If you’re here, then you’ve found a buyer, negotiated home repairs, and are ready to prepare for the closing of your house. Here, we’ve laid out everything you need to know to have a successful closing.
What is the Closing of a House?
Closing of a house is the phase in the selling process when money and documents are transferred in order to transfer ownership of the property to the buyer.
The closing date is the date ownership of the property is officially transferred from the seller to the buyer; it’s an exciting moment. The home closing process is all of the steps that are outlined in the sale contract that must happen from the time you accept the buyer’s offer to the closing date.
Closing of a House Is the Final Step
Closing, or “settlement,” is when both parties sign the final ownership and insurance paperwork, and the buyer becomes the legal owner of the home.
Typically, the closing day takes place about four to six weeks after you signed a purchase and sale agreement. During this window, the buyer’s deposit or earnest money is held in an escrow account until all contingencies, like the home inspection contingency and appraisal contingency, are met.
You can book a session with a Falaya agent to answer questions and offer support through closing on your house.
What are the steps to closing on a house?
There are certain things that every responsible seller should do, and you can make sure you accomplish them all if you make a home-selling checklist.
Your closing checklist is a guide for your actions after all your personal belongings and furniture have been removed from your home. While you may already be moved out, you are not always required by law to empty the property immediately upon closing.
Do a title search and obtain title insurance
Your closing agent will order a title search, which is a review of public records to make sure you’re the legal owner of your property. If there are any claims or judgments against the property, the title search should uncover them. These issues must be resolved for the sale to move forward.
Unlike homeowners insurance which helps protect against future events like a fire, title insurance helps protect against past events affecting your home. For example, if you later found out the home you purchased has a lien for unpaid bills, title insurance would typically have you covered.
There are generally two types of title insurance in a home sale: a policy for the new owner and policy for the lender. The party responsible for paying each policy varies by state and even county, according to Bankrate. In some cases, buyers and sellers can haggle over who pays each cost.
Secure Your Documents
Retain all seller disclosures as well as the purchase contract and the closing statement. Ideally, your escrow officer or closing agent will hand you a complete package containing all these things at closing. Sometimes these documents get scattered. Do your best to keep them in one location, as you might need them again in case something happens.
Before You Close, You’ll Have a Final Walk-Through
Most sales contracts give the buyer one last chance to do a walk-through of the home within 24 hours of settlement. This is their chance to check that the property is in good condition, and to make sure the agreed-upon repairs were completed.
In most cases, no problems arise at this stage of the transaction. (If something is amiss, your agent can walk you through it.) The final walk-through before closing on your house mostly gives buyers peace of mind knowing that you, the seller, have adhered to the conditions of the sales contract and home inspection-related repairs.
Follow These Steps to Prepare for the Final Walk-Through
To help ensure that the walk-through goes smoothly, take these six steps ahead of time to prepare:
Step #1: Clean house
Your home should be spotless for the final walk-through. Assuming the buyer is taking ownership on closing day, you should be fully moved out at this point. But moving can be messy. After purging, packing, and moving, you may want to do one more deep cleaning.
Step #2: Leave owner’s manuals and warranties
Make the buyer’s life easier by providing all manuals and warranties you have for home appliances. Print physical copies and put these documents in one place for the new owner. If you have receipts from contractors for repairs, leave them with the manuals.
Step #3: Provide a vendor list
Give the buyer contact information for home contractors or maintenance companies that you’ve used in the past. These vendors are familiar with your home, and the new owner will appreciate having a list of service providers they can trust will take good care of their new home.
Step #4: Check for forgotten items
Do one more check throughout the home to make sure you’re not leaving anything behind. One exception: You may want to leave unused or leftover paint cans in the colors currently in use within the home — but confirm with the buyer first.
Step #5: Turn off water shut-off valves
The last thing you want before closing is a flood. With the buyer’s permission, turn off your house’s main shutoff valve 24 hours before closing.
Step #6: Lockup
Until a settlement is complete, you’re legally responsible for the home — meaning you’d be liable if there’s a break-in before closing. So, the day before settlement makes sure to close window coverings and lock the entry doors. If a house looks un-lived in, it’s a welcome sign to burglars. It’s a good idea to leave a porch light on or to set an interior light to turn on and off with a timer.
If the final walk-through reveals an issue with the house, don’t panic. The standard protocol is for the buyer’s agent to immediately alert the listing agent that there’s a problem. Then, both parties work together to solve it. Typically, either the closing gets delayed or there’s additional negotiation, such as monetary deduction of the sales price. In other words: There are options, and your agent can help you through this. If you need support, reach out to us and book a session with a Falaya agent.
Finalizing the sale on the closing date
The closing date is when the sale transaction is officially completed. You will sign a lot of paperwork, including signing the deed to the property over to the buyer. Don’t be afraid to ask your attorney or escrow agent about any documents you don’t understand. You have the right to know what you’re signing.
The closing of your house will take place at the office of your escrow agent, title agent, or attorney. Depending on your state, you might not be required to attend the closing. Ask your real estate agent or attorney if your attendance is mandatory, or if you may sign the paperwork ahead of time. If so, your agent or attorney will provide it at the closing.
Once all paperwork has been signed and funds have been disbursed, the buyer is officially the new owner of the property.
Close Accounts
Cancel the utilities and stop the newspaper. Make a list of phone numbers for each of your utility and entertainment companies in advance. Keep in mind that not every utility is always paid monthly. You might have a refund coming, have to pay a balance, or be able to transfer the balance to your next home.
Remember to Budget for Closing Costs
Closing costs can vary widely by location, but you’ll generally pay closing costs of 5% to 10% of the home’s sales price. So, on a $300,000 home, you can expect to pay anywhere from $15,000 to $30,000 in closing costs. In most cases, these costs are deducted from your proceeds at closing.
Closing costs for sellers typically include:
- The commission for the listing agent and buyer’s agent
- Transfer taxes or recording fees
- Loan payoff costs
- Unpaid homeowner association dues
- Homeowner association dues included up to the settlement date
- Prorated property taxes
- Escrow, title, or attorney fees
Necessary Incidentals
Leave all house keys, remotes, gate keys, pool keys, and mailbox keys for the new owner. The buyers will probably change the locks, but this won’t happen the instant they move in. Put them in a kitchen drawer or other location that is easily found.
Assemble a packet of appliance manuals, receipts, and any warranties as well. You might have come across manuals for the HVAC, security system, sprinkler system, or appliances as you were packing. If you have receipts from contractors, warranties, and termite inspections put them into an envelope and leave them in a drawer as well, along with the manuals and the code for the security alarm.
Don’t Leave Anything Behind
Check cabinets, drawers, and storage areas for any forgotten items. Run one more check even if your spouse or friend says they’ve gone through every room with a fine-tooth comb, searching for anything you might have overlooked.
Lock up on Your Way Out
Close the blinds, and lock the windows and doors. You’d be amazed at how many people forget to close up the house. It is especially important to lock up if the home is going to be vacant for a while. Consider leaving an inexpensive lamp behind on a timer.
Change Your Address
Don’t forget to let everyone know where you’ve gone. Submit a change-of-address form to the post office, but remember that not all mail can be forwarded. You might have to reach out directly to some entities to give them your new address.
The “Closing Disclosure”
You’ll get info about your closing costs from the title company.
Meanwhile, the buyer’s mortgage lender must provide the buyer with a Closing Disclosure, or CD, three business days before settlement. This is a formal statement of the buyer’s final loan terms and closing costs. As the loan borrower, the buyer is entitled to a three-day review period to see if there are any significant discrepancies between their CD and Loan Estimate (LE) — document buyers receive when they apply for a loan. The LE outlines the approximate fees the buyer would need to pay.
In most cases, there are no major differences between the CD and LE. However, if certain closing costs differ by 10% or more between the estimate and the disclosure, the buyer’s loan has to go back to the mortgage lender so that cost differences can be reviewed. If that happens, closing is usually delayed until the issue is resolved.
Who is involved in the home closing process?
You might be surprised at the sea of faces that greet you as you go through the process of closing on your house. If you thought this was a simple handshake and signature with the seller, think again.
In almost all cases you will have a representative on hand from your lender, as well as the closing agent.
From there, the list may grow depending on the circumstances of the sale. Some closing agents will bring an official notary with them to handle the documents. But you don’t need to worry too much about them.
Some lenders may send an attorney on their behalf, as well. This a big reason to contact your lender and complete any details before the big day.
The seller is one individual that won’t be in the room for this process. There are always exceptions to the rule, but most will handle their own documents and details. This might actually be preferable as it may help to smooth out the process.
What should you bring on the closing date?
You don’t need to bring much to the closing: usually just a government-issued photo ID, the keys to the property, and any outstanding documents and paperwork your attorney or escrow agent instructs you to bring. These may include documents showing you’ve completed all repairs requested by the buyer.
How long does the closing process take?
The full closing process, from the initial offer acceptance to the closing date, takes an average of 50 days, according to Realtor.com.
In a traditional sale, the buyer’s lender will be originating and underwriting the loan. This is a time-consuming process the lender undertakes to determine if the buyer qualifies for the loan. The underwriting process is one of the major things that can delay a closing.
The National Association of Realtors reports that nearly one-third of all closings are delayed, so be prepared for that possibility. Common issues that delay closing beyond buyer financing issues include title issues, home inspection issues, and home appraisal issues.
What are the seller’s responsibilities during closing?
Both parties have obligations to fulfill under the sales contract. During the closing process, you’ll typically be required to:
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- Remove all your possessions from the property, unless they’re specified to stay under the contract. Major appliances, for instance, are sometimes negotiated into a deal.
- Make any repairs you have agreed to make.
- Clean the home right before the closing date. A good rule of thumb is to leave it as clean as you’d like to find it if you were the buyer. (Typically required unless the home is sold in as-is condition.)
- Notify subscription services, creditors and acquaintances of your new address and set up mail forwarding.
- Collect any manuals and warranties you have for items in the home, such as the HVAC system and any appliances you’re leaving behind. Leave them on the kitchen counter for the buyer, along with any spare keys and garage door openers.
- Shut off water valves to prevent any leaks between the time the buyer takes possession and the time they actually move in.
Some states and municipalities have additional requirements, so check with your Falaya real estate agent or attorney. For example, your state may require a septic system inspection, or a smoke and carbon monoxide detector certificate.
Factors that can lead to delays in closing
Many factors can cause delays to the closing. One common issue that can cause a delay is if there is a repair that the appraiser believes needs to be addressed.
Another factor is a lien on the title that the seller is unaware of that must be satisfied before the closing can take place.
The buyer can also cause delays if they lack some of the documents that the lender needs to conduct the closing.
In peak real estate season — and as more borrowers rush to take advantage of today’s record-low interest rates — there can also be delays simply due to volume.
Conclusion
Closing on a house seems like a cumbersome task, but the toughest part of it is the waiting. If you take the time to enlist the help of good professionals at every stage of the process and you feel confident that you’ve done your research, you’ll look forward to the day when you move into your new house.
Buyers, sellers, and even real estate professionals get nervous about real estate closings. But they’re part of the process of transferring your home from one person to another. Knowledge and preparation are essential for you to make your closing go as planned. So take time to read and follow the guide above.
