- When you close on a real estate transaction, it involves the signing of documents and the exchange of money. What do the documents that are signed mean? What have you agreed to?
- Typically, there are two (2) parts to the closing. One part involves the documents that transfer the real estate from the seller to the buyer. The second part is the loan documents that the buyer needs to sign to get the money to purchase the home. If the deal were a cash transaction, then there would be no loan closing. The closing would just consist of the transfer of the property to the buyer in exchange for the case.
- Both parts of the closing can involve many papers that require the signature of the buyer, seller or both. Some documents are signed by the Realtors and the closer (personnel from the title company) as well. Most of the documents are simply multiple copies of the same thing.
- The real estate commission requires the real estate offices involved, buyer, seller and the title company receive a complete set of documents with original signatures. An important exception is that the most important documents, the warranty deed, trust deed and note are only signed once. Copy packages for everyone's file are made.
- Typically, a closing last 45 minutes to an hour. It is prudent to review what you will be signing and there is not enough time to do this properly at the closing. Your Realtor can get copies of the documents prior to the closing for your review.*
- If the lender is unable to get copies of your actual loan documents see if they can provide blank copies, so you can at least review the text. You can then identify the blanks for the loan amount and interest rate to check those at closing.
A review of the real estate documents
that you would generally sign at a closing...
- The closer from the title company refers to the contract to purchase the home and all the amendments and extensions of that contract to determine the documents for the closing. For example, is the buyer taking title as joint tenants or tenants in common? Is tax settlement going to be based on last year's taxes or the most recent levy and assessment? Is the home to be transferred by general, special or other warranty deed?
- In most cases, a general warranty deed is used to transfer ownership from seller to buyer.
- The closing agent notarizes the seller's signature and this document is recorded with the county. This puts on public notice the owner of record.
- Other typical documents requiring signatures in the real estate closing are the tax agreements, utility agreement, lien affidavits, waivers, name affidavit and settlement statements.
- Most of the time the taxes agreement is a final statement. This alleviates the buyer and seller from having to get together in January to re-prorate the taxes.
- Utility agreements indicate the seller will pay all the final bills and the buyer agrees to switch the utilities into their name if they haven't already do so. The seller signs the authorization to transfer the r4sponsibility to pay the resulting bills.
- Both buyer and seller sign separate lien affidavits. The buyer is signing that, if they have had access to the property prior to closing, that they have not had work done or ordered something for which they do not intent to pay.
- The seller signs the same and also that they have not taken out any loans against the property that are not being paid off through the closing.
- In the real estate section of the closing, both buyer and seller have separate settlement statements which itemize and account for the costs (debits) and the credits.
- When appropriate, these items are apportioned or prorated between buyer and seller. Typically the day of proration is the day of closing unless otherwise specified in the contract.
- Regardless of what part of the day you close, whether early in the day or late in the afternoon, the day of closing is considered the buyer's day for the purpose of proration.
- The settlement statement accounts for the debits and credit of each the buyer and the seller. This accounting tells the buyer what to bring to closing to buy the home and the seller what they should receive from the sell of the home.
- I can review this with you and answer the questions you may have. On the buyers' side, most of the charges are loan charges that you should have seen in the truth in lending that you received at the time of loan application.