8 Steps of a Real Estate Closing

Real estate transactions can be lengthy and involve several essential steps, with each step bringing you closer to owning your dream home. The 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 House Closing Mean? 

The closing 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’s the day they receive the proceeds from the sale. 

Before closing, sellers and buyers must complete several essential steps. Buyers secure the necessary mortgage or arrange cash payment. An appraisal and a third-party inspection 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. 

How to Prepare to Close a Property for Sale 

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

1. Hire a Real Estate Lawyer 

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. 

2. Open 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. 

3. Conduct a Title Search 

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 the 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. 

4. Schedule a Home Inspection 

Schedule a home inspection to ensure everything is in top shape before closing. Even perfect homes can have 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. 

5. Negotiate Your 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. 

6. Confirm Your Closing Date 

Secure your closing date, when 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. 

7. Conduct a Final 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. 

8. Review Your Closing Documents Thoroughly 

During the closing process, you will receive several crucial documents—potentially over 100 pages. Take the time to understand each by consulting with your real estate attorney or Realtor. Here’s what to expect: 

1. 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. 
2. 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. 
3. 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. 
4. Mortgage Note: This is your commitment to repay the mortgage, outlining the loan amount, terms, and lender actions if you miss payments. 
5. Mortgage or Deed of Trust: This document secures the mortgage note and gives the lender a claim against the property if you don’t meet the terms. 
6. Certificate of Occupancy: This legal document is necessary to move into newly built homes. Request copies of the title policy and survey, too. 
7. 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’re agreeing to. Here’s 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’ll 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’ll 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 don’t 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.