This is the third of a short series of posts about the transfer of property — the first was about title insurance, and the second was about tax aspects. The fourth (and final) post will be about deeds.
After a contract is signed — or ratified — by both parties (seller and buyer), there are a myriad of details that need to be ironed out before going to the closing table and finalizing the deal. Once those details are hashed out and everything has been taken care of, going to closing is a wonderful feeling! It can be nerve wracking — many times it is the largest transaction the parties have been a part of — but when all the “i’s” are dotted and all the “t’s” are crossed, take a deep breath and enjoy the day.
But wait, what exactly is “closing?”
Closing is that point in time when the seller tenders the title to the buyer in exchange for the buyer’s payment of the purchase price. This usually happens 30 – 60 days after the contract has been ratified. A closing is conducted, typically, by a settlement agent, or real estate attorney.
What are all the details that have to be taken care of before closing?
This is where it is GREAT to have a professional working with you. Shameless plug: our team has an extensive quality control system in place so that no detail gets overlooked, and it has proven successful transactions time and time again! Here are just a few of the tasks that have to (or should) occur before closing:
On the buyer’s end:
- Title inspection
- Home inspection
- Radon test (if there is a basement)
- Homeowners Association Packet needs to be reviewed (if applicable)
- Application made for loan and interest rate needs to be locked
- Homeowners insurance
- Appraisal completed (before loan can be approved)
- Utilities need to change names from seller to purchaser
- Closing costs ready for the day of closing
On the seller’s end:
- Homeowners Association Packet requested and delivered to purchaser (if applicable)
- Send a copy of the contract to the settlement agent and/or the attorney preparing the deed
- Repairs made to home if agreed upon in the Home Inspection Agreement
- Appraisal completed
- Termite check
- Disconnect the utilities
- Well and septic tests done (if applicable)
- Measure the amount of fuel remaining on the property (if applicable)
With closing comes closing costs. What are those?
The main purpose of closing is to transfer title to the buyer and disburse the funds to the seller. But there are several other expenses that must be allocated among the parties in order to accomplish this purpose. These include:
- Taxes that the seller pre-pays must be reimbursed by the buyer
- Broker’s commission must be allocated to the broker
- Attorney’s fees (i.e. for running title search and preparing the deed)
- Recording expenses
- Transfer tax
- Title expenses
- Loan fees
- Tax reserves
- Insurance reserves
- Appraisal fees
- Survey fees
All of these expenses can be found on the Closing Statement or HUD. It is a detailed record of all cash received, all charges and credits made, and all cash paid out in the closing transaction. Closing statements are prepared by the settlement agent, attorney, escrow agent, or sometimes a broker.
Reading about this is sort of like drinking water from a fire hose, but don’t be hindered by this amount of information! We take care of almost all of the details for our clients and make each transaction run as smoothly as possible. We have checklists and more checklists for ensuring that everything is handled appropriately and in the right timing.
Questions about closing? Comment below or contact us directly. We’re happy to help!