In Part 1, we’ve learned that the closing process is the final stage in the real estate transaction. It is when the homebuyer receives the key to their new home and the home seller gets paid for the sale of their property.
We also talked about the typical closing period for both mortgage-financed home acquisitions and all-cash transactions. Now, we’re going to dive deeper into the closing process and the role of a title service company in a seamless home closing.
Closing on a house is frequently done in phases and on various days. Although not necessary for every party to be present, the following parties frequently are:
The settlement meeting is facilitated by the closing agent, who also ensures that all paperwork is signed, and documented and that escrow and closing costs are paid promptly.
The fees you have to pay before officially owning a home, apartment, or townhouse are known as closing costs. Closing fees should be between 2 and 5 percent of the mortgage amount. According to CoreLogic, the national average for closing expenses in 2021 was $6,905 with transfer taxes included. Washington, D.C. according to the same survey, Missouri had the lowest average closing costs at $2,061, while had the highest average closing costs at $29,888.
Depending on the purchase price of the property and the financing arrangement, closing fees might vary, but generally speaking, they consist of:
On closing day, you may have to pay additional fees for an attorney, a notary, and any county or local taxes or fees that certain jurisdictions impose on real estate transactions.
From signing the original contract to signing the closing documents, there are numerous processes involved. Many of these actions are quite obvious, such as signing off on negotiations to the terms of the contract as either side, having an inspection of your home done if you are the seller, or submitting financial paperwork to your loan officer if you are the buyer. However, a lot of these actions are less obvious but just as crucial. Many of these can be completed by a title company, including:
Disbursement Of Funds: Following completion of the transaction and signing of all paperwork, the title firm will distribute the money by the buyer, seller, and lender's instructions. This entails settling any unpaid liens or debts on the property and giving the rightful recipients of the leftover money.
Escrow Services: Title companies frequently serve as impartial intermediaries during the closing process, keeping crucial documents and earnest money deposits in escrow until all terms of the sale are satisfied. This guarantees the safe and equitable handling of money and paperwork.
Title Search: The main duty of the title business is to carry out a thorough title search by looking through public records to confirm the ownership history of the property. To make the title clear and marketable for transfer at closing, the title company searches for liens, defects, or encumbrances that may still exist.
Settling Title Issues: The title company attempts to remedy any title concerns found during the title search before closing. This can involve resolving other title problems, fixing inaccuracies in the property description, or collaborating with creditors to pay off outstanding liens. Presenting a clear title is the aim of the title business.
There are a few choices accessible when it comes to choosing a title firm for a dry closing. While some purchasers prefer to select their own title company, others prefer to go with one that is recommended by their lender. It's critical to conduct due diligence and select a respectable title company with an established track record of accomplishments.
Nonetheless, a title company plays a crucial role in the safety of your property and ease of closing, so be sure to take the time to choose one.
Looking for a reliable title service company in Indiana?
If yes, then don't look further! At IndyLegal, our goal is to help home buyers and sellers, banks and lenders, builders, developers, real estate brokers and agents, and more find the best title insurance and services.
We also offer escrow services, settlement services, and investor services.
To learn more about our offers, click this link.
Buying a property is an exciting and overwhelming adventure. From choosing the location to negotiating and buying the home, every process is a new challenge to face. That stays true even during the closing transaction.
It requires a plethora of paperwork, signings, and payments. Knowing what to expect when closing a home can help you learn more about the process and get ready.
The last stage of what is frequently a drawn-out real estate transaction process is closing. It might take many months to go from the signing of a purchase and sell agreement to sitting down at the closing table.
Closing is the day that buyers receive the keys and formally become the property's owner. On the other hand, closing is the day that sellers get paid for the sale.
Numerous crucial tasks need to be finished by the time of closing. The potential buyer will have obtained the mortgage required to buy the house unless they are paying cash. There will have been an evaluation of the house and a condition inspection by an impartial third party. All further conversations regarding expenses, repairs, and fittings will have been resolved to a satisfactory degree. The purchaser is going to do a last inspection of the property. Usually, the vendor has left after packing.
The buyer of the property must sign a ton of documents on closing day to complete the transaction. On closing day, several additional parties are frequently present, such as the seller, the lender, real estate agents, the closing agent, and frequently an attorney who will also be reviewing the documents being signed.
There can be a range of times between putting in an offer and finalizing the deal. The typical closing period for mortgage-financed home acquisitions is 47 days, as reported by mortgage consulting and technology platform ICE Mortgage Technologies. Closings, however, can happen as quickly as thirty days, particularly in all-cash transactions.
The process of closing on a home is difficult. What you should do to prepare is as follows:
Consult A Real Estate Lawyer
Purchasing a home involves more than just the buyer and seller doing business. It's also a somewhat intricate legal procedure. You might find it helpful to work with a real estate lawyer to guide you through the process and make sure everything closes without a hitch. Generally optional, however having legal representation can help you steer clear of unforeseen problems later on.
Create An Escrow Account
At the beginning of the closing process, the majority of homebuyers open an escrow account, which is normally handled by a title company. This account contains all the cash related to the sale, including an earnest money deposit, before you formally close on the property. After closing, the mortgage provider transfers the monies to the buyer and seller, respectively, guaranteeing a safe and secure transaction.
Do A Title Search
Early in the closing process, do a title search on the property you are buying. Any problems or claims against the house, including unpaid property taxes or liens placed on it by contractors, will be revealed by a title search and might potentially threaten your ability to legally buy and occupy the property. During this time, you should also consider purchasing title insurance, which would pay for any title disputes that arise while you are the owner.
Get A Home Inspection
One of the most crucial aspects of closing is getting a house inspected. There may be hidden problems in even the most exquisite homes.
A contractor or qualified inspector will look for significant problems such as leaks, cracks in the foundation, faults with the plumbing or electrical system, and possible safety risks during a house inspection. You may choose to back out of the agreement based on the inspection's findings, or you may request that the seller remedy the problems as a condition of the sale.
Negotiate On Your Closing Costs
Certain charges are negotiable even if closing costs can be high. Check to see if your lender may waive the application fee or reduce the origination fee. Ask your mortgage company whether you can shop around for the cheapest rate instead of paying a set charge to the insurance company of their choice if you need a lender's title insurance.
Confirm Your Closing Date
Verifying the date of your closure is the next step. On this date, the seller will vacate the property completely and you will have the opportunity to move in. Remember that the closing date comes at least one month following the acceptance of the purchase offer. If you encounter unforeseen obstacles when shutting, it may take much longer. You can begin packing your belongings and contacting moving companies as soon as you have the closing date confirmed.
Do A Final Walkthrough
Doing a last walk-through just before moving into a new home is a good idea, even if your initial home inspection went well. There's always a chance that damage happened in the interim between the initial inspection and the day of your move-in. Make sure the seller repaired everything that needed to be fixed and cleared the house and property of everything that wasn't covered by the purchase and selling agreement at the last walk-through.
Understand Your Closing Documents
You will receive many crucial paperwork at the closing. Ask your real estate lawyer or Realtor to go over each document's purpose as there may be up to 100 pages in it. Some of the documents you might anticipate receiving are as follows:
Loan estimate: Key details about your loan, including terms, interest rate, and closing fees, are included in this document. Verify that everything is accurate, including how your name is spelled.
Closing disclosure: This document provides information about your mortgage, just like the loan estimate. This form should be sent to you at least three days before the closure. You have the opportunity to compare the information on the loan estimate and the closing disclosure within this window of time.
Initial escrow statement: Any payments made from your escrow account by the lender during the first year of your mortgage are included on this form. Insurance and taxes are included in these costs.
Mortgage note: This paperwork formally commits you to paying back the mortgage. It outlines the loan's conditions and amount as well as what will happen if you don't make your installments.
Mortgage or deed of trust: If you default on the mortgage note, this instrument secures the note and grants your lender a claim against the house.
Certificate of occupancy: This legal document is required for you to move into a freshly built home. Additionally, get a copy of the survey and title policy.
The two main things you will need to accomplish on closing day are signing legal paperwork and paying escrow items and closing expenses. The documents you will sign will cover the terms and conditions of your mortgage from your lender as well as the agreement between you and the seller, who is transferring ownership of the home. To ensure you understand exactly what you're committing to, it's crucial that you thoroughly read each of these contracts.
On closing day, you will also need to pay for all escrow goods and closing charges. Getting a mortgage and changing ownership of real estate comes with several costs. These costs consist of HOA dues, utility bills, and property taxes. Typically, the money is sent to the escrow business via wire transfer certified check, or cashier's check made payable to the bank. Personal checks are frequently prohibited.
It's also crucial to find out what kind of identification is needed before closing day. Though some businesses demand two, typically just one form of ID is required. Usually, you have to bring the following items:
Closing delays can be caused by a variety of factors, such as inadequate appraisal, unfulfilled conditions, title issues, and issues with the mortgage money.
Low Appraisal
An appraisal is a professional evaluation, mandated by the mortgage lender, of the value of the house you are considering purchasing. Ensuring the home's sale price is in line with its fair market worth is the aim of an appraisal. If the home appraises for less than the purchase price and/or the amount you are trying to borrow, this step could affect the closing process. The maximum amount the lender will lend you is the appraised value. Therefore, your agreement can collapse if you lack the funds to close the assessment gap.
Failing To Secure Financing
Closing may be slowed down or the loan may be canceled completely if you are unable to obtain a mortgage due to a change in your circumstances, nonpayment of the loan, or other delays.
Unfulfilled Contingencies
In a real estate contract, contingencies give either party the option to withdraw from the agreement if specific requirements are not fulfilled. This could be the result of a home inspection that finds significant issues, the purchase is conditional on the buyer obtaining financing (see above), or the seller buying a new residence. These and other contingency-related issues could stop the deal or make it completely collapse.
Issues With Title
Any real estate transaction requiring a closing needs to have a clear title, meaning there should be no questions or claims regarding ownership. This implies that the closure cannot take place until any form of lien or claim against the property is resolved. If a seller owes unpaid income or property taxes, the Internal Revenue Service or the state government may lay liens on the property.
These are some of the basic things you need to know when closing a home. In Part 2, we’ll dive deeper into the closing transaction and talk about the importance of a title service company.
