With interest rates still low, now is a great time to buy a home. After finding your dream house, it’s time to begin preparing for the closing process. Sales of existing homes increased 2% in October, the largest increase since 2007. The trend is expected to continue: new home sales are expected to rise 10% in 2017. Each of these transactions requires a closing. When you sign a contract to buy or sell a property, the closing process is set in motion. If you are one of the millions of Americans who will be moving soon, take a look at these tips to ensure the process is accurate and efficient.
Familiarize Yourself with the Closing Process
Real estate closings differ depending upon the state. In some areas, attorneys must close your home, while other states allow a title company to complete the transaction. Closings go by different names, like settlement or escrow. The purpose of a real estate closing is to transfer ownership from the seller to the buyer. In legalese, these parties are referred to as the grantor and grantee, respectively. You likely will see these terms numerous times in signing documents at closing.
Ownership of property is shown through a deed. Unless paying cash, a buyer signs a mortgage designating the bank’s interest in the property. Because they lend the buyer money to purchase the property, they receive a secured interest in the property. In the event the buyer is unable to meet the terms of the mortgage, the bank can foreclose.
Most closings for existing homes take place one to two months after the signing of the contract. However, closings for new home homes may take longer. Many lawyers, title companies, and real estate agents refer to this gap as the escrow period. During this time, the home is inspected, and the appropriate documents including the mortgage, loan, and deed are prepared.
Successful communication requires questions. When you don’t fully understand what the loan officer, attorney, or other party means, take the time to ask and find out. Bank officers and lawyers deal with real estate closings all day, and are often quick to use jargon with which you are unfamiliar. As your closing date nears, speak with the attorney or title company handling the closing to make sure you are on the same page. If their answers don’t resolve your question, keep asking until you understand. It’s much better to address questions or concerns early in the process as opposed to the day of closing.
Review Documents in Advance
Instead of trying to read mountains of paperwork at closing, consider reviewing the mortgage and other documents ahead of time. Insist on having all of the documents prior to the closing so that you have time to review them. It’s tempting to sign paperwork without reading. Even though lawyers and paralegals have reviewed your documents prior to closing, mistakes happen. You are much more likely to catch a misspelled name or a wrong address when it is your own.
Bring Along a Check or Other Payment Method
Even though it may seem obvious, don’t forget to bring along a certified check if you are buying a home. If you are selling your house, have your account information handy as well. As an alternative to writing a check, you may be able to execute a bank wire. However, this can delay the closing.
Clear Your Calendar on Closing Day
Even though most closings are relatively quick and painless, they occasionally do run long. If there’s a problem with the documents or other party, the closing could be delayed hours or days. Delays tend to happen more often at the end of the month. Consider scheduling early in the month to avoid problems. As a general rule, avoid scheduling a closing on your lunch break. In the event you recognize a problem at the closing, be prepared to take the extra time to have the problem corrected by the bank or lawyers.
Walk-Through the Home One Last Time
Most real estate purchase contracts have contain a clause allowing a buyer to physically inspect or walk-through the house just before closing. By taking advantage of this final inspection, you can prevent unnecessary snags. A final walk-through can ensure the seller has completely moved out, the home has not been damaged, and is in the condition agreed to in the contract. Any problems that the seller agreed to fix should now be fixed. Any problems the buyer observes should quickly be brought to the attention of the seller and the buyer’s attorney.
Bring Required Documentation to the Closing
A current government issued ID is almost always required at closing. You should also bring your new home insurance policy with proof of payment. Know your information, like your new address and social security number.
Be Prepared for the Unexpected
While most real estate closings are relatively hassle free, occasionally a closing turns into a nightmare. Luckily, your preparation and research into the closing process will help ease stress and misunderstandings. Some things can be quickly resolved with communication. Other problems are addressed with additional legal instruments. If you are selling a home, and are unable to attend the closing, you may be able to execute a power of attorney designating someone to be present at the closing in your stead. These substitute provisions are subject to state law.
Through careful preparation and attention to detail, you can increase the likelihood that your closing process will be smooth and enjoyable. Even though the process can seem daunting, just remember that this is likely the last major hurdle standing between you and your new home.
About the Author:
Morris Lilienthal is a shareholder with the personal injury law firm Martinson & Beason, P.C. He is AV rated by Martindale-Hubbell and has received the Alabama Super Lawyer Rising Star award. In addition to car accidents, he also assists clients with wrongful death, nursing home negligence, and products liability cases.