arhome realty blog

understanding the closing process in real estate transactions

Closing a real estate transaction is a big step in the home buying and selling process. It's the final stage where the ownership of the property is officially transferred from the seller to the buyer. Keep reading to get a comprehensive look at the steps involved in closing a real estate deal and what both buyers and sellers should expect.

1. the offer and acceptance.

The offer outlines the price a buyer is willing to pay as well as other terms they are offering or require. Sellers can accept the offer, reject it, or negotiate the terms. Once both parties agree, the offer becomes a legally binding purchase agreement.

2. escrow and earnest money deposit.

After the offer is accepted, buyers will deposit earnest money into an escrow account, showing their commitment to purchasing the property. The escrow company holds this deposit until closing, ensuring all conditions of the sale are met, providing reassurance to both parties.

3. title search and insurance.

A title company will conduct a title search to ensure the property is free of any liens or claims. They will also provide title insurance to protect buyers against future issues that could be uncovered in the future regarding the property. Sellers need to ensure the title is clear of any issues that could delay or derail the sale.

4. home inspection and appraisal.

Buyers should schedule a home inspection to check for any potential issues with the property. Additionally, if financing the purchase, the lender may require an appraisal to confirm the home's value. Buyers should be prepared to negotiate repairs or price adjustments based on the inspection report, unless they agreed upon an as-is sale. The appraisal should ideally match or exceed the sale price to avoid financing issues. If the appraisal comes out lower than the sale price, and the buyer added an appraisal gap clause into the contract, they would be responsible to bring those additional funds to closing.

5. loan approval.

Buyers must finalize their mortgage application and provide any required documentation to their lender. Once approved, they'll receive a commitment letter outlining the loan terms.

6. closing disclosure.

Buyers need to review the Closing Disclosure document before the closing. This document outlines the loan terms, monthly payments, and closing costs. Sellers should ensure all seller-related costs and credits are accurately reflected in the document, preventing any last-minute discrepancies.

7. final walkthrough.

Buyers should conduct a final walkthrough of the property to ensure it's in the agreed-upon condition and that any requested repairs have been made. Sellers should make sure the property is clean and any agreed-upon repairs are completed, presenting the property in its best condition for the new owner. If the contract allows for post-closing possession, an additional final walkthrough is normally completed again once buyers receive possession.

8. closing day.

On closing day, buyers will sign a series of documents, including the mortgage note and deed. They'll also pay the remaining down payment and closing costs. Sellers will sign documents transferring ownership of the property to the buyer. Once all documents are signed, sellers will receive the proceeds from the sale, minus any fees or outstanding mortgage balance.

9. transfer of ownership

Once the documents are signed and funds are transferred, buyers will receive the keys to their new home. The title company will record the new deed with the local government, officially transferring ownership to the buyer, marking the completion of the sale.

Understanding the closing process can help both buyers and sellers navigate the steps with confidence. Buyers should be prepared for a significant amount of paperwork and ensure they understand each document before signing. Keeping in constant communication with their real estate agent, lender, and escrow officer can help avoid any last-minute surprises. Sellers should ensure their property is in the agreed-upon condition and have all necessary documentation ready. Clear communication with the buyer and their real estate agent can help facilitate a smooth closing process. Always talk to an experienced real estate agent to know how to manage the closing process and what to expect.

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