This is it. This is what it all worked toward — all the searching and open houses, the negotiations and inspections, the contracts and reports – all to get to closing day. This is the day when the seller signs the property over to the buyer. But it started months earlier.
The closing process is the culmination of a real estate transaction. The sales contract is the map of the transaction for all parties, including the lender and the title company.
But what happens at a closing? Read on for a tour of the ins and outs of real estate closings.
Smart preparation is the key to a smooth closing. Wise agents will prepare for closing long before that happy day:
- Double check that all the information on all the documents is correct. If anything on the contract has changed, the title company needs a copy of the amendment.
- Co-ordinate closing and possession dates carefully. Use temporary lease agreements when possession and closing are not the same day.
- Do not assume that funding will be the same day as closing. Ask the title company. When a sales contract indicates that possession will be at closing and funding, that is when the buyer gets the keys and can begin to move in.
- Make sure the buyers have received all the required and agreed upon disclosures, reports, survey, and HOA documents.
- Ensure the escrow agent gets all the completed, legally valid documents needed for the closing.
- Review the Closing Disclosure form with the buyer the day before closing.
- Remind the seller to leave utilities on till the day of closing.
- Remind the buyers to switch the utilities to their name the day of closing.
When a copy of the sales contract is delivered to the title company, they open a file for the transaction and begin to prepare a preliminary title report. A title search and examination will begin.
In most transactions, the title company is also acting as the escrow agent: They will deposit the earnest money check into an escrow account where the funds will be held until closing. The escrow agents will review relevant documents and the lender’s instructions and prepare the closing statements. The title company schedules a closing day and time through the real estate agents.
The Closing Disclosure form, furnished by the lender at least 3 days before closing, will list the closing costs to be paid by the buyer and seller.
Buyer’s Final Walkthrough
Usually 24 hours before closing, the buyers and their agent inspect the property one last time to make sure there’s no unexpected damage and that everything is as the parties agreed.
Finally, closing day arrives. All the documents are waiting at the title company. Agents will attend closing with their clients. Normally, the buyer goes in first and then the seller. The title company closer will conduct the closing.
All real estate professionals involved should ensure that the buyers and sellers understand the terms and conditions of the purchase contract, as well as any addenda. One or both parties may wish to consult an attorney before signing the sale paperwork.
The seller usually supplies title evidence (legal documentation of the title condition), the deed, and hazard insurance policies. The buyer brings evidence that he or she has secured a loan, property insurance policies, inspection reports, and the agreed-upon cash (usually a cashier’s check) needed to close on the property.
Both parties should read the documents first and ask questions; don’t sign anything with blank lines. The seller will sign the deed transferring title to the property over to the buyer. The buyer will sign the mortgage and the note.
The escrow agent ensures the transaction documents are recorded, the title insurance policies are sent to the lender and the buyer, and that the seller gets the sale proceeds.
The Agent’s Role
While the responsibilities of real estate agents in the closing process vary by state, there are things all agents can do to help ensure a smooth transaction:
- Confirm all disclosures were given in a timely fashion and signed off.
- Ensure everyone has a copy of all documents.
- Determine when the sellers and their possessions will be moved out of the property.
- When working with buyers, communicate with their lenders. Find out exactly which documents are required and the date by which they must be submitted.
- When working with sellers, make sure they comply with all requirements imposed by the buyer and the lender.
- Ensure the client is meeting the deadlines.
- Communicate with the other party’s broker.
- Stay involved! The agents often accompany clients to the closing to answer questions and offer support.
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