You’re in the home stretch of buying or selling a house. You’ve made it through negotiations, the inspections, appraisal, underwriting and all there is left is the closing. What is a closing? What happens at closing? Who will I see at closing? Glad you asked. Here’s closing 101.
What is a closing and what actually takes place?
The closing is usually the name given to the final meeting that is the last step in the process of the sale or purchase. Regardless of whether you’re buying or selling, all of the legal documents which are needed to transfer ownership of the property to the buyer’s name are signed during this meeting. If you’re a buyer and have obtained a mortgage to purchase the home (i.e. not paying cash), you will also be signing all of the mortgage documents. The whole gist of these mortgage docs can pretty much be summed up into one theme: you have to pay to stay.
Where does the closing take place?
It usually takes place at your closing company’s office, although many closing companies are willing to drive to meet you if circumstances don’t allow you to come in their office. It’s often advantageous for you to close at the company’s office because it’s much easier for the attorney to make corrections if any clerical adjustments are needed on any of the docs. Don’t have a preferred closing company? Ask Drew for some great companies who his previous clients have been very happy with.
What happens if I’m an out of state buyer or seller and can’t attend a physical closing?
Most Realtors and closing companies are used to dealing with this situation. A document package can be sent via overnight mail to your location. It can also be emailed and printed upon receipt. Once you receive the document package, you will need to arrange a time to sign most of these documents with a pen in front of a notary. This will generally occur the day prior to the actual closing date. Once the document are signed, they can be overnighted back to the closing company.
Who is at the closing?
Typically, your Realtor, the closing attorney, you (as the buyer or seller) and the lender (if they’re a local lender) will be present. In middle Tennessee, we generally have split closings which means that the other party in the transaction will close at a different time and place than you so you’ll never meet them (see next question).
Will I meet the other party (buyer or seller) in the transaction?
Most of the time, no. We typically have split closings in Middle TN which means the buyer and seller close at different locations (and times) on the day of the closing. This is is not the case everywhere and can vary from state-to-state. This helps keep the transaction a little more business-like and can be very welcomed in the unusual situation where the transaction has become a bit contentious between parties leading up to the closing.
If we’re doing a split closing, how does the other side trade money?
Once both the buyer and seller’s sides have closed, the closing companies will take care of exchanging documents with each other and wiring the funds to the appropriate people. Technically speaking, a property is not closed until it is fully funded, or in other words, all the money has been transferred to the correct people.
What do I need to bring to closing?
Buyers generally only need to bring a driver’s license or if you don’t have that, some other form of government issued ID. Sellers may also need to bring a voided check so the closing attorney will know what account to wire the proceeds of the sale. If you’ve recently been married and are selling a home, you may also be asked to bring a marriage license. Your Realtor and closing company will be able to tell you if anything else is needed. As far as money to close goes, you’ll typically need to wire the money to the closing company prior to closing (see next question).
If I’m buying a house and need to pay money to close, can I write a check?
If you’re the buyer and the amount you need to pay at closing (aka “cash to close” amount) is more than a few thousand dollars, you will likely need to do a wire transfer to the closing company prior to closing. Wire instructions are provided by the closing company.
How much money do I need to close if I’m a buyer?
You will get a closing disclosure (CD) at least three days prior to your closing date which will give you the final “cash to close” amount. This will tell you how much money you need to wire to close (see above question).
If I’m a seller, how do I get the proceeds from my sale?
In addition to a driver’s license, a seller should also bring a voided personal check to closing so the closing attorney knows what account to wire the proceeds to.
Is the house officially mine (if I’m a buyer) once I finish closing?
A purchase/sale is not legally closed until it’s fully funded (see question on split closing above). As long as both sides of the transaction closed before the bank wire cut-off for the day (which your Realtor should help ensure is the case), the transaction should be fully funded that same day. It typically takes less than an hour or two after both parties have had their closings for the transaction to be fully-funded and the house to legally become yours.