This is the second of a three-part series on real estate closings.
At closing, the parties to the sale of real estate take the final actions necessary to complete the transaction to convey the property interest from the seller to the buyer. It can take up to 60 days to close on a property from the point a purchase offer has been accepted by a seller. There are many factors that impact how quickly a property can close. One of the biggest is whether or not the buyer is using financing, and what type. Cash purchases can close quickly, while conventional lenders may be backed up for weeks. Once a closing has been scheduled, some advance preparation is required to ensure the transaction goes smoothly.
Scheduling the Closing
A time and place for closing should be scheduled promptly, checking to be sure that the buyer and seller can accommodate the schedule. A confirmation notice should be sent to both parties to the transaction as well as their agents. While the schedule may slip due to circumstances, calendaring a closing date sets a tone of determination and urgency to get the deal done as expeditiously as possible.
Preparing a Checklist
It is important to have a checklist of the items needed to close the transaction; whose responsibility it is to furnish each item; the date that item needs to be circulated for review; who needs to review and/or approve that item; and the date that review/approval must be completed in order to achieve a closing on the scheduled closing date.
For example, most purchase agreements have contingencies set in place that buyers must do before the sale is official. These include an appraisal to ensure the value of the property is accurate, inspection showing the property doesn’t have any issues and the ability to back out of the sale if the buyer’s financing falls through.
Before closing, the buyer’s loan must go through an underwriting process. Underwriters are like real estate detectives; their purpose is to make sure that the buyer has represented himself and his finances honestly, and that no false or inaccurate information was given on the loan application.
Examine the Closing Disclosure
If securing a loan, one of the best ways a buyer can help ensure a smooth closing is to thoroughly review the closing disclosure or settlement statement. This official document outlines the exact amount of the mortgage payments, the loan’s terms, and closing costs. Comparing the closing disclosure to the loan estimate provided by the lender is also important. Any discrepancies should be explained by the lender.
Most sales contracts allow buyers to do a walk-through of the property within 24 hours before closing. During this time, the buyer should make sure the prior owner has vacated (unless other arrangements have been made). Buyers should also ensure the condition of the property is what was agreed upon in the contract. If the inspection reveals problems the seller decided to take care of, the inspection should also include confirmation that all the repairs were completed.
Required Documentation for Closing
To avoid any delays, buyers should gather the following before closing and remember to bring them to closing:
- Proof of property insurance
- Inspection reports
- Government-issued photo ID
- Any paperwork the bank required to approve financing
- Certified funds for whatever amount is due at closing
Finding the right home or commercial property is a major undertaking, one that neither party wants to see derailed at closing. Proper planning and preparation are essential to ensuring the transaction closes smoothly. Finally, having an attorney at closing to handle any unforeseen issues can often mean the difference between closing and postponement.