The closing in a real estate transaction is when the seller officially transfers ownership rights in the property to the buyer, assisted by closing agents or attorneys. This requires meeting the terms of the agreement and resolving any contingencies that have been stipulated. The closing will involve signing off on your loan and giving the seller your down payment, while the lender pays the seller the purchase price.
The purchase agreement generally will provide when the closing should happen, although the parties can adjust the date. The location of the meeting or series of meetings that comprises the closing might also be provided in the purchase agreement, or it might take place at the office of your agent or your attorney or at the registry of deeds. The buyer, their agent, their attorney, the buyer’s mortgage broker, and a notary public may all attend. Even if you have not yet used an attorney in the process, some states require that you retain an attorney for the closing. You also may want to have an attorney’s assistance for this final step to make sure that the documents are in order. The seller and their agent may attend the closing, or they may handle their part of the process in a separate meeting. Whether the buyer or the seller signs the documents first makes no difference.
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You should schedule one last inspection of the house to confirm that the seller has moved out, the place is in proper condition, and any agreements about repairs or fixtures have been heeded. This should happen on the day before the closing or on the day of the closing, but in any event no more than five days in advance. Your agent and in some cases the seller and the seller’s agent may attend. You should essentially mirror the steps taken in the general inspection by a licensed professional that you will have arranged earlier in the process. If any damage happened after the seller moved out but before the closing, the seller likely will be responsible for fixing it. However, if you find something that the inspector or you missed at the general inspection, you may not be able to get the seller to fix it.
If you are buying a new home from a developer, you will want to bring your contract with the developer to the walkthrough to make sure that any upgrades and specifications have been addressed. The developer may come with you to explain how certain things work. If issues remain to be resolved, you can list those for the developer and have them agree to make the adjustments before the closing. If the issues seem major or hard to resolve, you can try to delay the closing or try to create a new agreement with the developer to put the money to make the repairs into a separate account, from which the developer can collect when the work is complete. You should specify the time period in which the developer can complete each repair.
You should receive the Closing Disclosure from your lender at least three days before the closing. It will provide the various required fees. These should be similar to the fees listed in your most recent loan estimate, but you should still double-check the numbers. You should also check the interest rate, the property address, the spelling of your name, estimates of property taxes and homeowners’ insurance, and the amount of cash required for the closing. Make sure that it includes any additional provisions for which you may have arranged, such as balloon payments or pre-payment penalties. If you already have paid a fee, such as a fee for an appraisal, this should appear as a credit on the Closing Disclosure. The Cash to Close number is the specific amount with which you need to arrive at the closing.
Other Key Documents at the Closing
The closing will involve certain documents related to financing the purchase. These include the mortgage itself in addition to the promissory note, which provides that the buyer is borrowing a certain amount of money from a lender and guaranteeing to repay it. You should also receive a copy of your monthly payment letter, which will provide how much money you will need to pay each month for both the loan principal and interest. If you are moving into a co-op, which does not require a mortgage, you may receive a UCC-1 Financing Statement, which contains the lender’s claim on your property interest.
At the closing, you also will receive documents related to transferring the property. These include the deed, the bill of sale, and an affidavit of title and ALTA statement. The deed should have been signed by the seller and state the purchase price as well as your name and the way in which you are taking title. To record your title, your closing agent or attorney will file the deed with the public records office. (If you are buying property in a co-op, you will receive a stock certificate and a proprietary lease for your unit instead of a deed.)
Prepare a list of expected documents beforehand with the help of an agent or attorney and check them off as they are reviewed during the closing.
Meanwhile, the bill of sale will cover any personal property that is sold with the house. This involves things other than fixtures, which are physically attached to the property and transfer automatically unless the buyer and the seller agree otherwise. The affidavit of title allows the seller to promise to the title insurance company that there are no problems regarding title of which they are aware, and the ALTA statement makes a request for title insurance, signed by both the buyer and the seller.
Moving Into Your New Home
At the end of the closing, the buyer usually has the right to take possession and move into their new home. You may need to do this within 60 days if your lender requires it. The purchase contract may provide something different, however, so you should check the clause describing possession to make sure that you are complying with it. In some states, a buyer will need to wait for their deed to be recorded to actually get the keys and take possession. The specific time period in which this happens varies from state to state.