Property closing – also known as settlement – is when all of the financial pieces come together in order to complete a real estate purchase or sale. Closing can also happen when refinancing an existing mortgage loan on a home.
Settlement Coordination
There’s often a settlement professional involved in a real estate transaction. Companies like Buchanan Settlement Services help coordinate the closing process, serving as a neutral point of contact for buyers and sellers, their agents and/or attorneys, and any lenders. Settlement services can begin once a buyer-seller purchase agreement or refinance loan application is in place.
Duties include:
- Coordinating with parties as needed, including arranging for documents to be signed
- Preparing disclosures and the closing or settlement statement
- Reviewing the title to the property for any issues affecting ownership or encumbering interests
- Receiving and disbursing funds as necessary and approved
- Ensuring all requirements have been met to close the transaction
- After closing, sending documents (deed, mortgage, etc.) for recording, and any additional follow-up
Settlement services continue until after closing, when final tasks like document recording are complete.
Title Review
Each person involved in the settlement is focused on something different. Lenders will want to ensure all loan requirements are met, while buyers often concentrate on the physical condition of a house, for example. Sellers may be concerned about payoff details for an existing mortgage. However, one element can affect all of these priorities: whether there are issues with the title to the property.
Even if everyone signs a purchase agreement, a sale can’t be completed (and funds can’t be dispersed) if there are items that must be cleared, released or otherwise resolved before transferring an interest in the home. That’s why a title review is conducted – more info at this link. This process researches the legal history of the property, ensuring that the seller has the right to sell the house and that there are no problems that could impact a buyer’s (or lender’s) interests.
Issues could range from unpaid liens to simple recording errors to more complex matters like ownership claims from former titleholders or ownership or use restrictions. Estates can have special challenges too. Title problems must be resolved before the sale can close – so if you’re working with a settlement agent and have questions about the review process, raise them as soon as you can.
Statements and Secure Funds
The heart of settlement services is making sure all funds due from and to everyone in a transaction are calculated and delivered. The closing statement summarizes all money received and due, from the purchase price, mortgage money, and deposits to tax credits and insurance premiums, mortgage payoffs, and closing costs. Reviewing the statement ahead of time is wise to catch and correct errors and avoid last-minute surprises on settlement day. When presented to sign, make sure that names and the property are described correctly. Check the sales price (if applicable) and any deposit, payoff amounts, and credits.
It may sound unlikely, but unfortunately, closing transactions are prime targets for fraud schemes, which further discussed at https://www.nar.realtor/wire-fraud, because so much money is at stake. If an email arrives about changed or urgent wire instructions, it’s important to slow down, confirm that it is legitimate and use payment instructions you know are correct.
For purchases, buyers should know when funds will be due and whether they must be good funds prior to closing, for instance. Sellers may want to understand how sale proceeds are dispersed as well.
After Signing
While it may be the finish line for some in the transaction, there are still items to be completed after documents are signed. These might include confirming receipt of funds, reviewing signed documents and sending the deed and other items for recording – the official process of documenting the change in ownership, for example. Finally, funds will be released to whomever is due.
Buyers will want copies of important closing documents after the sale, and sellers may want to keep the final settlement statement or payoff statements, for example.
Also important to address prior to closing is timing and possession. Closing doesn’t necessarily guarantee that the buyer will be able to occupy the property right away: the contract might provide the seller with a period to vacate or make possession contingent upon recording or funding.
The buyer should establish arrangements for key exchange, garage door openers, access codes and utility changes.
It’s also helpful to schedule a final walk-through before closing to ensure that the condition of the property and items included align with the terms of the contract.
Closing-Day Preparation
The road to a smooth settlement starts with asking questions. Carefully reviewing the final closing documents and statements takes diligence but can pay off. In the case of a purchase, for instance, buyers might want to set aside at least 30 minutes to review final settlement documents. It’s important not to be rushed! Ahead of time, also make sure everyone knows what items to have at closing, including forms of identification, wire instructions, etc.
