The first step in the closing process is negotiating the various components of the purchase agreement. Typically, when you submit an offer on a home, if the seller likes what you have to say, they'll negotiate with you on the various components. These can include the purchase price, the closing date, the escrow deposit, or the inspections. Once an agreement has been reached and signed by both parties, that's when the clock will officially start toward closing day.
After you've signed the contract, the next step is to submit your earnest money deposit. (commonly referred to as EMD) Your earnest money deposit is your "good faith deposit" that shows you intend to buy the property. Your real estate agent will typically supply you with wiring instructions to the title company for the amount agreed upon, when your offer is accepted and it will be put into an escrow account, that EMD amount will be deducted from your total deposit amount.
Instead of being held by the seller, an escrow account is managed by a third party -- an escrow company or escrow agent -- not personally involved in the transaction. If all goes well, when you're ready to go to closing, the money from your deposit will be applied to your down payment. However, if you break the terms of the purchase contract, the seller may be allowed to keep your deposit money.
HOA Demand and Resale Package
The Seller is responsible for paying for and ordering these packages from the HOA that deliver the rules and regulations to the buyer and transfer the HOA responsibilities and also pays off any outstanding dues or fines. This can be a time consuming procedure and take weeks to accomplish without rush fees and can cost the seller between a couple hundred and a couple thousand dollars. The buyer then has an allotted time to review the documents before deciding to continue with the sale.
The next step in this process is ordering a title search and insurance. In essence, a title search ensures that there are no issues with transferring the ownership rights to the property. Title insurance is there to protect you from being held responsible if any issues -- like previously unpaid property taxes, for example -- are discovered in the future.
Your real estate agent will likely order this policy for you, and the cost will be paid at closing.
As the buyer, you'll be responsible for scheduling and completing any inspections that you elected to perform in the purchase agreement. Usually, you're allowed to attend these inspections and to ask the inspectors any questions that come to mind. Once they're completed, you'll receive a comprehensive report as to what was found, and you can use that information to formulate your repair requests to the seller.
For their part, the seller will have a few additional days to respond to your requests. If all goes well, you'll reach an agreement and can move forward with the transaction. If not, however, sometimes buyers end up walking away from the home.
If you're using a mortgage to buy the home, your mortgage lender will likely require a satisfactory appraisal as a condition of your loan. An appraisal determines the fair market value of the property and is there to ensure that neither you nor your lender is overpaying for the property.
As long as the appraiser assigns a value to the property that is at or above the purchase price in the contract, you're good to go. That said, if the appraisal comes back too low, you may need to try to renegotiate the price with the seller.
After you submit your loan application, you'll first work with a servicer to gather your loan documents. Then, you'll go into underwriting, where an underwriter will vet your finances similarly to how the lender did when they first did your preapproval letter. This time, however, the process is more complicated, as they're trying to issue your loan approval.
Most likely, the lender will first issue you a conditional loan approval, meaning you have to meet certain conditions in order to be approved for your loan. You'll want to do your best to resolve these conditions as quickly as possible to ensure there are no issues with closing on your loan.
A day or two before closing, you'll conduct a final walkthrough. During this visit to the property, you'll want to make sure that any agreed-upon repairs have been completed and that all of the seller's belongings have been removed from the property.
Around the same time, your lender will likely give you your closing disclosure. This document outlines the final costs and terms of your loan. As long as everything looks good on both fronts, you'll sign off on a document for each of these procedures and prepare to go to closing.
On closing day, you'll sign your final documents and bring a cashier's check in the amount listed on your closing disclosure statement. After closing, the escrow agent will distribute the funds to the appropriate parties.
Even though most of what happens during your closing timeline will be out of your control, there are things you can do to help keep your closing moving forward smoothly. With that in mind, read over the tips below to be prepared for each step of the closing process.
Following all of the deadlines listed in your contract is a crucial part of any real estate closing. Essentially, that's what keeps the transaction moving forward without issue. Unfortunately, if you miss a deadline, you'll technically be in breach of contract, and at that point, the seller would be entitled to take your deposit money if the contract falls apart.
Your best bet once your purchase agreement has been signed is to read through the agreement and to mark any important dates on the calendar. That way, you can be sure to stay aware of any important dates.
During the course of your transaction, your lender and real estate agent will likely be giving you lots of advice. For example, most lenders will recommend against making any big purchases, like buying new furniture, during the underwriting process. In order to keep the closing process moving smoothly, listen to the advice from your team of experts. Their industry knowledge is, after all, why you hired them in the first place.
Lastly, do your best to respond to any requests from your buyer's agent or mortgage lender in a timely manner. As you saw above in the house-closing timeline, a real estate transaction has several moving parts, and if one gets held up, it could spell bad news for your closing. With that in mind, do your best to make sure to respond to any requests as quickly as you can.
The homebuying process takes about six weeks to complete from the time the seller accepts the buyer's offer to the time everyone sits down at the closing table. To say that there's a lot to do in those few weeks is an understatement. With that in mind, make sure to educate yourself on the house-closing timeline above and keep it in mind as you move forward with your real estate transaction.