The steps involved in the closing process
Basically, closing in the real estate business refers to the paper work involved in the last stages of a home buying process. However, before you get to that point where you walk away as the owner of the home you have just bought with the keys in your hands, there are several steps that you must take. Your local real estate agent will usually assist in walking you through the process and setting up all of the vital connections.
Here is a list of the things to expect
You need to open an escrow account which is usually held by a third party. The reason for having a neutral third party hold the account is to ensure that neither of the party gets ripped off before everything is finalized. In many instances, this is a real estate attorney.
2. Do a title search and get a title insurance
The importance of getting these two is that it will give you legal protection so that when you finally buy the home, nobody else will claim that it belongs to them whether it is a relative or a creditor. When the title search is being performed, the title officer will ensure that there are no issues with the title and if there are any it will be settled before the ownership of the property is transferred to you.
3. Get the Appraisal Completed
Appraisals are a standard contingency when purchasing a luxury home. This is where a licensed professional is hired to get the true value of your home. Most real estate contracts are written to where the home MUST appraise at or higher than the sales price.
4. Finalize Your Homeowners Insurance
Your lender will not let you close on your new home until the proper homeowners insurance is in place. This not only protects you – but the lender themselves. You also may need to have flood insurance if you live in a flood zone A or flood zone B.
5. Negotiate the closing fees
Some title companies are known to have excess junk fees. Speak up for yourself and demand to have some excessive escrow fees reduced or removed all together.
6. Home inspection
Ensure that you get the home inspected and decide to either back out of the deal of request the seller to have the repairs fixed if the purchase offer had a home inspection contingency. While at it, you should also have a pest inspection and if there is any issue discovered it has to be fixed before you close the deal. If the two inspections unearth anything, you should renegotiate the offer.
7. Interest rates
Get the best interest rate possible in your circumstances. It is also possible to buy down your interest rate by asking the seller to pay points. This is commonly done on some of the more expensive, luxury homes or luxury condos.
8. Cancel the contingencies
It can either be done in writing or what is referred to as active approval or without any writing (constructive approval). All contracted contingencies must be met prior to closing. This may include appraisal, loan approval, signing the condo documents and more.
9. Fund the escrow
This step will signal your commitment. Once the funding is finalized the closing documents will be prepared for signing.
10. Do the final walkthrough
Walk through the property one last time to make sure everything is fine. This is usually done either the day before, or the morning of the closing.
11. Sign the papers
Sign the paperwork and ensure that you take to read the fine print your time before signing.