Closing the Transaction
You’ve found a
home, done all the inspections, your loan is approved, and now
it is time to complete the transaction. If your lender and
Realtor have done their jobs the actual closing of your loan
and the purchase transaction should be somewhat anticlimactic.
For most people it will be just a bunch of papers to sign. If
all of the details have not been worked out a head of time it
can be a stressful time and an unpleasant ending to what
should be a very joyous occasion. Before dealing with what
actually happens we will cover the mistakes that can be
mistakes that happen at a closing happen due to rushing
things. While your Realtor, Lender and Seller all want the
transaction to go smoothly, this is a very important day for
them. This is the day they all get paid for their efforts.
Many times they will push to close for their own benefits and
not that of the buyer.
purchasing with mortgage financing is still a very paper
intensive project. Occasionally an unforeseen delay may occur
in order to get the proper paperwork ready. Be prepared to
have your closing date or time changed.
Closing on the
last day of the month. Avoid this day if at all possible. This
is the busiest day for the Lenders, Title and Escrow
companies. When people are overworked mistakes can happen. Try
to close a few days before the end of a month.
Resolve all issues
prior to closing. Be sure that any outstanding issues are
resolved before going to closing. It’s harder to get things
done after closing and you don’t want to be negotiating things
at the closing table.
Get a final Good
Faith Estimate from your Lender or Broker 2 days prior to
closing. While these numbers will not be perfect they should
be reasonably accurate. You do not want to be surprised at
closing that your need an additional $2,000 -$3,000.
are two common ways to finalize your Real Estate transaction.
One is an Escrow Closing the other is generally referred to as
a Round Table Closing.
These are most common in Western States but are growing in
popularity. An escrow company is an intermediary who handles
all of the documents between the Buyer, Seller, and Lender and
Title Company. In an escrow closing the buyer and seller are
scheduled to come in for the “Signing” at different times.
Once the documents are signed the Escrow Company sends the
loan package back to the Lender for review. The Lender reviews
the documents and if all is satisfactory, notifies the escrow
company they are ready to fund the loan. The escrow company
confirms to the Lender that they are ready to record the
Mortgage/Deed of Trust and Grant Deed and receive the funds
from the Lender. Once the Escrow Company has the necessary
funds from all parties, they record the required documents at
the county recorders office and “go on record”. The
transaction is now “Closed” and all funds are disbursed to the
In a round table closing the Buyer, Seller, Realtor,
Attorneys, Title Company and Lender may all gather around a
table to complete the transaction. Thus the Term “Round
Table”. The documents are passed around the table for the
appropriate parties to sign. The Lender rarely attends these
types of closing and instead relies on the Title Company to
protect their interest. Remember the Title Company is an agent
for the Lender. Their job is to close the transaction. They
are not there to give legal advice to the buyer or seller. The
buyer or seller, if they choose, may bring legal council with
them. Once the documents are signed, the title agent may be
required by the lender to fax certain documents to the lender
for their review. Because it is very hard to track people down
and people are not as motivated after the closing, Lender’s
want to make sure that their documents are signed properly.
Once the Lender is happy with the documents they release the
funds via a wire to the Title Company who disbursed the funds
to the Sellers and Realtors. They also are required to payoff
any underlying loans or liens.
With round table
closings everything takes place at once. Because multiple
things are happening at one time it is not uncommon for these
transaction to cause more stress to the parties involved,
require last minute changes, or take several hours to
complete. Some of the common delays that can occur are last
minute conditions that need to be signed by an underwriter,
delay in wires from lenders, delays in time for lenders to
review the documents, and others items. In all cases remember
that everyone is trying to do their jobs and close the
transaction. Do not let the process frustrate you or let you
get aggravated. It’s better to have a small delay and get the
job done right the first time then to have problems later on.
On occasion with a
round table closing you might have a situation come up called
a “Dry Closing”. This term generally mean that all of the
documents are going to be signed but for one reason or another
the seller will not receive their money while at the table.
This condition is most often caused by a wire from a lender
not reaching the title company prior to signing all of the
documents or the lender wants to review all of the documents
before sending their money. While it might irritate the seller
who is expecting his money right away, it should not bother
you as the buyer. Once again everyone is working to make sure
everything is correct. Usually this delay is resolved by the
end of the day or by the following day. The one downside for
the buyer on a “Dry Closing” is the seller will probably not
allow you to take possession until they have their funds. If
you are expecting to take possession of the property the day
of closing, ask your lender the chances that you will have a
“Dry Closing” so you can plan accordingly.
Now that you
transaction is closed, the joy of homeownership can begin.