A home purchase is one of the most important financial transactions most people will ever make, and as a result, it is also one of the most stressful. However, learning about the process will help you relax and enjoy your new home sooner by reducing stress and ensuring a smooth closure.
Step 1: Signing the Contract
When the buyer and seller sign the final purchase and sale contract in Georgia, the real estate closing process begins. The contract specifies the most important details, such as the purchase price, earnest money amount, closing date, any seller-paid closing charges, and any contingencies (such as financing or appraisal contingencies.)
The earnest money is paid by the buyer. Earnest money is normally provided by the buyer and retained by one of the real estate agents or the closing attorney.
In Georgia, all real estate transactions must be closed by a qualified Georgia attorney, unlike in many other states where title firms handle escrow and closing.
The contract is forwarded to the buyer’s lender and the closing attorney. A title order, which is the lender’s instructions to the closing attorney to search title to the property and represent the lender at closing, is also provided by the buyer’s lender. The buyer will collaborate with the lender to submit financial information necessary to execute the transaction. Because the information required by each lender differs, work closely with them to avoid any delays. The lender will also request that the closing attorney do a title search. All real estate transactions in Georgia must be closed by a licensed Georgia attorney, not a title firm. (Of course, if there is no need for financing, the contract will be delivered directly to the closing attorney.)
In Georgia, all real estate transactions must be closed by a qualified Georgia attorney, unlike in many other states where title firms handle escrow and closing. In most transactions, only one attorney is involved, and that attorney represents either the buyer’s lender in a lender-funded transaction or the buyer in a cash sale. Both the buyer and the seller have the option of hiring their own attorney to analyze paperwork and represent them at the closing. While the closing attorney may represent the lender, they are ethically required to treat all unrepresented parties fairly and will explain the paperwork in detail to both parties. Even though the attorney is representing the lender at closing, the buyer has the option of selecting the same counsel, as long as the attorney meets the lender’s requirements.
Expect the closure to take roughly 30 to 45 days from the time all parties sign the contract. The buyer, buyer’s real estate agent, buyer’s lender, and closing attorney will all be working towards the closing during that period.
Step 2: Due Diligence Period
Most purchase and sale contracts include a due diligence period during which the buyer can do any property inspections he or she want. Buyers are recommended to employ the services of a professional. This process might be aided by your real estate agent so that it is done within the contract’s timeframe. A home inspector can assess the property’s condition and produce a comprehensive report on their findings. A termite examination is also performed by many buyers. If the property inspection reveals any necessary repairs or other undesirable finds, the buyer normally has three options: terminate the contract and obtain their earnest money back, negotiate for repairs or a price change, or accept the property as-is.
Step 3: Property Appraisal
The lender will order a property appraisal to assess the property’s market worth once any due diligence time has expired. The lender may refuse to accept the loan if the home does not appraise for the purchase price. (An appraisal contingency in the contract, which allows the buyer to terminate the contract if the home does not appraise for the purchase price, is a smart idea in this case.)
Step 4: Title Search
The closing attorney has two main responsibilities: 1) supervise the conveyance of the property in accordance with the contract provisions, and 2) verify that the buyer’s lender has first lien position while recording the new security deed (similar to a mortgage or deed of trust used in other states.) As a result, the closing attorney must do a title search to ensure that nothing stands in the way of the lender’s first lien position, prepare the closing paperwork, and coordinate the closing ceremony.
The closing attorney will produce a title commitment for the lender and buyer based on the results of the title search, outlining the terms under which the attorney will offer title insurance. Title insurance plans are divided into two categories. Each of these is normally paid at closing by the buyer.
1) Title insurance for the lender. A lender will normally require this to verify that the lender has first lien status on the property.
2) Title insurance for the owner. This safeguards the buyer by guaranteeing that the title is marketable. It is a one-time premium that is paid upon closing. The closing attorney might go over the different types of hazards that the insurance covers in further detail.
Title clearance may be performed by the closing attorney. There could be ancient security deeds that were never canceled of record, for example. The closing attorney is also in charge of acquiring payback amounts for any outstanding debts, taxes, homeowner’s association dues, or any liens or judgements against the property. To ensure that title to the property is correctly passed from seller to buyer, these items must be paid at the time of closing.
The lender will tell the parties that the loan is “clear to close” and ask the closing attorney to schedule the closing ceremony once all of the lender’s loan criteria have been met.
Step 5: Closing Ceremony
The closing attorney works with the parties and their agents to schedule the closing ceremony after being notified by the lender. If someone is unable to attend, notify the closing attorney in advance so that the attorney can make alternate arrangements, such as preparing a power of attorney.
The lender will send the buyer a closing disclosure three business days before the closing date, including the loan details, including monthly payments, closing charges, and the money required at closing. Before the closing, study the disclosure and ask your lender any questions you may have. The buyer will wire the necessary cash to the closing attorney’s trust account prior to the closing.
Typically, the closing ceremony lasts one hour or fewer. The buyer must present a valid driver’s license or other government-issued identity. A checkbook is also a good idea in case the closing disclosure is altered slightly. The attorney will explain the closing documents to the buyer and seller and answer any questions they may have during the closure. The attorney’s trust account is used to collect and disperse all closing payments.
The attorney records both the deed conveying the property and the lender’s security deed after the closing. The original deed can take up to four weeks to be returned to the buyer. The lender’s and owner’s title insurance policies are also issued by the attorney.
The selection of a real estate agent, lender, and closing attorney is critical, and it can make all the difference in assuring a smooth transaction throughout the closing process.
Sherman & Phalen, LLC’s William Phalen is a partner in the business. Sherman & Phalen, LLC has been conducting residential and commercial real estate closings in Georgia, Florida, and South Carolina for over two decades. He served on the Executive Board of the State Bar of Georgia’s Real Property Law Section and is a previous president of the Georgia Real Estate Closing Attorneys Association. Mr. Phalen has worked on legislative issues such as defining and policing the unauthorized practice of law when performing real estate transactions, the licensing of attorneys with the insurance commissioner’s office, and the method of issuing liens for unpaid water bills, among others, as a board member of both organizations.
How is the amount of title insurance calculated?
The cost of title insurance is estimated by multiplying the purchase price of your home by your insurance company’s rate per thousand. For example, if the premium is 0.6 percent per thousand and you purchase a $300,000 home, title insurance will cost you $1,800.
Does seller pay title insurance in Georgia?
A title agent would usually undertake a third-party title search before transferring real estate to ensure that there are no existing liens or encumbrances on the property. Mortgages, mechanics liens, outstanding judgements, code infractions, and utility liens are examples of “clouds” on clear title. Before the property can be sold, any such encumbrances must be resolved. The cost of a title examination is normally between $200 and $400.
A third party will certify the chain of title during the title examination. The chain of title examines the property’s history from the first owner to the current owner. This investigation confirms that the property was sold correctly each time it was transferred and that the title is clear.
The title business can give title insurance after the test is completed. This shields the new homeowners from any claims or title flaws that the inspection may have missed. The cost of title insurance is determined by the home’s purchase price, and who pays for it is discussed between the buyer and the seller. It may be usual for the buyer or seller to pay for title insurance, depending on the Georgia county where the property is located. Ensure that this is addressed and resolved during the negotiation process.
How much is a closing attorney in GA?
Although closing expenses vary depending on the condition and value of the property as well as specific lender regulations, there are some costs that will be payable in every home transaction in the state.
The Appraisal Fee
Lenders will not proceed with a home loan unless the property has been appraised by a competent appraiser.
This protects the lender’s investment by ensuring that the price the buyer pays is a reasonable market value. The cost of an appraisal varies, but the national average is $333.
Home Inspection Fees
In Georgia, home inspections are not necessary when buying a house. Many others, on the other hand, seek to purchase one in order to avoid financial ruin if unforeseen problems in the property necessitate costly repairs.
Attorneys’ Fees
Unlike some other states, Georgia mandates that all real estate transactions be signed off on by an attorney at the time of closing.
According to Bankrate, the attorneys’ fee covers evaluating the closing documents and amounts to roughly $721 on a $200,000 house transaction.
The Application Fee
Buyers must pay a fee to the lender in order for their loan application to be processed. This could include credit checks and other expenses, so talk to your mortgage broker or lender about what’s included in this price.
Title Fees
A title search and transfer fee is also needed at closing to confirm that the property in question is free of liens and that legal ownership of the property transfers smoothly from the seller to the buyer.
A title insurance coverage can protect the buyer’s investment in the event that their ownership of the property is challenged in the future.
Discount Points
Some Georgia house buyers choose to pay for discount points up front in order to get a cheaper interest rate. A discount point costs one percent of the loan amount and can drastically reduce the interest rate.
For example, on a $200,000 loan with a 4.5 percent interest rate, purchasing two points can reduce the rate to 4 percent, saving $58.54 per month.
Real Estate Transfer Taxes
In Georgia, as in many other jurisdictions, real estate transfer taxes must be paid when properties change hands. Although these are usually the seller’s obligation, some purchasers agree to shoulder these costs during the negotiation process.
The fee is equal to $1.00 per $1,000 of the property’s value. In addition, Georgia imposes an intangibles tax of $1.50 per $500 on the loan amount, as well as a $10 fee on each loan subject to the Georgia Residential Mortgage Act.
Other Costs
Aside from the closing costs, homebuyers must budget for extra costs that will be added to their monthly payment.
Georgia citizens, for example, must pay property taxes based on their county’s millage rate and the assessed value of their home each year. Homeowner’s insurance and house maintenance expenditures are examples of additional costs.
All of these aspects must be considered when determining whether or not you can afford a given home.
What is intangible tax in Georgia?
Based on the amount of the loan, the State of Georgia Intangibles Tax is applied at $1.50 every five hundred ($3.00 per thousand). For example, a $550,000.00 property would be subject to a $1,650.00 State of Georgia Intangibles Tax. The tax must be paid within 90 days after the instrument’s date of issuance.
How does title insurance work in Georgia?
The policies cover the property owner for as long as the property is owned and, in some cases, even after it is sold. Protection is restricted to the policy’s face amount, which is usually the property’s market value at the time of acquisition.
Is Georgia a title closing state?
Georgia has long been known as a “attorney-closing state,” which means that only qualified attorneys are permitted to administer the settlement at which closing documents are signed. The legislation forbids anyone other than the transaction’s settlement agent from overseeing the closing and disbursing payments.
Who pays the transfer tax in GA?
The real estate transfer tax is an excise duty imposed on transactions involving the sale of real estate in which title is transferred from the seller to the buyer.
The real estate transfer tax must be paid before a deed, security instrument, or other paper can be recorded at the clerk of the superior court’s office. The clerk of the superior court or their deputy will attach a certification that the tax has been paid to the deed, instrument, or other writing once the tax has been paid.
The real estate transfer tax is calculated at a rate of $1 for the first $1,000 or fractional part of $1,000 and 10 cents for each additional $100 or fractional part of $100 of the property’s sale price. The person who executes the deed, instrument, or other document, or the person for whose use or profit the deed, instrument, or other writing is performed, is responsible for paying the tax. Although the seller is responsible for the real estate transfer tax, the parties typically stipulate in the sales contract that the buyer will cover the cost.
Electronic Filing of Form PT-61 Real Estate Transfer Tax Declaration
The Department of Revenue determined the format of the e-file Real Estate Transfer Tax Declaration form and the Georgia Superior Court Clerks Cooperative Authority (GSCCCA) established the electronic procedure that allows the form to be completed and filed on-line in order to implement Senate Bill 97’s revisions.
Contact
- For Electronic Procedure Questions – The GSCCCA offers a list of frequently asked questions about the electronic procedure for filing the PT-61 on its website. If you have any issues about the PT-61 electronic filing, please call GSCCCA customer service at (800) 304-5174 or (404) 327-9760.
- Real Estate Transfer Tax – If you have any queries concerning the taxability or exemptions for real estate transfer tax, you should contact the county’s Clerk of Superior Court.
Forms for Tax Officials
FA-RETT – The Clerk of Superior Court shall report the total amount of Real Estate Transfer Taxes allocated among the state, county, and municipalities within 60 days of the end of each calendar year. Every year on March 1st, this report is due.
How much is closing cost?
What are the costs of closing? Closing expenses, commonly referred to as settlement costs, are the fees you pay when you get a loan. Closing expenses are normally 3-5 percent of the loan amount and are paid at the time of closing.
How much is closing cost in GA?
Closing expenses typically vary from 0.5 to 5% of the entire loan amount. A $200,000 mortgage in Georgia costs an average of $1,897. This is somewhat more than the national average of $1,847 and less than 1% of the loan amount.