Most people only participate in one or two real estate closings in their lives, and are unsure of what the process will be like. Home buyers often comment to us at the closing table about how shocked they are when they are required to provide “everything but their blood type” in the weeks leading up to closing. These comments have seemed to come more often than usual in the past few weeks, so I thought it would be worthwhile to blog about the closing process from start to finish and shed some light on why they feel like they are giving everyone their blood type and first-born.
- From the perspective of a buyer, it all starts with financing…unless, of course, it is an all cash sale. All cash buyers are rare in comparison to financed buyers, so I will focus on the latter. Prior to beginning the home search, it is imperative that the buyer have realistic expectations of the price range for which he or she may be approved by a lender. In order to accomplish this, the prospective buyer will be asked to provide many documents to the lender so that creditworthiness can be determined. Many buyers are surprised by the volume of documents requested by the lender, but rest-assured that this is normal and is all part of the process.
- Once the buyer selects a home, the next step towards closing is the completion of a purchase agreement (also called a Buy-Sell Agreement). The parties will put in writing the terms of their agreement, including price, reserved items, proposed timeline for closing, etc.
- Next comes the inspection period. The buyer will have negotiated a set period of time during which inspections of the home can be performed. Further negotiations will then take place regarding items that appear on the inspection report. An appraisal of the property will also take place in the early days following completion of the purchase agreement, and additional negotiations may take place as a result of the appraisal report as well.
- Once the inspection period has passed and negotiations are complete, many lenders will then request that we, the title company, open a file and begin performing our duties for this particular transaction. At this point, the title company will contact all parties and obtain vital information such as full names, marital statuses, addresses, social security numbers, etc. This information is necessary in order for us to properly search the public records and determine whether any encumbrances are present that must be dealt with prior to closing. We will also confirm with the tax assessor that there are no outstanding property taxes owed on the property.
- When it has been determined that title is clear and all pre-closing conditions have been met, we will work with the lender to draft documents for the parties to sign at closing. The Closing Disclosure will be distributed to the parties, with buyers and sellers each having their own separate closing disclosure.
- At the closing table, the closing attorney is charged with authentication of the documents signed by the parties, meaning that the attorney is responsible for verifying the identities of all parties who are signing documents, and ensuring that no party is signing under duress. In addition, we are the custodian of all funds transferred during the closing process, which means we will receive all funds from the buyer and lender and make certain that all mortgages and other encumbrances are paid prior to distributing the remaining proceeds to the seller.
- After all documents have been signed and funds have been disbursed, we will record the required documents with the Clerk of Court of the proper parish and will issue any title insurance policies that have been requested as part of the transaction.
I hope that this shines a bit of light on what happens “behind the curtain” between the execution of a purchase agreement and the day when the parties all sit at the closing table. As always, feel free to reach out to us at any point in your transaction if you have any questions about what is going on or why you are being asked to provide information to us that you believe is private and not necessary.
