Buying or selling a home requires a lot from all parties involved. The most important part of your home buying or selling experience comes down to closing day – and by the time you get there, you may feel more than ready to cross the finish line.
Fortunately, when you know what to expect, navigating that critical last step can make the process smoother for everyone involved.
Before closing day
What is the closing day? This is the actual date on which the ownership of the house, the “title”, is transferred from the seller to the buyer. For this to happen, several major tasks will need to be done up front, which is why the entire closing process usually takes 30-50 days. During this period, there may be additional negotiations on the purchase price or terms of the home, depending on details that emerge during the inspection and financial due diligence process. Then both parties will agree to sign the final documents.
During the closing period, the following events generally take place:
- The buyer and the seller sign the purchase and sale contract. The realtor(s) produce a real estate contract for the sale. Both the buyer and the seller must sign this contract of purchase and sale. The buyer pays a deposit in good faith.
- A home inspection is performed. Buyers, it’s time to do your due diligence. Hiring a home inspector means you have an expert who assesses the home from top to bottom and alerts you to any potential issues. Sellers, you will need to ensure that the home inspector has access to your entire home and that utilities are turned on. Based on the results of the inspection, stipulations can be made and changes to the contract.
- The buyer secures the financing. Most buyers need to get a mortgage to buy a home. Even though they may have been pre-approved by a lender, they now have to go through a detailed underwriting process to get a loan for that specific property. In fact, this step is usually the reason closing takes so long.
- The house is appraised. If you get a mortgage, your lender will likely require an appraisal of your home as the next step. The lender will usually walk you through the process to get the appraisal completed.
- The buyer obtains insurance. Again, lenders require this to protect their financial interests (and yours). You are generally required to obtain proof of a home insurance policy prior to your loan closing date in order for the loan to be approved and the closing to be successful.
- The unforeseen are released. Real estate contracts usually have contingencies that say something has to happen for the sale to happen. Sellers usually establish a contingency that the buyer needs to obtain the required mortgage on a certain date, for example. Or the buyer can make the purchase contingent on the seller fixing something that was discovered during the home inspection. Both parties must release all applicable contingencies before they can sign on the closing day.
- The buyer receives the closing disclosure. This is an important document that mortgage lenders must legally provide to the buyer three days before closing. The final disclosure summarizes key loan details, such as the interest rate, loan amount and the buyer’s monthly mortgage payment. It also shows the amount of money the buyer needs to bring to the closing table for the down payment and closing costs. Sellers also receive a closing statement from the title company or closing agent handling the transaction, an itemized list of all purchase or sale costs associated with the sale.
- The buyer completes the final walkthrough. The final walkthrough is usually the last step that takes place right before the closing date. It allows the buyer to review the property and ensure that everything is in order so that he can take over.
As the actual closing date approaches, buyers and sellers also need to think about the logistics of the upcoming move. This usually means organizing a moving company, setting up utilities at your new address, and change of address with the US Postal Service.
On the closing day, the buyer signs the agreement with their lender so that the latter can issue money to the seller for the purchase of the house. At the same time, the seller legally transfers title to the house to the new owner.
Historically, closings took place in person with a title agent, with both the real estate agents and the mortgage lender present. During the Covid-19 pandemic, however, the process has become largely digital. In some states, you will need to have at least a notary come to your home at a specific time to witness the signing of certain documents.
The real estate agents involved in the process should help set the closing date and organize the details for closing day. They will help you if you choose to close in person or if you decide to close virtually. If you have any concerns, you may choose to hire a real estate attorney, if necessary.
Once the closing date is set, there are a few day-to-day tasks that will usually need to be done by both buyer and seller.
Preparing for the closing as a seller shouldn’t take you more than a few hours, and the actual tasks for closing day can take less than half an hour. In some cases, you might be able to sign documents at home and have the money wired to you, which means you don’t have to go to the closing table at all.
At closing, vendors will typically produce these items for the appropriate parties:
- Personal identification documents, such as a driver’s license
- House keys, garage remotes, security system codes, mailbox keys, or anything else that provides access to the house and its attachments
- Any relevant home documentation, such as warranties or owner’s manuals for appliances or systems
- Certified checks to pay off their mortgage (if they have one), administrative fees they are responsible for
- A pen to sign the title and the final purchase contract
You have a much more involved closing day than the seller. Prepare to be at the closing table for a couple of hours or so, mostly reporting on all required signatures.
To prepare, your realtor and mortgage lender should let you know what you need to prepare. This usually includes:
- Personal identification documents, such as your driver’s license, a marriage certificate (if you are buying the property with a spouse and you do not have the same last name or ID for your co-signer)
- Certified funds for down payment and closing costs (usually a certified check or cashier’s check)
- Proof of home insurance
- A pen to sign everything from title and mortgage to closing disclosure, purchase agreement and all HOA documents
Your lender may also ask for other specific documents, such as a letter if a relative offers you money for the down payment. Keep a list of everything you need to bring so you can stay organized. You may even find it helpful to keep the necessary documentation in a folder to take with you on closing day.
What could go wrong? Prepare for potential problems
The main problem that occurs on closing day is missing or inaccurate documentation. Arriving at the closing table without everything you need can mean extra time or travel to find something. If you have online access to your bank account, home insurance policy, or mortgage agreement, bringing a laptop or tablet with you could save you a trip. Printing extra copies of documents that require notarized signatures can be helpful if someone is signing in the wrong place or there is a typo that needs to be corrected before signing.
Any other issues – like something the buyer discovered during the final walkthrough or an issue with their mortgage – usually arise and can be resolved before closing day. At most, it could delay the closing for a few days. By the time the actual closing date arrives, everything should be in order.
Closing Day Final Thoughts
The closing process usually takes a month or more so that everything can be arranged for the sale of the home. At the time of closing, the buyer should be happy with the current condition of the home and have the funds to purchase it. The seller must be prepared to transfer title to the home and hand over the keys.
It takes a lot of work, but it’s also an exciting experience. If completed correctly, closing day marks the opening of a new chapter in the lives of both parties.