Although most purchasers or sellers of resort properties have been through the process of purchasing or selling real property in the past, and due to the inordinate number of buyers and sellers from outside of the State of West Virginia, we decided to give a brief overview of the closing process as it applies to our area.  Since the buying end of the real estate transaction is slightly more complicated, the information contained here may benefit the purchaser more than the seller.  Some of this information can be gathered prior to even seeing your real estate agent, and thus expedite the entire procedure of going to closing. Since cash purchases and 1031 Like-Kind Exchanges are not unheard of in the purchase and sale of resort area real estate, some of the information contained herewith will not apply to all purchasers and sellers.  But as in the majority of real estate transactions, a lender is generally involved.

It should be noted that the following guidelines are based on standard procedures for the process of buying or selling your home.  All lenders and closing attorneys may have slight variations regarding their respective methods of operation.

Pre-qualification and Pre-approval

To assist your real estate agent in finding a suitable property to meet your needs, it is prudent to consult with a lender prior to even meeting with your real estate agent.  By meeting with your lender, you can find out ahead of time that you have qualified for a loan to purchase the real estate, and basically have been pre-approved to purchase real estate in a certain price range.  These approvals are usually subject to the appraisal by a licensed certified appraiser.  By providing this information to your real estate agent in advance, the agent can narrow the number of properties that you need to spend time viewing, which will save not only your valuable time, but the agent's also. 

Some of the information the lender will request from you in order to have your loan pre-approved is as follows:

A copy of your driver’s license and social security card (for all borrowers)

Income Information

Normally the past two years of employment, with the name and addresses of any employers during that time period.  They will also wish to know the length of time on the job.

Past two years W-2 Forms

Most  recent paycheck stubs, generally for at least the past 30 days.

If you have other income, such as social security, child support, or retirement, the lender will request verification of the same.

If you are self-employed, the lender will usually request your past two years of tax returns, along with all of the attached schedules, and a current profit and loss statement for the immediate year.  They may also request that the profit and loss statement be signed by your accountant.

If you own rental properties, they will normally request copies of the leases on those properties.

Assets

Provide the past three months of statements for any bank or credit union accounts.

Most recent statements reflecting any stocks and bonds that you own.

Make, model, and estimated value of any vehicles, boats, and/or airplanes that you own.

An approximate value of all of your household goods.

Creditors

Provide all of your current credit card statements showing balances and account numbers.

Provide balances, monthly payments, and addresses for any existing installment loan purchases.

If you own other property(s), you will need to provide account numbers, balances owed, monthly payment amounts and addresses on those properties.  If you have sold any property within the last two years, they will request proof of the sale be presented.

Amounts for any child care obligations.

Any bankruptcy discharges, along with a schedule of the creditors.

Letters of explanation regarding any adverse credit situations.

Once you have provided the above requested information, you will be pre-approved for a loan, in a certain price range.  We encourage all purchasers to acquire a pre-approval, but are more than willing to sit down with any purchaser and go through the same details with you to determine what price range we believe you will qualify for based on the criteria set forth by the normal lender.  Once we have completed that procedure, it is time to look at some homes.

Finding the Right Home or Property

Armed with the financial information you have provided, the agent will then select several properties for you to view which fall in the price range and criteria that you have provided him with.  He will make arrangements with the sellers, or other brokerage firms, for you to visit the property.  He will also provide you with information regarding recent sales of comparable properties, allowing you to make an educated decision when making an offer on the property you choose.

Making the Offer

To make an offer on a property, the agent will prepare a West Virginia Contract for Purchase, which will provide all of the terms of the purchase, such as the purchase price, any contingencies to the offer and notification of when you are willing to close on the purchase.  Contingencies can include such things as having a current survey performed, being able to secure suitable financing, and/or permission to conduct pest and home inspections.  The contingencies are not limited to these items however, because each property could have its own issues which you may want to address in the Contract for Purchase.  Prior to your execution of the Contract for Purchase, your agent will discuss and answer any questions you have regarding this document, and you will also be asked to sign an “Agency Relationship” form.  The Agency Relationship is required by the State of West Virginia to inform you whom your agent is representing.   This form will tell you if your agent is representing you exclusively in the transaction, or as happens in many cases, he is representing both the buyer and the seller.  It could also show that he is representing just the seller.  Also at this time, you will need to provide the agent with a check representing your “earnest money deposit” on the purchase.  This check is held in the brokerage trust account until it is disbursed in accordance with the terms of the agreement.  If the purchase is consummated, these funds will be included as part of your down payment for the purchase.  If the purchase does not close, for any other reason than the buyer’s willful breach of the contract, you will receive these funds back.

Presenting the Offer

Depending upon whether or not the selling property is listed with our agency or listed with another brokerage firm, we will present the written offer to either the seller directly, or to the other listing brokerage firm.  We will also require by the terms of the offer that the seller has only a limited number of days to respond to the offer.  At this time it is the choice of the seller to either (a) accept the offer along with the contingencies;  (b) outright reject the offer; or (c) counter the offer and contingencies.  This procedure is always carried out in writing on the original Contract for Purchase.  Any changes to that agreement must be in writing, and all changes initialed on the actual agreement.  Once all negotiation has been completed, and an offer and contingencies accepted by both parties to the transaction, and if not done so previously, it is time to select a lender and continue toward closing in accordance with the terms of the agreement.

The Lender

If the buyer has not previously selected a lender, your agent will assist you by providing names of various lenders which are familiar with the area and market.  It will be the responsibility of the buyer to select which lender they prefer.  In the Snowshoe area, it is not uncommon for the buyer to select a secondary market lender when purchasing property as a principal residence, second home, or investment property.  Most transactions regarding raw land purchases, such as large acreage or building lots, are handled by the local banks.  Many purchasers that are buying a second home will also use the equity in their principal residence, through a second mortgage or home equity loan, to acquire the second home.  In these cases, the lender is generally their primary mortgage holder on their principal residence.

Once the lender is selected, they will qualify you for the loan, and usually grant you a pre-approval letter based on certain conditions, such as the appraisal being for at least the amount of the selling price.  Once approved for the loan under these conditions, it is time to move on to the next stage of the closing process, which will now require the lender to secure the help of outside professionals to facilitate the closing.  One of which will be to order a credit report to determine the buyer’s credit worthiness.  This is also the time that the buyer’s preparation can assist them.  Most lenders will do “lock” on the interest rate for a period of up to 45 days.  But if the buyer has been previously approved for the loan, a substantial amount of the work in compiling the loan application has already been completed.  This will generally allow the sale to be closed sooner than the 45 days, allowing you to qualify under those circumstances for a 30 day “lock” on your rate.  Since the lender is not gambling for a longer time period with whether or not the rate will increase, the buyer is generally afforded a better interest rate “lock” for that shorter period of time.

The Appraisal

In order for the lender to be secure in the fact that the home which they are lending money for is of sufficient value to protect their investment, the lender will order a certified appraisal of the subject property.  Most lenders will require a submission of a check from the buyer prior to ordering the appraisal, as this work will be performed by an outside contractor, and the bank will not wish to be held accountable for payment of the appraiser’s fees should the transaction fail to close.  This upfront payment is normally requested by the lender upon the client making a loan application.  Once contacted, the appraiser will visit the property, and most likely the county court house, to determine that the bank’s loan amount will be sufficiently secured by the value of the property, and that the property is not being purchased at an exorbitant price compared to similar properties selling in the area.

While the appraisal is taking place, your real estate agent will be working diligently to collect certain information that will be provided to the closing attorney, and which will expedite the closing procedure.   Most of the items that they will be soliciting are those detailed items that will require proration to the day of closing, such as utilities bills, mountain service fee statements, and association dues status.  In order that you have a smooth transfer of title and utilities on the day of closing, your real estate agent will be providing you with a list of contact numbers and respective account numbers.

The Closing Attorney

After the appraisal of the property has been approved by the lender, it will be the responsibility of the buyer to choose a West Virginia licensed real estate attorney to conduct the closing.  Since this attorney will need to be approved by the lender to represent their interests, most likely the lender, along with your real estate agent, will assist you in this selection by providing you a list of qualified attorneys.   Under West Virginia law, the choice of the closing attorney rests with the buyer, not the seller.  Although the seller does not have to use the selected attorney to prepare the new deed, it is not uncommon in this area for the closing attorney to prepare all of the documents necessary to facilitate the closing.  Also, under West Virginia law, an attorney, or someone under the direct supervision of the closing attorney, will be required to conduct the actual closing of the sale.  Another responsibility of the buyer at this time is to secure homeowners insurance on the property being purchased.  You will need to provide your insurance agent with the name and address of the lender, since they will be the primary recipient of any claim proceeds until their loan is satisfied.  You will need to provide a binder from the insurance agent to the lender prior to closing.

It will be the responsibility of the buyer’s attorney to conduct a title examination of the subject property, both for the benefit of the buyer and the lender, and to issue a title insurance policy assuring the lender that the property is free and clear of any encumbrances.

Due to the nature of second homes and investment properties not being located where the buyers and sellers normally reside, it is also not unusual for the closing to be conducted as a “mail-out”.  Under these circumstances, the attorney, or the lender under their direct supervision, will overnight the closing documents to the buyer for signature.  These documents will be clearly marked where they need to be executed, and the necessary down payment amount will be provided to the buyer.  The buyer will then execute the documents, in the presence of a qualified Notary Public, and return them to the lender or closing attorney’s office with a certified check for the down payment.  Of course if all parties are available, they can just go to the lender’s or attorney’s office and sign all necessary documentation.  It is normal for your real estate agent to attend such in-person closings.

The Seller will also be required to execute a settlement statement (HUD Statement) and sign a deed of conveyance, again with the assistance of a Notary Public, and overnight the documents back to the closing attorney or lender as instructed, or execute them in person at the time of closing.

Once the lender or closing attorney has received all of the properly executed documents and down payment funds from the respective buyer and seller, the next step will be for the attorney to record the documents  in the Office of the Clerk of the County Commission at the local court house for the respective county in which the property exists.  At that time the attorney will also conduct a follow up examination of the court house records to assure that no encumbrance has occurred with regard to the property since they conducted their initial examination. 

Once recordation at the court house has occurred, the buyer is the new owner of the property, and the closing attorney or lender will disburse the closing and seller’s proceeds in accordance with the Settlement Statement.

Insurance

If you are purchasing a stand-alone home or a fee-simple town house, you will be required to have a standard homeowners policy issued by your insurance company showing your lender as a claimant.  When purchasing a condominium, it is the practice of the lender to be listed as a creditor on the condominium association's liability policy.  You are only required to purchase a condominium policy for the contents of the unit, since the association will have a policy in place to cover the actual buildings owned by the condominium association.  These condominium policies are similar to a renters policy.

The Settlement Statement     

The standard settlement statement used is a HUD-1 Settlement Statement.  This document outlines all of the financial details of the entire transaction, with columns for both the buyer’s transaction and the seller’s transaction.

In the buyer’s column will be listed all of the expenses and credits reflected to the day of closing, and will show a net amount due from the buyer to finalize the transaction.  This is the amount of the certified check that it will be necessary for the buyer to provide at closing.  The buyer’s column will itemize all charges of the transaction, including those expenses incurred by the buyer in securing their loan, and any credits or expenses necessary to prorate real estate taxes, homeowner association dues, and/or mountain service fees, to the day of closing.  There will also be an itemization of any title insurance premiums, mortgage insurance premiums if applicable, and the legal fees incurred.  All previous payments made by the buyer, such as the earnest money deposit and the lenders charges paid previously, will also be reflected on this document.

In the Seller’s column, he will find off-setting credits or expenses for any of the charges or expenses found in the Buyer’s columns, reflecting those items that need to be prorated to closing.  The Seller’s column will also show any existing mortgage payoffs, computed to the day of closing or disbursement, which sometimes is a day or so after the closing date due to the logistics involved.  The Seller will also have legal fees for the preparation of their deed of conveyance, and will normally have a charge for half of the attorney’s cost of conducting the closing.  Also, under West Virginia law, the Seller is responsible for paying the "transfer tax" on the property.  This tax in Pocahontas County is currently $6.60 per thousand dollars of the sale, and will be reflected on the Settlement Statement. 

Neither the Buyer, nor the Seller, should ever execute this settlement statement unless they have completely reviewed all of the entries found thereon, and completely understand and agree with every entry.

On the day of settlement, your real estate agent will contact your new homeowners' assocation, and if applicable Snowshoe Mountain Resort, and notify them of the change of ownership of the property.  If the property is currently being managed for short term rental, we will also contact the appropriate rental management company to have the monthly rental disbursement prorated to the date of closing.

Congratulations, you have just completed the entire buying and selling process, and we at Mountain Resort Realty, LLC are pleased to have been afforded the opportunity to assist you.