The Closing Process: What Home Buyers Can Expect on the Big Day

closing what to expect

By: Margaret Heindenry

The hardest parts are over: You’ve found that perfect home in a haystack of listings, negotiated a deal you’re happy with, and secured a mortgage—and you’re now in the home stretch of the home-buying process. Just one more critical hurdle lies ahead: the home closing. Also known as “settlement” or “escrow,” this is a day when all involved parties meet to make this transaction official.

To make sure you’re fully prepared, here’s what to expect from the closing process, step by step.

Step No. 1: How to prepare for a closing

Review your closing disclosure form: If you’re getting a loan, one of the best ways to prepare is to thoroughly review your HUD-1 settlement statement.

“This helps ensure the buyer understands the terms of their loan,” says Ben Niernberg, executive vice president of business development and operations at Proper Title.

The HUD-1 settlement statement outlines your exact mortgage payments, a loan’s terms (such as the interest rate and term) and additional fees you’ll pay, called closing costs (which total anywhere from 2% to 7% of your home’s price). Compare your HUD-1 to the good-faith estimate your lender gave you at the outset; make sure they’re similar and ask your lender to explain any discrepancies.

Thanks to new regulations put in effect in October 2015 known as TRID (which stands for TILA-RESPA Integrated Disclosure), you will receive your HUD-1 three days before closing so that you have plenty of time to check it over. (Before TRID, home buyers received this form only 24 hours ahead of time, which resulted in a lot more last-minute surprises and holdups.)

Do a final walk-through: A buyer’s contract usually allows for a walk-through of the home 24 hours before closing. First and foremost, you’re making sure the previous owner has vacated (unless you’ve allowed a rent-back arrangement where they can stick around for a period of time before moving). Second, make sure the home is in the condition agreed upon in the contract. If you’d had a home inspection done earlier and it had revealed problems that the sellers had agreed to fix, make sure those repairs were made.

If you find an issue during your walk-through, bring it up with the sellers as soon as possible. There’s no need to panic; at worst you can simply delay the closing until you resolve it.

Step No. 2: What to bring to closing

All your paperwork: You’ll want to bring proof of homeowners insurance, a copy of your contract with the seller, your home inspection reports, anything the bank required to approve your loan, and a government-issue photo ID. (Note to newlyweds who just changed their name: That ID needs to match the name that will appear on the property’s title and mortgage.)

Your down payment: You will already know from your disclosure form exactly how much  you’ll have to cough up for a down payment and closing costs. Yet since a personal check won’t cut it, be sure to ask before closing whether you should wire transfer those funds or if you’ll need to bring a cashier’s check. Also bring your personal checkbook to closing, since that’s typically fine to pay smaller fees and may come in handy in case any unforeseen expenses crop up.

Step No. 3: What to expect at closing

A bunch of people: Exactly who will be present at a closing (and where it’s held) depends on the state you live in, but there are certain supporting characters you can usually expect to make an appearance. The cast includes the home seller, the seller’s real estate agent as well as your own, buyer and seller attorneys, a representative from a title company (more on that below), and, occasionally, a representative from the bank or lender where you got your loan.

Title clearance: Before you can own or “take title” to a home, most lenders will require a title search of public property records to make sure there aren’t any liens or issues with transferring the property into your name (which is rare, but if something does crop up, it’s better to know that upfront).

Signing your name a lot: You’ll be putting your John Hancock on a pile of legal documents (so be prepared for a mild hand cramp if you’re not used to writing in cursive).

A few curveballs: Be prepared for things to go awry at the closing, like someone gets stuck in traffic, a document is missing, or a name is misspelled. But don’t stress, simply do what’s in your power to make the day go off without a hitch. For instance, don’t schedule something two hours after the closing is supposed to start in case your closing runs over.

If all goes well (as it usually does), you will eventually leave your home closing with a stack of documents (which you should save) and the keys to your new home (finally!).

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How to Dodge a Closing Day Curveball: 3 Real-Life Home Saves

By: Craig Donofrio

How to Dodge a Closing Day Curveball: 3 Real-Life Home Saves

With the MLB season set to begin, we’ve got baseball on the brain. Specifically, we’ve been thinking about how even the greatest sluggers sometimes strike out when faced with a nasty curveball, knuckleball, or slider. But hey, curveballs can strike—metaphorically speaking—in other parts of our life as well. Like buying a home!

A lot of twisty, unpredictable, and downright frustrating things can happen on closing day. But no matter what goes wrong, you may still be able to pull off a last-minute (home) save. So get out the scoreboard and heed the advice of these three buyers who were struck by surprises late in the ninth inning.

Time zone terror

Are you dealing with a buyer or seller in another time zone? It pays to plan accordingly. Michelle Faulkner, principal of Big Swing Communications, relayed a tale of time zone terror that happened to her 12 years ago. She and her then-husband planned to have a same-day sale and purchase, selling their condo in Watertown, MA, to a buyer from San Diego and buying a family-friendly place in the burbs of Reading, MA. The back-to-back closings were to take place on the Friday before the Fourth of July weekend.

“We didn’t realize until the closing he was using a West Coast bank for his mortgage. The closing went smoothly, except the funds from his bank hadn’t arrived. They were due ‘shortly’—our attorney told us not to worry, and we went on to the closing for our purchase,” Faulkner recalls. “We had a 17-month-old daughter and a packed moving truck waiting.”

The funds didn’t come through for four days. The seller’s attorney allowed them to move their stuff into their new place, but they couldn’t sleep there, so the family had to shack up with a friend. Later that day, “I felt a little nauseous,” she says. A familiar kind of nausea. “Yup, found out that night I was pregnant. Pregnant and temporarily homeless.”

Take-home lesson: When you’re doing back-to-back closings, make sure everyone is crystal clear on the timeline and time zones.

Absconded appliances

It’s imperative that everything is accounted for in writing, or else you may find yourself like the buyers in this story.

Last year, Brett Vlasek, a Realtor® with VIP Real Estate Brokers in Delray Beach, FL, represented a seller who had a ruby red Samsung washer and dryer set that was admired by many potential buyers who visited the home. One day, a buyer came through and, after remarking on how wonderful the appliances looked, put in an offer.

All was well in this small townhouse, until the final walk-through on closing day.

“The ruby red washer and dryer were replaced with a run-of-the-mill, plain white set,” Vlasek recalls. The buyer wasn’t happy, and refused to close on the house without the Samsungs. Alas, the sellers had already moved out of state—with the scarlet set. They were also a bit perplexed.

“They insisted they’d told the buyer and her agent that they were going to keep the red appliances and replace them before closing,” Vlasek says. Neither the sellers nor the buyer would budge. With the danger of a deal falling through, the agents came together and gave the buyer a credit at closing “to purchase a brand-new washer and dryer in whatever color she pleased.” Yeah, including Dorothy-slipper red.

Take-home lesson: Whether you’re a buyer or seller, make sure you convey what does or doesn’t come with the property, in writing. As a general rule, if it’s attached to the home—for example, light fixtures or built-in bookshelves—it stays, but appliances are considered movable. That said, getting it down in writing will help you avoid any closing day delays.

Liens from beyond the grave

After two years of his house sitting on the market in Gloucester, VA, Matt Sabo jumped when an offer came along. He, his wife, and their 11(!) kids would need to find a home to buy before their sale would close in four weeks.

They found a 1960s ranch estate that needed a few updates but seemed like a solid investment. Everything was looking good, and Sabo’s ginormous family wouldn’t be homeless. Right?

How to Dodge a Closing Day Curveball: 3 Real-Life Home Saves

“The bombshell came two days before closing,” Sabo recalls. The title search found there were liens against the property. “We were told it shouldn’t take more than a few weeks to get it straight.” It turned out to be more like five months. Naturally, his first reaction fell someplace between alarm and outright hysteria, but his Realtor/closer took the mound and saved the game.

“Our Realtor managed to work out a deal where we could stay in the house, rent-free, while the bankruptcy issue got cleared up,” Sabo says. “Ultimately we ended up moving into the house on time and living in it for five months until we closed.”

For anyone in a similar situation, Sabo says not to panic. Get your agent on the phone and start thinking outside the (batter’s) box.

“We got creative in making a deal, and it turned out well,” he says. “It was a case of a potential disaster turning into a blessing.”

Take-home lesson: Make sure to do a title search on a property you want as soon as possible—ideally, weeks before you close. That way you’ll uncover any liens or other problems long before you’re in too deep.

 

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