Closing on a Home

Your Role, as Buyer

When you, the buyer, close on a property, you’re satisfying every agreement you negotiated with the seller during the purchase-offer negotiation process. At closing, then, you’ll take ownership – and sometimes immediate possession – of the property you legally agreed to buy.

Closings are typically referred to as the “settlement” phase of a home purchase because all open accounts between you, the seller, your lender (if used), and the real-estate service (if used) are settled simultaneously. If your lender is like most, he or she will assign someone to “officiate” the closing for you in order to ensure that the interests of all parties are satisfied.

Expect to sign a slew of documents at closing, which the parties involved exchange. These documents make funds available for you to pay the seller in full any monetary amount you agreed to pay for the property. This amount is still due the seller after you make your down payment. In addition, the documents you’ll sign release money to pay any real estate companies, title companies, or other service providers involved during the negotiation process of the sale. Once the transfer of funds is complete, you can expect the seller to provide a legal deed and clear title to your new property.

Most important of all, closing is your final opportunity as a buyer to make changes to the purchase agreement. Once both you and the seller sign all closing documents, no further changes can be initiated on the contract to purchase the property, and all documents are legally binding.

Preparations

You’re best advised to start preparing for closing no later than the day before the agreed-upon closing date. You’ll need to have gathered any relevant paperwork generated during the negotiation process to which you have access.This paperwork typically includes …

• Your copy of the signed purchase agreement between you and the seller,
• The Closing Disclosure provided by your lender, showing the interest rate, mortgage closing costs, and any required mortgage insurance fees included,
• Your copy of the Title search and Title insurance provided by your title company,
• Your proof of property insurance coverage – including flood insurance, if necessary, provided by your insurance carrier, and
• Your copies of the home inspection and any inspection reports and/or estimates if repairs to the property or major appliances were negotiated during the negotiation phase.

Having these documents ready and available beforehand will make the closing go smoothly. You’ll also have more of an opportunity to review them and see that nothing has been overlooked. Should you spot something that needs correcting, you’ll have given yourself sufficient time to notify all parties involved that you wish to move the closing date until the discovered issue is resolved.

Expectations

Generally, your role at closing is to sign your name and record the closing date – over and over, time and again, on a multitude of legal documents. Most of these documents you should have seen before. If you haven’t, though, make sure you read them and fully understand what it is you’re signing. Remember these are legally binding documents – contracts between you and the lender, you and the seller – that’ll hold up in a court of law should disputes later arise. So any cramp you might get in your writing hand from all the signing you’ll do is clearly worth it!

If you negotiated for the seller to pay all closing costs, you’re home free, so to speak. On the other hand, if you owe a negotiated percentage of the closing costs, or if any escrow monies are required by the lender, this money will be expected from you at closing. Similarly, any fees due other parties who’ve provided services and that haven’t been rolled into the monetary amount you mortgaged on the property are also expected at closing.

Attendance

It may surprise you who actually shows up at your closing. In many instances, the seller will not be present. Sellers typically have a real-estate agent or attorney represent them at closing so they don’t have to attend.

Unfortunately, you, as the buyer, don’t have that option. But, then, neither do the lenders involved, nor any title company representatives. Your presence is an absolute necessity, given the substantial number of documents requiring your fresh signature.

Loan officers from both financial institutions, the seller’s and yours, will also be present as they need to make sure monies are transferred correctly and applied correctly to any outstanding mortgages. Your lender officer’s main goal is to make sure your new property is free and clear of any financial liens that anyone may have against it.

You can also expect a representative from the title company at your closing. This representative ensures that the seller’s title is free and clear. Typically, by closing, any and all title investigations will have been completed, and this appearance by the title company is merely a formality.

Receipt of Documents

You signed a lot of documents, and you can expect to depart the closing with a lot of documents in your possession. If common experience offers a clue, your mortgage lender will be the one to provide you with an oversized vinyl envelope to hold this vast amount of paperwork. Keeping it together in one location makes it a lot easier to access when you need it – at tax time, for instance.

Among the documents you’ll receive is a copy of the closing disclosure, which provides in writing the details of the mortgage you secured. You’ll also get a copy of the mortgage note you signed, promising to pay the mortgage amount in full. Beyond that, you’ll be provided with a deed that secures the note and gives your lender a claim against the property should you fail to live up to the note’s terms. If the home you’re buying is newly constructed, you’ll also receive a legal certificate of occupancy, which many states require in order for you to move into such a dwelling.

Post-Closing

When all the documents have been signed and dated, all the handshaking is done, and your new keys have been turned over to you, that’s when you actually assume ownership of the property. If negotiated, you can take immediate possession of it. If, however, the seller negotiated a delay in possession, you still own the property, but the seller becomes a renter – one who’s liable for any damages incurred before he or she moves out and you move in. Should the seller not respond to your wishes as the new owner, citing justifiable cause, you can have the seller evicted from your new property. Any repairs promised by the seller that were not completed by any negotiated time restraints are also just cause for legal action. Mutual post-closing agreements typically include compensation for real property taxes when the exact amounts that could be due are unknown on the closing date, or for certain repairs that couldn’t be made prior to the closing. Funds for the monetary cost of repair or replacement and labor would be available in the post-closing agreement.

A successful close is contingent on a number of things; not least, your understanding of the role you play in bringing it about. Knowing what’s expected of the buyer in the closing process, as described here, should help you better fulfill that role – and get you the home you’ve set your sights on a lot sooner and with a lot less difficulty than you might have expected.