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Closing (Also known as closing of escrow, transfer of title or
settlement)
Part one
The closing process varies greatly from one area to another, even
within the same state. You should ask your agent or an attorney to
describe how closings take place in the area where you are buying a
home. And don’t assume that closing will take place exactly on the date
that is in the contract. That is a target date and closing generally
takes place before or after and rarely on this date.
In some areas, an escrow company handles the closing. A
copy of the purchase and sale contract is sent to the closing agent and
they “open escrow”. Once contingencies are removed and the mortgage
commitment is issued they make arrangements with the bank to have the
paperwork readied and the money available. You would then be contacted
to come in and sign documents and pay the balance of any money that is
due. When everything comes together the “escrow closes”.
In other areas, including upstate New York, attorneys
handle closings. When a mortgage commitment is issued the buyer’s
attorney sends a request to the seller’s attorney for “title papers”.
“Title papers” consist of a re-dated abstract of title (this is a packet
of papers documenting the title, liens, mortgages, easements,
encumbrances, and other title issues pertaining to the property for 75
years or so to the present), a survey map (this is a drawing of the land
showing fences and structures sitting on the land) and a proposed deed
(a deed is the actual document that transfers the title to the property
to you and it includes a description of the land that you are buying
which has to coincide with the survey map).
When the title papers arrive at the buyer’s attorney’s
office they review title to make sure that the title is good and
marketable. If they have any objections to title they send a request to
the seller’s attorney to fix any problems.
Part Two
Once the buyer’s attorney is satisfied with title they obtain title
insurance. Nearly all lenders require title insurance to protect them
from potential title defects that may surface after closing. This lender
policy doesn’t cover your interest and equity in the home. A “fee” or
“owners” policy which protects you interest is available usually at a
discounted rate if purchased at the same time as the lender’s policy.
Although it is rare that you would ever experience a title problem, the
one time investment for an owner’s policy should seriously be considered
due to the extreme problems and expense that an actual title problem
could cause, including the actual loss of your home or inability to
resell it. A fee title policy is guaranteed peace of mind.
Once title insurance is obtained the title papers and
the title policy are delivered to the bank’s attorney. They complete
their review of closing documents and they then set up an actual closing
date with the seller’s attorney and buyer’s attorney.
In the Rochester, NY area, real estate closings take
place generally at the bank attorney’s office. Sellers usually sign
papers in advance at their attorney’s office so rarely would sellers be
at the actual closing. However, their attorney needs to be. You need to
be at closing as you have to sign lots of bank papers, such as the note
and the mortgage. Your attorney will be there also.
Part Three
Your real estate agent should be at closing as well, especially if
you are using a “buyer’s agent”. However, agents rarely go to closings.
We always go to closings as we feel that it is part of our duties to our
buyer clients. We have your attorney fax us a copy of the preliminary
closing statement so that we can check the numbers to make sure that you
are getting credit for your deposit and seller concessions and repair
credits, if applicable. We also want to make sure that the bank isn’t
overcharging you for the various closing expenses by comparing the
closing statement with the “good faith estimate” from the lender.
We also do a “final” inspection of the home with you
just prior to closing to make sure that all the appliances that should
be there, are in fact there and that no damage has taken place to the
home. We also will read the utility meters and call the reads in to the
utility companies so you won’t have to deal with it. And, we usually get
a set of keys to give you at closing so you can take possession
immediately following closing.
After you have signed all the papers at closing you will
finally receive the keys to your new home, as well as copies of all the
documents that you signed including a copy of the "HUD 1" before you
leave the closing. The "HUD 1" is a form required under RESPA (Real
Estate Settlement Procedures Act, enacted by Congress in 1974). This
form, which has to be signed at closing, documents and discloses the
majority of the closing costs that you are paying and has a statement by
the buyer, seller and the closing agent that the numbers accurately
reflect the details of the transaction. More than likely you will also
receive a separate closing statement from your attorney which will show
other items which generally don't appear on the HUD 1, such as attorney
fees, real estate commissions, repair credits, and other miscellaneous
items not having to do with the mortgage loan.
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