This article is an overview of a residential real estate closing. This will include the start to finish process and the need for an agent to represent the parties involved to protect both the buyer and seller’s interests.
It is vital to have a Real Estate Contract prepared by either the realtor or the seller’s attorney. This will be drawn up, read and signed by both parties. Included in the contract should be the sales price, realtor commission, deposit, closing date, and any other agreements made between the two parties. For example, the seller may be giving a credit for carpet replacement or the buyer may be buying furniture in the house for an additional cost.
Once the contract has been signed and the down payment given to the seller to be held in an escrow bank account for closing, the process can begin. If the buyer is getting a mortgage, they will need to give the bank the information regarding who will conduct their side of the closing. If a realtor was used, they typically have real estate attorneys to represent their clients. The lawyer can only represent the buyer or seller but not both.
The buyer’s legal counsel will do a title search on the property going back to the developer of the subdivision. Each person that held title to the property will be searched to make sure that no liens or judgments were put on the property during the time of their ownership. Any judgments or liens less than 20 years old will have to be paid off if they are attached to the property. There will also be a search for all mortgages placed on the property and verification will be made that those mortgages were paid or a letter calling for a payoff of the mortgage will be sent to the mortgage holder/bank. As part of making sure the property will be clear of any debts, the County / City taxes, water, garbage, or assessments must all be checked on the property. If there are any outstanding debts on the property, the seller will have to pay these off at closing.
Some homes are within a deed-restricted area where annual dues are collected by a homeowners association. If this is the case, a letter will be obtained regarding any outstanding fees on the property. Many times the new buyer must be approved by the homeowner’s association so the new buyer’s will need to make sure they have applied for approval and received it before closing. An attorney who represents the buyer will typically read the Homeowners Association Constitution as well as the buyer. This will help them make sure they are aware of all the rules and regulations for their new neighborhood.
A survey is typically done on the property and turned over to the legal representative for the buyer to make sure no unauthorized structures are sitting on their property. Easements, roads and other parts of the property used to access utilities will be marked. If anything unusual comes up it will need to be taken care of before closing.
An appraisal will be done of the property, and a home inspection should also be done. The appraisal will insure that the buyers are paying a fair price for the property and a home inspection will reveal any problems with the property that can be negotiated before closing. In many states a termite inspection is required before the closing also.
Once the property has been thoroughly researched and all debt payoffs obtained the seller’s documents, such as the Deed, Closing Statement, and Affidavit’s, can be prepared by their legal counsel. The buyer’s legal counsel will receive the mortgage documents from the bank as well as make the Closing Statement with all the figures regarding the purchase for the closing.
The buyer and seller will typically have different closing times on the same day. Once the buyer has completed the mortgage documents, the funds can be sent from the bank. If this is a cash closing, once the documents are signed and the money sent to the buyer’s representative a cashier’s check can be made or a wire transfer made to send to the seller’s legal counsel. The seller will sign their documents and receive their funds for the sale of the home. The deed and mortgage will be sent to the recording department of the county that the property is in and then returned to the buyer’s legal counsel to be sent to the bank and homeowner.