The Closing Process
Nothing should be a surprise to you on closing day. Your lender and settlement provider (a law office or a title company) will send you the important final financial information for you to review before closing day.
A law office or a title company facilitates the actual real estate transaction. They are considered a Settlement Service Provider (SSP) as required by the Real Estate Settlement Procedures Act (RESPA). An SSP is a neutral party who makes sure each party gets what they are promised in the transaction and holds funds in escrow until the title of the property is transferred between the seller and buyer.
The other important role the law office or title company performs is confirming that the title can be delivered to you as the buyer free and clear of liens, easements, and/or encumbrances. They will make you aware of any title issues by producing a title report for you.
We know you are excited, and you don’t want the deal to fall through, but doing a comprehensive walkthrough is an important step. Before you sit at the closing table to sign the paperwork, you’ll typically do a walkthrough of the property. The walkthrough is the last step and is intended for you to:
- perform a final inspection
- verify that the seller has fully moved out
- check to make sure that there are no new issues since you completed your due diligence
Discuss any issues with your real estate agent or attorney. Any issues can potentially be brought up at closing so that they can be addressed.
Cash to Close
Cash to close refers to the funds a home buyer needs to finalize a real estate purchase. This is usually in the form of a certified cashier’s check from your bank, and includes your down payment plus any additional closing costs.
You may have the option to electronically transfer funds to the appropriate account. You will need this information before closing day.
You’ll also want to make sure you have a valid ID with you such as a driver’s license or passport on closing day.
What Happens at Closing
Closings often take place at a law office or title company, but they can also take place at a real estate office, lender’s office, or the house itself. The seller, buyer, real estate agent(s), and closing agent or attorney typically are all present though not required.
The closing agent or attorney will facilitate the closing by collecting your cash to close due and making sure all paperwork is understood and completed correctly. There will be a stack of papers for you and the seller to sign. Depending on the state you live in, there may be an opportunity to complete closing documents electronically.
Each state has different guidelines to work within. The intention of the paperwork is to fulfill two contracts:
- The exchange of the property from seller to buyer
- The lender provides funds to the buyer/borrower.
In the next section, we will look at the important closing day documents.
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