Steps to Closing a Real Estate Deal
We all have heard the saying, it is not over until the “Fat Lady Sings”. That a good way to explain the actual closing of a Real Estate transaction. The reason for this is that there are a number of things that have to happen along the way and, if they do not happen, then the closing will not happen in a timely manner!
The Title Company
When a client receives an offer on a home, there may be a lot of negotiating back and forth between the Sellers and Buyers several times before they have an agreement and at that time, they all sign the contract and at that point it is an Executed Contract. It is then when Earnest Money is hand delivered to the Title Company. The Title Company is holding this money in Escrow until the transaction closes and at that time the Earnest Money is credited to the Buyer because this money was given as money in good faith that they are in fact going to buy the home.
The Title Company will then do a title search and will issue Title Insurance, which basically states that the Title Company is guarantying that there are no liens on the property, etc. They will also be the official record keeper of all documents, changes, etc. to this transaction.
At the closing itself, all parties to the transaction sign all their pertinent documents and then the Lender, if there is one involved, issues to the Title Company a finding number which is the official authorization that the file is closed. At that point, Funds will be transferred, checks issued to the appropriate parties, etc.
All Sellers and Buyers have the right to be represented by an attorney to review the documents and attend the actual closing if their clients so chose. This usually occurs in very large transactions and those where one of the parties to the transaction does multiple transactions on a regular basis and they simply want their attorney involved.
Obtaining Pre-Approval for your Mortgage
If you are prospective Buyers seeking to purchase a home, one of the first and important steps is getting a Pre-Approval from a strong qualified lender. Jan, as your Trusted Advisor, has the resources to refer you to a lender who can take care of all the details of getting you the Pre-Approval you need. It is important for you to understand that your discussions with the lender stay with the lender and Jan does not know any of the personal details of your finances, etc. The lender will simply provide Jan with a Pre-Approval Letter on their company’s letterhead. Most agents representing Sellers will not consider an offer without a Pre-Approval letter from a qualified lender or Proof of Funds if it is a Cash transaction.
Estimated Closing Costs
If you are Sellers, Jan will review with you your estimated closing costs based on the amount of your existing loan on your current home, whether you are paying your own taxes or escrowing them, etc. This estimate will make sure there are not any surprises when you get to the closing. And three days prior to closing both the Sellers and the Buyers will receive a CD(closing disclosure) from the title company outlining all your costs and if you are Buyers how much money you need to bring to closing in the form of a Cashier’s check or have the funds wired directly to the Title Company.
Jan will provide all Buyers with a list of home inspectors. All Buyers need to make sure they understand the importance of having an inspection. Buyers will be asked to sign a form stating that they have been informed about the importance of having the home inspected. With your permission, the home inspector will provide Jan a copy of the inspection. Jan will then review the items of concern with the Buyers and finalize an Amendment asking the Seller to replace and/or repair these items of concern. This takes place during what is called the Option Period. If there are major problems with the home and the Sellers do not agree to take care of these issues, the Buyers have the right to Terminate the Contract and Request for their Earnest Money to be returned to them by the Title Company. Jan will also recommend that you have a Termite inspection done on the home. If there is an active infestation of termites, Jan will likely recommend that the home be treated for termites at the sellers’ expense.
Prior to closing, Jan will coordinate for the Buyers to do a final walkthrough of the home. Usually this is done the evening before the closing the next morning. We do this to make sure the previous owners have properly moved out leaving the home what is called “Broom Clean”. Naturally, we want to make sure that no damage has been done to the property. We also want to make sure that items that were to remain in the home have not been taken out. These items would have been part of an Addendum to the contract.
The Closing Itself
Jan will in most cases attempt to schedule your closing for the first thing in the morning when the Title company opens. The reason for this is to make sure you are not waiting on another closing to finish before you.
Jan will remind you, but be sure you know the directions to the Title Company and allow extra time to arrive. Generally, we are the first transaction to close so the Escrow Office will be ready for us and usually we can actually get started a little early.
Even though you have received a Closing Disclosure, review it before hand and jot down any questions you may have for the Escrow Officer or your Lender who in most cases will also attend your closing.
Allow the Escrow Officer to review the Closing Disclosure and stop them with any questions you have as you go along.
It is a simple process and at this point, it will be over before you know it and you have bought or sold your home.
Moreover, of course, Jan will be there with you to celebrate the closing!
Further reading about buying a home