at closing to create an account that will be used to pay the owner's property taxes and insurance. Most banks require a cushion in the fund so they will collect money at closing to create the cushion in the account and then collect for taxes and insurance every month after the closing.
- Prepaid Interest: Unlike rent, mortgage payments are made for the prior month rather than the coming month. For instance, your payment on April 1st is actually for the interest that accrued during March. Many lenders will collect the first mortgage payment or at least the interest at the closing for the next month. If your lender does this, you won't need to make your first mortgage payment until more than 30 days after the closing.
- Bank Fees: These are fees disclosed to you by your lender before the closing. They usually include the appraisal, a document preparation fee, a flood certification, a tax service fee and an origination fee.
Despite the best preparation some items may not be resolved by closing. If there are minor issues that need to be resolved after closing, the closing attorney will often agree to put a small portion of the seller's money on hold in escrow until the seller resolves the issue satisfactorily.