A closing takes place when the ownership of a property is handed over from a seller to a buyer. It involves the change of documents and funds to finalize the transactions.
However, the process for a seller and buyer differ and in this article, we will provide you with a detailed account of What Happens at a Closing for both the seller and buyer.
A buyer will pay the agreed price from the sales contract, and the seller will then exchange these for a lease, a deed, as well as other transfer documents to clear their title to the property.
Any adaptations, repairs, or improvements to the property that have already been agreed upon, such as removing an unwanted garden shed, should be completed and finalized by the closing date.
However, if the seller and buyer agreed to complete the work at a date after the closing then any work would not be expected to be completed.
Typically, a settlement agent or escrow- commonly called a disinterested party- will be invited to oversee the closing. This helps to ensure the finalizing process is secure and fair by witnessing that all tasks have been simultaneously completed.
The process will vary depending on which state you are in, but during the closing, you should expect to review, authorize, date, and sign numerous legal documents.
Where Does the Closing Take Place?
If you are applying for a mortgage loan, typically your closing will be held at your settlements agents or escrows offices.
🔑Key Insight: An escrow is usually the title insurance company that protects the buyer’s title for the property.
If requested, a mobile escrow can be sent to close in a location that is suitable for both the seller and the buyer.
However, if you are purchasing your home with cash and you do not need a lender, the buyer and seller can organize a location for the closing that is convenient for both parties.
There are several benefits for buying a house with cash- one of them being it speeds up the closing process. Take a look at our blog which lays out our top 12 benefits of accepting a cash offer.
Some closings are completed on a witness-only basis, which means an attorney will be present at the location chosen by the buyer and seller to issue the loan documents and disbursement services.
Whereas in other states, table closings is completed. Essentially, a table closing rounds up the entire closing to one day, and funds, documents, and other items that need to be transferred over for ownership purposes will all be processed in a meeting of all parties on a specified date.
Who Attends a Closing?
Attorney- if applicable
Attorney- if applicable
A representative from your lender- if you sought a loan
Real estate professional
Real estate professional
A closing agent/escrow
A notary pub
Who Should Attend A Closing For The Buyer And Seller
How Long Does the Closing Process Take?
On average, the closing process on a house takes around 40-50 days, but of course, some can take a little longer.
Many closing transactions end up facing some form of delay and can make the process seem like a living nightmare.
Typically a frequent cause of delay is from buyers who are borrowing money to pay closing day fees.
💡Top Tip: Try and sort your finances around 6 months before you consider buying a home and clear any existing debts, it’ll speed up the overall loan application, as well as your closing process.
Top Three Reasons for Closing Delays
Although we hope there will be no delays for your closing, it’s important to be aware of what implications or delays could spring up and throw a spanner in the works.
These issues can arise at any time, from your offer to the day of your closing- and sometimes it’s just uncontrollable so don’t beat yourself up!
Sometimes your offer may be rejected, and understanding the ways to deal with a rejected offer will allow you to bounce back stronger.
Appraisals usually take place in purchase and sale transactions- in particular, refinance transactions. They are completed by an unbiased professional who offers their opinion on the value of the home up for sale.
Appraisals can sometimes come out as lower than the value anticipated, and there is a range of reasons as to why the value may be low, such as the features of your home not replicating that of other homes in the neighborhood.
🌟Key Insight: Appraisals can show that you could be paying more for a home than what it is worth.
Lenders cannot approve loans that are more than the home’s value, but there are some options you can consider if the appraisal comes in lower:
You can ask the seller to decrease their asking price
Request further information on the appraisal to determine why it's so low- or request another opinion
Terminate the contract
Naturally, searching for your new home is an exciting endeavor and when you spot your perfect home the thought of someone else capturing it is upsetting.
That’s why many people make offers before they have even been preapproved for a loan- and this can cause delays.
A bank or lender needs to take a look at your finances before they can decide how much money they can lend to you. So, making an offer before preapproval could be fine- but there’s a possibility of it going wrong.
🧠Remember: Stay realistic and true to yourself, while it’s easy to fall in love with home make sure it's affordable. Your loan could be granted, but your take-home pay may not be sufficient to pay off your mortgage in a good amount of time leaving you in debt for years.
It’s preferable if you have your mortgage preapproved before you start looking at homes- you’ll have a budget or price range in mind and know exactly what you can and cannot afford.
Home inspections help to uncover underlying problems that you may not spot on your first visit to your house.
📋Good to Know: Most home inspections, whether on newly built houses or older homes, will reveal some issues.
While some issues found on your inspection are minor, there are some that you should not try to ignore. For example, problems like infestations that are not usually covered under standard homeowners’ policies are red alerts and can rack up huge amounts of money to resolve issues.
This could leave you having to pay between $1000 to $3500, for a 2500 sq ft. home to get a chemical extermination.
If problems like infestations, electrical damages, or water supply problems crop up from your home inspection, it's usually better to move on and find a new home.
What Happens at a Closing: The Buyer?
Essential the real estate term closing refers to the legal reviewing and signing of documents- and as the home buyer you’ll sign a bulk of documents, however, that’s not all there are other things to consider when analyzing what happens at a closing.
As mentioned, the process is usually led by or managed by an escrow agent. Your escrow agent is a trained professional who focuses on real estate closing, as well as preparing all relatable documents.
Depending on which state you are in, the process can vary. Some state allows the home buyer and seller to close individual on different dates and times. But in some states, it’s a requirement for both seller and buyer to wrap up the closing together at the same time.
✍️Extra Information: In states where both parties are required to attend the same closing, both the buyer and seller’s real estate agents should be present.
Overview of What Happens at a Closing:
Although some aspects can change the process in different states, the general process remains the same. Let’s take a closer look:
The buyer will bring along a cashier’s check which will cover any remaining fees and costs to close.
The home buyer will sign a document that transfers the property title from the homeowner to the buyer.
The closing agent, escrow, lawyer, or notary will take the new deed to the correct government office for registration. At this point, the home buyer will be recorded as the rightful owner of the property being sold.
Real estate agent/s will now receive their commission fees
Finally, the seller will be given any takings they are due from the sale as soon as their remaining mortgage balance and closing costs have been paid.
🔄Round-up: During a closing, the ownership and property title are passed on from the seller to the buyer. A home buyer will sign many different documents that an escrow has prepared, and any closing cost will be settled. Commissions for your real estate agents will be paid and then distributed by the closing or escrow agent.
Buyers Checklist: What to Bring
Photo ID-: Bring along a government-issued form of identification i.e., driver’s license or passport.
Cashier’s Check: To pay off your final closing costs and fees you’ll need a validated check
Home Insurance Certificate: Your lender will ask for your insurance policy before signing off the closing. Contact your agent beforehand to get a new copy of your insurance policy.
What Happens at a Closing: The Seller?
Now that the official home selling process is completed and the purchase and sale agreement documents have been signed around four to six weeks later the closing process can begin.
The seller will receive a notice containing information on where the closing is taking place, along with who will be present on the closing day such as the real estate agents, closing agents, escrow, and of course the buyer.
On the day before the closing or some occasions on the day of the closing, the buying and real estate agent will attend a final walkthrough. It allows the buyer to walk through the property and make sure everything is in perfect order.
For instance, you may have requested some repairs and on the walkthrough day, these should be completed.
🔥Hot Tip: Check all appliances, water, and lights are in working order, as well as the overall condition of the house.
Once the final walkthrough has been completed, it's time to attend the closing at the noted location, usually a third-party place such as the escrow's office. At the office, the seller will sign all the relevant documents such as The Deed, Bill of Sale, Statement of Info, Statement of Closing Cost, and the HUD-1 Form.
Sellers Checklist: What to Bring
Photo ID-: A form of government-issued identification i.e., driver’s license or passport.
Keys, Garage Door Keys, and Codes
Info for Doorbells, Smart Locks, etc
Remotes or Devices that control household systems
Checks for repairs and closing costs: If you offered to pay to repair any damages to the house, you should bring the funds in a cashier's check from your bank.
Anything else your professional tells you to bring
Conclusion: What Happens At a Closing?
There’s a lot to consider for both a seller and buyer when determining What Happens at a Closing, but taking your time through each step and being in frequent contact with your real estate agent will offer your professional guidance and relieve some pressure.
Essentially, the closing process runs from when your offer is accepted until the date where legal ownership is transferred from the seller to a buyer.
The closing process can take up to 50 days on average to be completed, so having patience is essential. Avoiding any delays will help to speed up the process, so stay true to yourself and know what you can and cannot afford.
Always, make sure you know who you are working with, it's an agent or a sub-agent, as there is a range of things you have to look out for.
📝Remember: it's always best to send an offer to the seller once your mortgage or loan has been preapproved- that way you know what price range is affordable for you.
How Much Are Closing Costs?
The closing costs are settled concerning the terms set out in the purchase contract between both parties. Typically a buyer will cover more of the closing cost, but the seller will also have costs that they need to pay.
Closing costs are usually between 3 and 5 percent of the finalized purchase prices, including the fees and taxes.
When Can I Move In?
Technically speaking, on the day of the closing the seller should already be moved out as all keys should be transferred to the buyer and the buyer is now the legal owner of the home.
However, buyers and sellers normally agree on when the seller should have left the property. It’s usually around 24-48 hours or sometimes up to one week.
Who Signs the Documents First- Seller or Buyer?
The seller will usually sign all of the closing documents first, and sometimes they will be signed before the buyer arrives at the third-party office. Generally, this is because the buyer has more documents to sign than the seller does, and the seller is not obliged to sit and watch the buyer sign every document.
Does The Seller Get Paid At The Closing?
At the closing, everyone who is receiving payments gets paid practically immediately, including the seller, estate agents, and title companies. So you can expect your funds on the same day, or maybe the day after.
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