Closing the Transaction           

You’ve found a home, done all the inspections, your loan is approved, and now it is time to complete the transaction. If your lender and Realtor have done their jobs the actual closing of your loan and the purchase transaction should be somewhat anticlimactic. For most people it will be just a bunch of papers to sign. If all of the details have not been worked out a head of time it can be a stressful time and an unpleasant ending to what should be a very joyous occasion. Before dealing with what actually happens we will cover the mistakes that can be avoided.

The biggest mistakes that happen at a closing happen due to rushing things. While your Realtor, Lender and Seller all want the transaction to go smoothly, this is a very important day for them. This is the day they all get paid for their efforts. Many times they will push to close for their own benefits and not that of the buyer.

Be flexible, purchasing with mortgage financing is still a very paper intensive project. Occasionally an unforeseen delay may occur in order to get the proper paperwork ready. Be prepared to have your closing date or time changed.

Closing on the last day of the month. Avoid this day if at all possible. This is the busiest day for the Lenders, Title and Escrow companies. When people are overworked mistakes can happen. Try to close a few days before the end of a month.

Resolve all issues prior to closing. Be sure that any outstanding issues are resolved before going to closing. It’s harder to get things done after closing and you don’t want to be negotiating things at the closing table.

Get a final Good Faith Estimate from your Lender or Broker 2 days prior to closing. While these numbers will not be perfect they should be reasonably accurate. You do not want to be surprised at closing that your need an additional $2,000 -$3,000.

Generally there are two common ways to finalize your Real Estate transaction.

One is an Escrow Closing the other is generally referred to as a Round Table Closing.

Escrow Closings: These are most common in Western States but are growing in popularity. An escrow company is an intermediary who handles all of the documents between the Buyer, Seller, and Lender and Title Company. In an escrow closing the buyer and seller are scheduled to come in for the “Signing” at different times. Once the documents are signed the Escrow Company sends the loan package back to the Lender for review. The Lender reviews the documents and if all is satisfactory, notifies the escrow company they are ready to fund the loan. The escrow company confirms to the Lender that they are ready to record the Mortgage/Deed of Trust and Grant Deed and receive the funds from the Lender. Once the Escrow Company has the necessary funds from all parties, they record the required documents at the county recorders office and “go on record”. The transaction is now “Closed” and all funds are disbursed to the appropriate parties.

Round Table: In a round table closing the Buyer, Seller, Realtor, Attorneys, Title Company and Lender may all gather around a table to complete the transaction. Thus the Term “Round Table”. The documents are passed around the table for the appropriate parties to sign. The Lender rarely attends these types of closing and instead relies on the Title Company to protect their interest. Remember the Title Company is an agent for the Lender. Their job is to close the transaction. They are not there to give legal advice to the buyer or seller. The buyer or seller, if they choose, may bring legal council with them. Once the documents are signed, the title agent may be required by the lender to fax certain documents to the lender for their review. Because it is very hard to track people down and people are not as motivated after the closing, Lender’s want to make sure that their documents are signed properly. Once the Lender is happy with the documents they release the funds via a wire to the Title Company who disbursed the funds to the Sellers and Realtors. They also are required to payoff any underlying loans or liens.

With round table closings everything takes place at once. Because multiple things are happening at one time it is not uncommon for these transaction to cause more stress to the parties involved, require last minute changes, or take several hours to complete. Some of the common delays that can occur are last minute conditions that need to be signed by an underwriter, delay in wires from lenders, delays in time for lenders to review the documents, and others items. In all cases remember that everyone is trying to do their jobs and close the transaction. Do not let the process frustrate you or let you get aggravated. It’s better to have a small delay and get the job done right the first time then to have problems later on.

On occasion with a round table closing you might have a situation come up called a “Dry Closing”. This term generally mean that all of the documents are going to be signed but for one reason or another the seller will not receive their money while at the table. This condition is most often caused by a wire from a lender not reaching the title company prior to signing all of the documents or the lender wants to review all of the documents before sending their money. While it might irritate the seller who is expecting his money right away, it should not bother you as the buyer. Once again everyone is working to make sure everything is correct. Usually this delay is resolved by the end of the day or by the following day. The one downside for the buyer on a “Dry Closing” is the seller will probably not allow you to take possession until they have their funds. If you are expecting to take possession of the property the day of closing, ask your lender the chances that you will have a “Dry Closing” so you can plan accordingly.

Now that you transaction is closed, the joy of homeownership can begin.