12 Steps of a Real Estate Closing

12 Steps of a Real Estate Closing

Real estate transactions can be lengthy and involve several essential steps, but each step brings you closer to owning your dream home. The real estate closing process is when you officially sign the papers and take ownership, but getting there requires careful attention to various details. Each task ensures a smooth and successful closing, from securing financing and completing inspections to finalizing paperwork. While the journey may seem complex, every step plays a vital role in making the property yours. By staying focused and organized, you can navigate this process confidently and look forward to the moment you receive the keys to your new home.  

What Does “Closing on a House” Mean?  

Closing on a house marks the final step in the real estate sale process. After signing a purchase agreement, the journey to the closing table typically spans a few months. For homebuyers, closing is the moment they officially take ownership and receive the keys. For sellers, it is the day they receive the proceeds from the sale.  

There are several steps that must be done prior to closing. Buyers secure the necessary mortgage or arrange cash payment. An appraisal and third-party inspection are conducted to assess the property. Any discussions about costs, repairs, and fixtures are resolved, and the buyer performs a final walk-through. Typically, the seller has already packed up and moved out.  

On closing day, the homebuyer signs the paperwork that finalizes the transaction. Typically, the seller, lender, real estate agents, closing agent, and an attorney are also present to ensure everything is in order.  

What Are the Steps to Buying a House?  

Closing on a property can be straightforward with the right support. Your lender and real estate agent will coordinate many steps with the necessary parties. Here is how you can prepare for a smooth closing:  

1. Set Up an Escrow Account 

Most homebuyers open an escrow account at the start of the closing process, typically managed by a title company. This account securely holds all the funds related to the sale, including the earnest money deposit. Once the closing is complete, the mortgage provider smoothly distributes the funds to the seller and buyer, ensuring a safe and secure transaction. 

2. Complete a Title Search and Secure Title Insurance 

Conduct a title search early in the closing process. This search reveals any issues or claims against the property, like contractor liens or unpaid taxes, which could affect your right to purchase and live in the home. Consider purchasing title insurance at this stage, as it will cover the cost of any title claims during your ownership. 

3. Consider Hiring a Real Estate Attorney 

Buying a house is more than just a transaction; it is a complex legal process. Hiring a real estate attorney can help you navigate this smoothly, ensuring everything goes as planned. While optional, having a lawyer on your side helps you avoid unexpected issues and makes your closing experience more secure. 

4. Review and Negotiate Closing Costs 

Closing costs can add up, but you can often negotiate them. Ask your lender to reduce the origination fee or waive the application fee. If your mortgage requires lender’s title insurance, request the option to shop around for the best rate instead of accepting a fixed payment from their preferred insurance company. 

5. Schedule a Professional Home Inspection 

Schedule a home inspection to ensure everything is in top shape before closing. Even stunning homes can hide underlying issues. A professional inspector will examine the property for problems such as foundation cracks, leaks, plumbing or electrical issues, and safety hazards. Based on the inspection results, you can walk away from the deal or request that the seller address the issues as part of the sale contingency. 

6. Arrange for a Pest Inspection 

In addition to the general home inspection, it is advisable to conduct a pest inspection to ensure the property is free of wood-destroying pests like termites. This step can prevent future structural issues and unexpected repair costs. 

7. Revisit and Adjust the Purchase Agreement if Needed 

If the inspections reveal significant issues, you may need to renegotiate the purchase offer. This could involve requesting repairs, a price reduction, or credits at closing to cover the cost of necessary fixes. 

8. Lock in Your Mortgage Interest Rate 

Interest rates can fluctuate between the time you apply for a mortgage and the closing. To protect yourself from potential increases, consider locking in your interest rate with your lender. This guarantees the current rate for a specified period, typically until closing. 

9. Clear All Contingencies 

Ensure all contingencies outlined in the purchase agreement are addressed and removed. Common contingencies include financing approval, satisfactory home inspection, and appraisal. Removing these confirms that you are ready to proceed to closing. 

10. Finalize the Closing Date 

Secure your closing date- the day the seller will have moved out and you can move in. Typically, this date falls at least one month after you accept the purchase offer. Be prepared for potential delays if issues arise during the process. Once you confirm the date, start packing and contact moving companies to prepare for your new home. 

11. Conduct a Final Property Walk-Through 

Even if your initial home inspection went well, it is wise to perform a final walk-through just before moving in. Damage might occur between the first inspection and your move-in date. During this walk-through, verify that the seller has completed all required repairs and removed items not included in the purchase agreement from the house and property. 

12. Thoroughly Review All Closing Documents 

You will receive several crucial documents, potentially over 100 pages, during the closing process. Take the time to understand each by consulting with your real estate attorney or realtor. Here is what to expect: 

  • Loan Estimate: This outlines key details about your loan, including terms, interest rate, and closing costs. Double-check all information, including your name’s spelling. 
  • Closing Disclosure: Similar to the loan estimate, this document details your mortgage terms. You will receive it at least three days before closing, giving you time to compare it with the loan estimate. 
  • Initial Escrow Statement: This form lists payments your lender will make from your escrow account during your mortgage’s first year, covering taxes and insurance. 
  • Mortgage Note: This is your commitment to repay the mortgage, outlining the loan amount, terms, and lender actions if you miss payments. 
  • Mortgage or Deed of Trust: This document secures the mortgage note and gives the lender a claim against the property if you do not meet the terms. 
  • Certificate of Occupancy: This legal document is necessary to move into newly built homes. Request copies of the title policy and survey, too. 
  • Purchase Agreement: This binding contract finalizes the real estate transaction, officially securing your new property. 

What Happens at a House Closing?  

On closing day, your main responsibilities are signing legal documents and paying closing costs and escrow items. Carefully review all documents to understand what you agree to. Here is what to expect:  

  1. First, provide identification like your driver’s license or passport, a marriage certificate (if applicable), and proof of homeowners insurance for your new property.  
  2. Next, you will sign several important documents, including the closing disclosure, the mortgage document securing your home, a promissory note for loan repayment, and the property deed, transferring legal ownership to you. 
  3. You will then pay closing costs and escrow items, including property taxes, HOA fees, and utility bills. This payment typically requires a certified or cashier’s check, or you may wire funds directly from your bank.
  4. Finally, unless the purchase agreement allows the previous owner to stay, you will receive the keys to your new home after completing the paperwork.

Conclusion  

Closing on a home involves several key steps, from hiring a real estate attorney to negotiating closing costs. On closing day, you will sign documents, pay closing costs, and finalize your mortgage or other payment minus any deposits. While the process may seem complex, taking your time and understanding each step ensures a smooth transaction. Be mindful of potential delays, such as low appraisals or title issues, but do not rush. Your diligence now will pay off, allowing you to confidently close on your new home and start the next chapter of your life with peace of mind.  

For any further inquiries or property management, contact us at BFPMInc. 

Read our related blogs here:

How to Prepare Your House for Sale

 


Trevor Henson

Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…
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Frequently Asked Questions(FAQs)

The buyer typically needs to be present at closing to sign final documents and complete the transaction. However, if the buyer can't attend in person, they can often appoint a representative to sign on their behalf through a power of attorney.

The most straightforward way to close a sale is to demonstrate to the decision-maker how your offering benefits them. Explain exactly how you solve their problems and why you’re the best choice. Keep the process straightforward and effective.

The sale closing rules typically involve finalizing financial agreements, signing necessary documents, and transferring ownership from the seller to the buyer. Both parties must complete these steps, including paying closing costs and settling any outstanding conditions or contingencies.