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Real Estate Closing
While our closing team at Aurum Title provides real estate closing services and title insurance to our customers, we take time to understand the client requirements and deliver the title information on time, every time.
At Aurum Title, we take customer experience seriously. Therefore, we have no hesitation to spend time understanding our client workflow and process to assure maximum efficiency.
Our real estate closing team comprises experienced attorneys, escrow officers, and assistants who have years of experience closing real estate transactions of all types.
We are ready to add value to your real estate assets with the ability to close from your smartphone.
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Key Takeaways
- Real estate transactions usually take a few weeks to complete and have many moving pieces.
- Transactions begin with establishing an escrow account and conclude with a final walk-through before signing the dotted line.
- The complexities of real estate closings are an excellent reason to employ an attorney to assist you.
- Ask your loan officer and realtor about all possible fees so you aren’t startled by closing costs.
- Buyers who have been pre-approved for a mortgage can usually close more quickly.
What Should You Know on Real Estate Closing?
Though it may seem like real estate closing process is a lot of work, it is worth the time and effort to get things right instead of hurrying up and signing a deal you don’t understand.
However, be wary of any pressure to close the deal fast. Real estate agents and other entities helping you will want their cut, but they won’t be around to care about the problems you could face in the long run from a bad deal.
A real estate transaction is typically a lengthy and tedious process, including numerous phases and procedural formalities. Real estate losing occurs when you sign the paperwork that makes the real estate yours, but there is a long list of things that must happen before that fateful day arrives.
Between the time your offer is accepted and the time you receive the keys to your new property, there are 12 stages to follow.
Things to Know
- Real estate transactions usually take a few weeks to complete and have many moving pieces.
- Before signing the dotted line, transactions begin with establishing an escrow account and conclude with a final walk-through.
- The complexities of real estate closings are an excellent reason to employ an attorney to assist you.
- Ask your loan officer and realtor about all possible fees so you aren’t startled by real estate closing costs.
- Buyers who have been pre-approved for a mortgage can usually close more quickly.
Why Is Getting a Mortgage Pre-Approved a Good Idea?
It’s good to get pre-approved for a mortgage before looking for a property unless you’re an all-cash buyer. While a pre-approval letter is not required to consummate a sale, most sellers expect buyers to have one. Therefore, having one can help speed up the process and give you greater bargaining power in negotiations. In addition, it communicates to the vendor that you are well-funded. It also gives you the option of locking in your interest rate, which means you’ll be more likely to get a good deal.
Getting pre-approved for a mortgage also informs you of the maximum amount you can spend on a property. It saves you time and effort by allowing you to focus your search on properties that meet your budget.
Finally, pre-approval for a mortgage offers you more time to respond to potential discrimination. For example, assume you believe a potential lender has treated you unfairly. In that situation, you might look for funding elsewhere and pursue legal action afterward. Pre-approval protects you from a single skewed lender destroying a good offer and postponing your aspirations. You’ll need to follow the procedures to close the deal once you’ve discovered the perfect property and a buyer has accepted your offer.
Discrimination in mortgage lending is against the law. Assume you believe that somebody discriminates against you because of your color, religion, sex, marital status, public assistance status, national origin, disability, or age. In that scenario, there are alternative options available to you. A report to the Consumer Financial Protection Bureau or the US Department of Housing and Urban Development is one such process (HUD).
Real Estate Closing In 12 Steps
1. Establish an escrow account.
A third party holds an escrow account on behalf of the buyer and seller. A property sale entails a series of stages spread out over several weeks. As a result, bringing in a neutral third party is the best method to protect either the vendor or the buyer from being duped. This third party can keep all of the money and documentation associated with the transaction until it is completed. After completing all procedural formalities, funds and papers are transferred from the escrow account to the seller and buyer, ensuring a secure transaction.
2. Insurance and Title Search
A title search and title insurance provide legal protection and comfort of mind. The title search and insurance ensure that no one else can claim property after you have purchased it. A title search is a review of public documents to establish and validate a property’s legal ownership and to determine what claims, if any, are pending against it. If any claims exist, they may need to be settled before the buyer may take possession of the property.
Title insurance is an indemnity policy that protects the policyholder from financial loss caused by faults in a property’s title. It safeguards property owners and lenders against loss or harm caused by liens, encumbrances, or title flaws.
3. Consult an attorney
While legal assistance is not required, it is usually good to have a professional legal opinion on your real estate closing documents. Even for well-educated people, the intricate jargon might be challenging to comprehend. An experienced real estate attorney’s perspective can provide several benefits for a reasonable charge, including clues of any potential difficulties in the documentation.
You may be required to engage an attorney to handle the closing in some areas. Check the laws in your state.
4. Arrange for the closing costs to be negotiated.
All related services and entities require money, from opening an escrow account to engaging a real estate attorney. If you’re not careful, these charges can quickly add up to a significant sum. Property and pest inspections, for example, are essential to avoid purchasing a property with hidden—and costly—problems. But many such services take advantage of consumers’ ignorance by charging high fees. Even standard real estate closing service fees might be exorbitant.
Junk fees are costs imposed by a lender at the time of a mortgage closing that is frequently unanticipated by the borrower and not adequately explained by the lender. These fees can add up to a hefty bill. Junk fees include administrative fees, application review fees, appraisal review fees, ancillary fees, processing fees, and settlement fees.
If you’re willing to speak up and stand your ground, you can usually get junk fees and other charges reduced or eliminated before closing.
5. Complete the Home Inspection
A physical home inspection is necessary to discover any potential property problems and look at its surroundings. If you find a severe problem with the home during the inspection, you’ll have an opportunity to back out of the deal or ask the seller to fix it. Of course, you can also have the seller pay you to fix it (as long as your purchase offer includes a home-inspection contingency).
6. Get a Pest Inspection
A pest inspection is separate from a home inspection. It involves a specialist ensuring that your home does not have any wood-destroying insects, such as termites or carpenter ants. Pests can be devastating for properties made primarily of wooden material. Many mortgage companies mandate that even minor pest issues be fixed before you can close the deal.
A small infestation can spread to become very destructive and expensive to fix. Wood-destroying pests can be eliminated, but you’ll want to ensure the issue can be resolved for a reasonable fee. You might be able to get the seller to pay and have pests eliminated before you complete the purchase. Pest inspections are legally required in some states and optional in others.
7. Renegotiate the Offer
Even when your purchase offer has already been accepted, you may want to renegotiate the price to reflect the cost of any necessary repairs revealed by inspections. You could also keep the purchase price the same, but try to get the seller to pay for repairs. Even if you’re purchasing the property “as is,” there is no harm in asking. You can also still back out without penalty if you find a significant problem that the seller can’t or won’t fix.
8. Lock in Your Interest Rate
Interest rates, including those offered on the mortgage, can be volatile and subject to change. Rates are subject to multiple factors, such as geographic region, property type, loan type, and the applicant’s credit score.
If possible, it is advisable to lock in the interest rate for the loan in advance. That prevents you from being at the mercy of market fluctuations, which could cause rates to rise before you finalize your property purchase. Even a 0.25% rate hike can significantly increase your monthly payments and the time it takes to repay the mortgage.
9. Remove Contingencies
Your real estate offer should be contingent upon the following five things:
- You obtained financing at an interest rate not to exceed what you can afford
- The home inspection did not reveal any significant problems with the home
- The seller fully disclosed any known issues with the home
- The pest inspection does not show any substantial infestations or damage to the home
- The seller completed any agreed-upon repairs
Such contingencies must be removed in writing by specific dates stated in your purchase offer, a process known as active approval. However, contingencies are subject to passive approval (also known as constructive approval). They are considered approved if you don’t protest them by their specified deadlines. Buyers must understand the approval process and take the necessary actions by the required dates.
10. Meet Funding Requirements
You most likely deposited earnest money when you signed the purchase agreement. Earnest money is a deposit made to a seller indicating the buyer’s good faith, seriousness, and genuine interest in the property transaction. The earnest money goes to the seller as compensation if the buyer backs out. If the seller backs out, the money is returned to the buyer.
To complete your purchase, you’ll have to deposit additional funds into escrow. As the original earnest money is generally applied to the down payment, arranging for the various other required payments is crucial before the deal is closed. Failure to do so can lead to the sale getting canceled, with the earnest money going to the seller. Furthermore, you could still be charged for the various services you used before the deal fell apart.
11. Final Walk-Through
Before you sign your real estate closing papers, one of the last steps should be to look over the property. First, you want to ensure that no damage has occurred since your previous property inspection. Next, it would be best to verify that the seller has completed the required fixes and no new problems have come up. Finally, check that nothing included in the purchase agreement was removed.
Real Estate closing can take from a week to 60 days, depending on the property type and whether you are paying cash or financing the purchase.
12. Understand the Paperwork
Paperwork is critical to closing a property deal. Despite a stack of papers filled with complex legal terms and jargon, you should read all of it yourself. If you don’t understand something, consult a real estate attorney. Your agent will also help making sense of any complex legal language.
Although you may feel pressured by the people who are waiting for you to sign your papers—such as the notary or the mortgage lender—read each page carefully, as the fine print can have a significant impact for years to come.
In particular, make sure the interest rate is correct, and all other agreed terms are clearly mentioned. More generally, compare your closing costs to the good faith estimate you received at the beginning of the process. Finally, vigorously dispute any fees you think are illegitimate.
Real Estate Closing FAQ
How Long Does It Take to Close On a House?
Typically it takes 30 to 45 days to close on a house, depending on a few factors like how fast it takes to get a home inspection and whether or not you are pre-approved for a mortgage.
How Much Money Should You Save Before Buying a House?
How much money you should save before buying a home depends on how much of a downpayment you might need to buy a house. For example, if a home you want to purchase costs $200,000, you might need a 20% downpayment, which would be $40,000.
Even if you don’t need a 20% downpayment, and not every buyer does, it may be helpful to have money to pay for inspection fees and anything else that might come up when house hunting.
How Much Are Closing Costs When You Buy a House?
There are many fees associated with closing costs from the lawyer, from appraisal fees to the fees you pay the lawyer who draws up your contract. These costs can add up to 2% to 7% of the home’s purchase price and are typically due at the closing.
When Is It Too Late to Back Out of Buying a Home?
If you haven’t signed a contract to buy the house, feel free to walk away. If you are “in contract” with the seller on purchasing property, getting out of the contract depends on the contingencies in the contract. For example, a property inspection or if you can’t secure financing. You may forfeit your earnest money if you walk away outside any contingencies. So, if you decide you “don’t want the home,” you may have some legal hoops to jump through, so it is best to speak with your lawyer.
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Why Aurum Title
We Are an Experienced and Efficient Title Company
Aurum Title is a full-service title agency offering competitive commercial escrow and title solutions with Gold Standard service in the Dallas Fort Worth metroplex.
We represents national underwriters such as Westcor Land Title insurance Company, Chicago Title Insurance Company and Fidelity National Title Insurance Company.
Our title closing team is committed to seeing our clients through sometimes stressful and challenging times when buying or selling your property. We understand that closings can be difficult but our Gold Standard Service relieves those stresses.
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