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Closing the Deal

What is the final closing statement?

The final closing statement is like your checkbook. The final closing statement records all the money related to your home purchase:

- Credits: Any money that you paid in advance (such as your initial deposit and down payment) appears as a credit to your account. You may also receive credits from the seller for such things as corrective work repairs and property taxes. And, of course, your loan is a credit

- Debits: Funds paid out in your behalf are shown as debits. Your debits include modest and not-so-modest expenses, such as what you graciously paid the seller for your dream home, loan fees, homeowners-insurance premiums, and property inspection fees.

Should I keep the final closing statement for tax purposes?

The final closing statement is extremely important. Keep a copy for your files -- it will come in handy when the time comes to complete your annual income tax return. Some expenses (such as loan origination fees and property tax payments) are tax deductible. Furthermore, the closing statement establishes your initial tax (cost) basis in the property. When you're ready to sell your property, you may owe capital gains tax on any profit you've made by selling the property for more than your cost basis.

When can I actually take possession of my home and move into it?

That depends on the terms of your contract. Here are your usual options:

Move in the same day of closing: This is fine if the sellers have already moved out. If, however, the sellers haven't moved yet and don't want to deliver possession until they're absolutely 100 percent certain of closing, you have a logistical problem. For two moving vans to occupy exactly the same driveway at exactly the same time borders on the impossible. Moving into a house while someone else is moving out is something you'll never attempt more than once. There are easier ways to go crazy.

Move in the day after closing: We recommend this alternative if the sellers won't deliver possession until closing. Let the sellers have the day of closing as their moving day. After all, the sellers are still the owners until title transfers. Moving day is stressful, even under the best of circumstances. Why create unnecessary stress for yourself by trying to move in as the sellers are leaving?

What's the best way to take title in a property?

One of the most important decisions that you can make when buying a home is how you take title in the property. If you're unmarried, your choices are simpler because you take title as a sole owner. When two or more people co-own a property, however, the number of ways to take title multiplies dramatically. Each form of co-ownership has its own advantages, disadvantages, tax consequences, and legal repercussions.

What are some forms of co-ownership and the advantages of each type?

Joint tenancy: Suppose, for example, that you and your spouse buy a house together as joint tenants. When your spouse dies 20 years from now, ownership of the house automatically transfers to you without going through probate. This feature of joint tenancy co-ownership is known as the right of survivorship.

There are also tax benefits. You also get a stepped-up basis on your spouse's half of the house. When you sell the house, this may save you big bucks on the capital gains tax.

Community property: Only married couples can take title as community property. Compared to joint tenancy, an advantage of community property co-ownership is that both halves of your house get a stepped-up basis upon the death of your spouse. This gives you even bigger tax savings.

Using the same figures as the joint tenancy example, as the surviving spouse, your cost basis is the full $300,000. Capital gains tax is forgiven on every penny of appreciation in value between the date of purchase and time your spouse died. Another advantage of community property co-ownership is the ability to will your share of the house to whomever you wish. Due to the right of survivorship, this choice isn't possible when title is held as joint tenants.

Tenants-in-common or partnerships: Holding title as tenants-in-common or in the form of a partnership doesn't give you a stepped-up basis upon the death of a co-owner. This creates an obvious disadvantage from a tax standpoint.

Offsetting legal advantages exist, however, for unrelated persons who take title either as tenants-in-common or as a partnership. Under these forms of co-ownership, you generally have the right to will or sell your share of the property without permission of the co-owners. Furthermore, co-owners don't have to have equal ownership interests in the property -- a nice feature for people who just want a small piece of the action.

What is buyer's remorse?

Buyer's remorse is the sinking feeling that you paid way, way too much for your new home. Buyer's remorse is compounded by many other anxieties -- that you're getting the world's worst mortgage, that the bottom will fall out of property values in the years after you buy a home, that you'll lose your job and that your health will fail.

We're here to help you deal with fear of overpayment. Those other anxieties are absolutely normal reactions to the uncertainties most of us initially experience. They will go away. If it makes you feel any better, nearly all homebuyers are traumatized by the same concerns while purchasing a home.

You can't deal with buyer's remorse until you accept it for what it is -- raw, naked fear.