Real Estate Closing Process


When you go to buy a property, be it residential or commercial, the buying procedure is the same. You make a checklist of the various aspects of your property, you begin your search, decide on a property and ask the price, budget for it, arrange the loan and mortgage, make a counter offer and finally, when everything is acceptable, you buy the property. Once you decide to buy the property you and the realtor, the settlement process, begins. Let us look at this procedure in detail.

The closing process is last in the home buying process and is the most important process in a real estate deal. It begins once the purchase offer or counter offer is accepted by the seller of the property. The last-minute changes regarding the property are made and the final offers are accepted. A number of documents like the contract, the proof of title, mortgage insurance, reports from the home inspector, etc., are required for this process. You can involve a real estate attorney for this process. The step by step closing process is mentioned below.

Earnest Money: The earnest money is the money which the buyer pays to the seller. Payment of earnest money means that the buyer is thoroughly interested in buying the house. The seller may consider that the home selling process has begun when he receives the earnest money. The buyer may pay cash or may give a check.

Check the Title: A closing agent or a title company is selected whose purpose is to check the correct title of the property. He will confirm the seller's legal claim on the property and will also check for any other lien on the property. His job is to check if all the necessary taxes have been paid by the seller. Once the title is cleared, the last-minute real estate negotiations can be done.

Disclosures: A buyer needs to look through the house once again in the last 24 hours to ensure if the seller has left the house the way he has promised to in the sales contract. The buyer will have to appoint a home inspector for the home inspection process. On the basis of his report, if the buyer feels that there are issues, he can delay the closing process.

Appraisal: Every buyer will require real estate financing from a lender. The lender of the buyer will have to conduct a real estate appraisal so as to determine the value of the property. If the lender is satisfied, he can speed up the closing process.

Approval of The Loan: The property appraisal becomes important from the lender's perspective. If the lender is happy with the property, he will approve the loan amount. This approval of the real estate loan is a big relief for the buyer. Once this is done, the title company will receive all the documents from the lender's side. These documents will be signed on the closing day, which is arranged by the title company. The seller will also need to settle all the past loans on the house before the buyer can sign the papers. An escrow account is also opened, at this stage, for smooth financial transactions.

Cashier's Check: The buyer needs to get a cashier's check for the balance amount. The final amount is calculated after considering all the related fees and price of the property, after consulting with the closing agent and the title company.

Closing: The buyer signs all the important documents like the loan papers, the title deed etc. The seller, either signs it all earlier or will sign it on the same day. This varies according to the states in which the transactions are taking place.

Final Touches: After the documents are signed by the parties, the next step is recording of this transaction by the county. Then the possession of the property is formally changed from the buyer to the seller.

The closing process for commercial real estate is also the same. However, there are some additional elements that need to be looked at. Commercial real estate is an investment property and so the entire process needs to be taken care of without errors.
  • As the commercial real estate is owned by entities and rarely by an individual, all the entities are checked thoroughly due to the high risk of liability involved.
  • A formal escrow account is opened due to the large amounts of money involved.
  • Title is complex as there is an organization involved.
  • A diligence period is fixed where all the documents and the leases etc. are agreed upon by the seller and the purchaser.
  • Apart from the regular documents, there are a few additional documents to be signed and handed over by the buyers and the sellers. For example, the buyer may want the same servicing company for the maintenance of the elevators, the same housekeeping staff etc. Documents related to these issues are to be handed over and signed.
Real estate investment requires to be handled with caution. Appoint an attorney for your property management after the closing process so that you do not have to worry about any problems related to the property.

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