1. Opening an Escrow Account
First things first after you have a ratified contract to buy a house, send it to a title company to open an escrow account. This account is maintained by the title company as a neutral third party, and it is where you may deposit the earnest money that your contract probably requires.
The title company holds all funds related to the home sale until all parts of the contract are met. It's a safeguard that ensures everyone gets what the contract says they should get.
2. Conduct a Title Search and Purchase Title Insurance
Next up, conduct a title search to verify the seller has a legal right to transfer ownership. Title insurance protects you from future property claims. It's essential to ensure you're getting what you paid for without any hidden surprises.
3. Hire a Competent Attorney
Though optional, having a real estate lawyer can help you navigate the complexities of real estate documents and transactions. They ensure you understand all the terms and conditions before you sign off on anything critical.
4. Determine Closing Costs
Real estate transactions aren't cheap, and closing costs can add up quickly. These include fees for inspections, attorneys, title searches, taxes, and more.
These expenses will be itemized on a preliminary closing disclosure for most home purchases, and finalized on a settlement statement before closing. Always review these expenses carefully and shop around when possible for the best service at the best price.
5. Home Inspection
Never skip the home inspection. It reveals necessary repairs and potential pitfalls in your new home. If major issues are detected, you can either negotiate repairs, ask for a price reduction, or even withdraw your offer, depending on the terms of your agreement.
6. Pest Inspection
Separate from a general home inspection, this checks for termites, carpenter ants, and other pests that can undermine the structural integrity of your new home. Depending on the findings, you may need to negotiate treatments or repairs before proceeding.
7. Renegotiate the Offer
If inspections reveal issues, don't hesitate to renegotiate your contract. It's not uncommon to adjust the sale price or request repairs based on new information.
8. Lock in Your Mortgage Rate
With fluctuating interest rates, locking in your rate can protect you from unexpected increases during the closing process. This step is crucial for budgeting your future payments accurately.
9. Remove Contingencies
Ensure all conditions listed in your offer are met before moving forward. These might include obtaining financing, satisfactory inspections, and legal reviews of the property’s status. Written removal of these contingencies signals you’re ready to close.
10. Meet Funding Requirements
You’ve likely paid earnest money when your offer was accepted. Before closing, ensure all additional funds are ready for transfer to the escrow account. This includes your down payment and any remaining closing costs, which will be itemized on your settlement statement.
11. Final Walk-Through
Just before closing, do a final walkthrough to ensure the property is in the agreed condition. Check that all repairs were made and that nothing included in the purchase has been removed or damaged.
12. Understand the Closing Paperwork
Finally, understand every document you sign. If something isn’t clear, ask your settlement agent or attorney for clarification. This step is your last chance to resolve any discrepancies before the property is legally yours.
FAQs About Real Estate Closing:
Q1: How long does it take to close on a house?
Typically, closing on a house takes 30 to 45 days from when your offer is accepted, depending on financing, inspections, and other factors.
Q2: What are typical closing costs?
Closing costs can range from 2% to 7% of the home’s purchase price. These include fees for loan processing, inspections, title searches, and attorney services.
Q3: When is it too late to back out of buying a home?
It’s usually too late to back out without penalty once all parties have signed the contract. However, some contracts include contingencies that may allow a party to back out after the contract is signed. Once all contingencies are removed, you’re set to close. Exceptions exist if issues are found during the final walkthrough or if final financing falls through.
The Bottom Line:
Real estate closings are complex, but understanding each step can demystify the process and ensure you are prepared for what comes your way.
Take your time, consult professionals, and remember, this is about making a significant life investment—patience and diligence will serve you well.
Comments