What Happens on the Day of Closing?
What Happens on the Day of Closing?
On the day of closing the buyer and the seller are at the end point of the journey for buying/selling a home. There will be a number of documents for both parties to sign. At this point the background title search will also have been completed, the mortgage loan (if being used to make the purchase) being given clear to close and any down payments (or payments from the seller) must be made. This article explores in depth what happens on closing day so both the buyer and the seller of a home can be prepared.
Buyer Closing with a Mortgage
Once the mortgage lender gives the buyer clear to close on the loan the actual closing can be scheduled and is usually scheduled by the title company. The mortgage lender will typically send the funds to the title company ahead of the actual closing time. Once all parties have signed their documents and the lender has gotten and approved of their required documents then the title company will be given authorization to release the funds to all parties as required by the contracts.
The buyer and the seller can meet at the closing table if their schedule permits. Closings can be done separately though with the buyer and seller signing separately at their own time and even in different locations. Not until both parties sign though is the transaction considered closed. The seller will not be able to get their proceeds check, nor will any of the real estate agents be able to pick up their commission check until both the seller and the buyer have signed their documents and provided their payments.
Typically, it is the buyer who must bring money to the closing table and that money is to cover the down payment as required by their mortgage as well as cover closing costs if not paid by the seller. While the seller usually gets a check back upon closing that is not always the case. If the seller owes more on the home mortgage than the home will get on closing of the sale, then the seller will also have to bring money to closing. Where the seller owes less on the home mortgage than the final sales price, the proceeds from the sale will be used to pay off the seller’s mortgage and closing costs and the seller gets whatever remains.
During a closing with a mortgage the buyer will have a majority of the documents to sign. There will be mortgage loan (note), loan application, loan estimate and additional documents. Usually the seller does not have many documents to sign. The seller will be signing the deed transfer documents, closing disclosure and more. There will be some documents that are signed by both the buyer and the seller and the person conducting the closing will make sure documents are signed in the right location and signatures are notarized when necessary.
Bringing Money to Closing
Sometimes the seller is required to bring money to closing. As noted above, in the situation where a seller owes more on the home mortgage that they are getting on sale the seller will have to bring cash to the closing table assuming this is a traditional sale and not a short sale. In a majority of cases the seller is getting money back at the closing table after any mortgages and taxes are paid off.
The buyer on the other hand will usually be bringing money to the closing table to pay for down payments, closing costs, a home warranty (if selected) and other costs associated with buying a home. There are closings where the buyer is buying a home with a no money down mortgage loan (like USDA or VA mortgage) and getting seller paid closing costs and as a result the buyer does not have to bring any cash to the closing table.
When the buyer does have to bring cash to the closing table, they need to verify ahead of time how the title company wants the funds. Some title companies require funds be brought in the form of a certified check or be wired into the title company’s bank account. Usually the requirements for how the money is to be provided to the title company is based on how much money is being brought it. The buyer should consult with the title company well in advance to make sure the money is sent according to title company requirements.
The seller usually has the option of getting their proceeds from the sale either in the form of a check or wired directly to their bank account. The seller should be discussing with the title company ahead of time the methods the title company provides for paying out seller proceeds and any fees associated with such method. When wiring money there are usually wiring fees that the title company will charge when sending money via wire.
Anytime funds are being wired to the title company (whether by the buyer or the seller), care should be taken to make sure the funds are wired to the title company and not some fraudster. There have been many cases where the title company, the real estate agents, the lender or someone else in the transaction has their email hacked or has their email spoofed. A spoofed email looks legitimate and directs the person sending the wire to send it to the wrong account. Once wired the money could be lost forever. Whoever is sending the wire should directly call the title company and verify wiring instructions. Sometimes the bank where the wire is being sent from will call to verify wiring instructions, but it is still the responsibility of account owner to make sure the money is sent to the write account.
Closing on a home can be an exciting time whether from the buyer or seller perspective. Avoid mixups and delayed closing means understanding and being ready for everything come closing day. Both buyer and the seller need to be on the look out for potential scams/fraud as well.
- FAQs about Earnest Money - Upon closing the earnest money should be generally credited to the buyer. Earnest money in general has a number of different rules and requirements with it and this article provides answers to common earnest money questions.
- The Final Walkthrough Before Closing - Prior to closing all buyers should be walking through the property in order to make sure it is still in the same condition as when initially seen. This will be the last time the buyer can correct any major issues with the seller.
- Common Home Seller Mistakes - For the seller everything comes down to closing day. Missing some steps prior to that may delay or even cancel closing so sellers need to keep on top of their tasks.
The above article “What Happens on the Day of Closing?” was provided by Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you. Contact me today!
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