The A-Z of Buying a Home (Part 4)
The Real Estate Closing
You have finished performing your Buyer's Due Diligence and everything's lined up for a closing on a specific date and time (usually at the attorney's office). What happens at this "closing"?
A "real estate closing" is the name given to a completion of the real estate transaction, including legal (title) and financial (loans & mortgages) aspects. It is an event that normally takes about an hour, in which normally all the parties are present (the sellers and their listing agent, the buyers and their buyer's agent, the closing attorney, and in some instances the loan originator). The parties each sit facing each other, and the attorney will explain the process and start sending papers their way to have them signed.
Be warned! By the time you finish, your signature hand will be tired! Buyers may sign 50-100 times (depending on the complexity of the financing and the lender). By contract, the Sellers only need to sign very few documents - so the Buyers have the most work...
The attorney will first start by reviewing the HUD-1 Statement to make sure that all the financials are correct. These include: Purchase price, earnest money, down payment, seller concessions, lender origination costs, agents' commissions, homeowners/wind & hail/flood/title insurance premiums, attorney's fees, taxes (i.e. deed stamps), prepaid items to create the escrow account, and any service providers' bills related to the real estate transaction (for example, the CL-100 - termite letter - is normally paid out of closing).
When everyone is in agreement, the attorney will normally ask everyone to sign several copies, and will also ask the Buyers for the balance owing for their downpayment (note that the Buyers' agent or closing attorney should have told the Buyers in advance how much they needed to bring to closing, since these funds need to be either wired in advance into the attorney's escrow account, of paid by Cashier's Check at the closing).
Next, Buyers and Sellers will normally sign all kinds of disclaimers and certifications (to make sure their identities, Social Security Numbers and information is right). The Buyers will also be asked to provide picture IDs (normally driver's licenses or passports), and the attorney's paralegal will make copies of those documents to comply with the Patriot Act. The Buyers will also sign a copy of the CL100 Termite Letter.
Following this, the attorney will usually ask the Sellers to sign the transfer of the deed and their mortgage discharge documents.
Now the fun part starts for the Buyers: Signing the loan(s) notes and their corresponding mortgage documents. The amount of paperwork varies depending on the lender, but this can take some time and effort, since the lenders will want the Buyers to sign and initial every document and affidavit in their closing package. Some lenders are very bureaucratic, others are not.
After all the paperwork has been signed, the attorney normally checks to verify if the funds from the new mortgage loans have arrived in his escrow account. If they have (the transaction is "funded"), the attorney will proceeed to disburse checks to all the parties, and the Sellers will hand over the keys of the home (and the garage door openers, pool keys, etc.) to the Buyers.
If the funds did not arrive on time, the parties can agree to do a "Dry Closing", in which case it is a good idea that the attorney holds all the paperwork and the house keys until the funds arrive (it may take just a few hours, or up to a couple of days!)
Now it's done! The home is officially the Buyers' (although the deed may take a few weeks to be registered in their name).
Next: Post-Closing - What Needs to Be Done?