What does my Realtor mean when referring to a "closing"?
A closing is the meeting where title and money are exchanged between the seller and the buyer, and the sale of a home is finalized.
At the closing all the progressive steps in buying a home-from the acceptance of the offer, title search, home inspection, buyer's loan application to approval, etc.-come together in a final transaction. The documents are ready to sign, the buyer is ready to hand over the purchase price, and the seller is ready to transfer title (and the keys!)
Usually held at the offices of a title company, the closing takes less than an hour and sometimes less than 30 minutes. The meeting is always attended by the buyer, usually the seller (although his or her signature can often be obtained in advance), the brokers and/or attorneys, and of course, the title company representative-who acts as the intermediary for the seller and buyer in the transaction.
What goes on during the closing? First the buyer reviews all the loan documents, which describe the loan amount, payments and itemization of closing costs, including impounds for tax and insurance, etc. If everything is as it should be, the buyer signs the loan papers.
Next, the buyer reviews and signs the title documents, making sure the deed is recorded as desired (joint tenancy, tenants in common, community property, etc.) By the time the closing is held, the title company has already conducted a title search and verifies that the title is held by the seller, and that no liens are held against the property. If there are any obstacles or other conditions that could potentially undermine the sale of the property, the title company will tell the seller about them (in writing) at the closing.
Assuming, however, that the funds are in order, the deed is correct and the title is clear, the final step is the disbursement of funds to the seller for the purchase price of the home, and the presentation of the keys to the buyer. The buyer may also receive a refund for overpayment of closing costs, which were paid out of his or her deposit check.
What should a buyer be prepared to bring to closing? That's easy: everything. The buyer should bring all of the documentation relating to the transaction, including a canceled check for the deposit paid with the offer, just in case the title company or lender asks for it unexpectedly. The title company should already have the loan funds in its possession, but the buyer needs to bring a cashier's or certified check for the purchase amount minus the loan amount (that is, the downpayment).
Ideally, the closing will go through "without a hitch." Some delays, such as receiving loan funds from the lender or an error in the loan documents, are unpredictable and therefore, uncontrollable. Other delays, however, can be avoided if they are anticipated and, if possible resolved ahead of time.
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What are closing costs and who generally pays them - the buyer or the seller?
First, the responsibility of who pays for closing costs is always negotiable. Local custom may dictate which fees the buyer will pay and those the seller pays.
Typically, the buyer pays for home inspection services and escrow, deed preparation and recording fees. He or she may also pay for title insurance, since this is required by the lender. The buyer is also responsible for any fees or costs associated with obtaining the purchase loan.
The seller customarily pays the real estate agent's commission, as well as costs associated with transferring an unencumbered title, such as a title search, reconveyance deed and documentary transfer tax. Often, a seller will sweeten the deal by offering a one-year home warranty.
Who will pay for what closing costs should always be clearly spelled out in the purchase offer. A creative sales associate will consider the cash, income and tax situation of the home seller and the buyer when constructing an offer. For instance, if the buyer is short of cash, the agent may ask the seller to pay the buyer's loan points up front in exchange for some other concessions from the buyer. In this scenario, the buyer and seller benefit-and both get what they want.
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