You’ve spent weeks – maybe even months – searching for that perfect home. You visited several properties with your realtor, flushed all of the toilets, surveyed each room in the house, and did your research on every neighborhood. Finally, you found the perfect home.
Unfortunately, some real estate transactions can fall through unexpectedly on the closing date. The good news is, however, issues that can stand in the way of a successful closing can be effectively avoided. To ensure that, good preparation in the weeks and days before the closing date is key. In this article, you’ll find a step-by-step guide to the key stages of the home buying process that will help you avoid unexpected problems with your transaction and secure a successful closing.
Step 1: Preparing and Signing a Real Estate Contract
You might be surprised that signing a contract is the first step leading to the closing rather than the last one. However, it should be noted that a real estate contract doesn’t involve the actual transfer of property ownership. Rather, such an agreement sets out the terms and conditions that will govern the transaction process and lists the rights and responsibilities of both the buyer and the seller. Following such a contract closely may greatly facilitate a successful closing.
Step 2: Opening an Escrow Account and Depositing Earnest Money
Escrow refers to the process of depositing certain items necessary for a real estate transaction to occur – most importantly, monetary funds – with a neutral third party called an escrow holder or agent. Earnest money is a deposit made by the purchaser to be held in escrow that serves as a proof of good faith. Depositing earnest money signifies that one party truly has the intention to buy the property being sold. However, making such a deposit doesn’t constitute the act of purchase.
Step 3: Home Loan Application
A very small number of buyers are able to purchase property solely with their personal funds. A grand majority of real estate transactions are financed by a long-term loan obtained by the buyer from a bank or other lending institution. In order to obtain such a loan, a prospective buyer needs to file an application and comply with a set of financial requirements. Before the loan is granted, the lender will usually have the value of the real estate property on sale appraised by a professional appraiser.
Step 4: Obtaining Title Insurance
While some individuals think skipping title insurance is a good way to save money on a real estate transaction, failing to obtain such insurance can actually be very costly in the long run. In fact, it is one of the main reasons why a real estate transaction may fall through at closing. Title insurance can protect the buyer from unexpected issues and defects of the property’s ownership title such as liens or other encumbrances against the real estate.
Step 5: Property Inspection and Survey
A property inspection is conducted by the buyer in order to ensure that the property and all its key constructional elements are in a good and safe condition and to determine any issues that need to be resolved before the transaction. A survey, on the other hand, is conducted by a professional surveyor and its purpose is to determine and confirm whether the actual boundaries of the property reflect and conform to the appropriate public records.
Step 6: Hazard, Wind, and Flood Insurance is Obtained
Obtaining such insurance may be required by the lender. The exact type of the insurance policy needed, however, may also depend on the location of the property.
Step 7: Pre-Closing Inspection
It is usually recommended that the buyer performs another inspection of the property shortly before the closing in order to ensure that the property’s condition didn’t substantially change and that any repairs and maintenance requested have been performed.
Step 8: Signing the Closing Documents and the Transfer of Money
On the day of the closing, important documents are signed by both the seller and the buyer. Such documents include a Promissory Note, a Warranty Deed, a Closing Disclosure and Loan Estimate as well as affidavits and other documents. Once this part of the closing is finished, the money will be transferred from an escrow agent and to the seller.
Ensure a Successful Closing by Having a Lawyer Help You Navigate It
A real estate closing is a complicated process that can make or break your real estate transaction. However, your chances of a successful closing grow exponentially if you work closely with a real estate attorney throughout the whole transaction process. An experienced Schlegel Livingston, LLC lawyer can help you dot all the I’s and cross all the T’s during your next property purchase and closing, making sure your transaction won’t fall through when you least expect it. Contact us today and let us safely guide you through the closing process.
Schlegel Livingston LLC
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