What Happens at a Real Estate Closing?

When you envision a real estate closing you may think back to movie images or your own past experiences where there are lots of people wearing suits, oversized mahogany tables, and fancy pens held by buyers and sellers who are signing paper documents ad nauseum.

While it’s true that some in-person closings still involve big tables and nice pens, these days much of the process has become routinely digital. If you are a military family who has bought or sold a home from a distance, you understand that the entire closing process can be done from your laptop.

So what exactly happens at a real estate closing? Generally speaking, the closing is the time when there is a transfer of ownership of the home from seller to buyer. Usually, funds are transferred from escrow, title and mortgage fees are collected, and the deed is transferred into the name of the new homeowner.

Now, on to the specifics.

The Team

It has taken a lot to get to this point in a real estate deal. There’s been house hunting, mortgage lender research, offers, negotiations, inspections, and final approvals. When it comes time to make the whole thing official, there are several pieces of the closing puzzle you should expect. Even though the buyer and seller have agreed upon a closing date, a final timeline to close is usually a group effort between both real estate agents, the lender, a real estate attorney, and the title agency.

Contingencies

Leading up to the closing there are five basic contingencies that your agent should help you navigate before the home purchase becomes legally binding. These include a viable home inspection, an appraisal to determine fair market value, loan documentation, proof of homeowners insurance, and a final walkthrough. Your real estate agent is working on your behalf in each of these areas. If something comes back not to standard or if there is a question or issue about any one contingency, the closing may be delayed.

Time and Expectation Management

In most cases, home closings take between 30 and 60 days to get all of the details nailed down. The aforementioned contingencies can cause delays as well as the fact that there are so many people involved in the process. For example, there could be a backlog of home appraisals that could prolong getting the home’s value assessed. If the appraisal comes back well below the agreed upon sales price, the mortgage lender may decide the buyer needs to make up the difference between the appraised value and the asking price if the buyer doesn’t qualify for that higher amount to be financed. Negotiations could continue, thus prolonging the closing process.

It’s best to keep the phrase “hurry up and wait” in mind when thinking about your real estate closing. Patience is key.

Be Prepared for Closing Costs

According to Ramsey Solutions, “Closing costs are the fees third parties charge when you finalize buying your home. These costs usually include the home inspection bill, premium for homeowner’s insurance, appraisal fee, credit report charges, attorney expenses.” This usually amounts to between 3%-4% of the home’s sales price. Negotiations take place between who will pay these fees, but oftentimes in a seller’s market, the buyer should expect to pay these fees.

Final Details

Last but not least, buyers and sellers alike will need to be prepared at closing, whether in person or online, with photo identification, closing documents, as well as a certified or cashier’s check to make the payment. If doing a remote closing, a public notary may be involved in certifying signatures on closing documents as well. Once the transfer of ownership is complete after all of those signatures, it may take a few days for funds to clear. After that, buyers should expect access to their new home!