CLOSING PROCESS
HOW A REAL ESTATE CLOSING WORKS
Buying or selling real estate can involve many moving parts, documents, and financial steps. While every transaction is unique, most closings follow a similar process from contract through final funding and transfer of ownership. The overview below outlines the general steps involved in many residential real estate transactions.
01
CONTRACT EXECUTION
Step 1 — Contract Execution
The process typically begins once the buyer and seller enter into a signed real estate contract. The contract outlines the purchase price, financing terms, closing timeline, inspection rights, contingencies, and other important terms of the transaction.
At this stage, Earnest Money is often deposited into Escrow pursuant to the terms of the contract.
IN SIMPLE TERMS
The transaction officially begins once the buyer and seller sign the contract and the initial deposit is made.
RELATED TERMS
02
TITLE REVIEW & TITLE COMMITMENT
After the contract is signed and the transaction is opened, the title review process begins.
The title company researches the public records associated with the property, including ownership history, mortgages, liens, easements, unpaid taxes, Legal Descriptions, and other matters affecting title.
Once the review is completed, the title company issues the Title Commitment outlining the conditions under which title insurance may be issued.
If title issues or Title Defects are discovered, additional documentation, corrective action, or coordination between the parties may be required before closing can proceed.
IN SIMPLE TERMS
The title company researches the property’s ownership and public records to help ensure the property can be legally transferred and insured.
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03
INSPECTIONS, FINANCING, ATTORNEY REVIEW & DUE DILIGENCE
While the title process is occurring, the buyer may also complete inspections, appraisals, financing approval, Attorney Review, and other due diligence activities associated with the transaction.
Attorneys may review the real estate contract, proposed title matters, surveys, and other transaction-related documents during this stage. At the same time, the mortgage lender reviews both the borrower and the property before issuing final loan approval and preparing closing instructions.
Many transactions involve ongoing coordination between attorneys, lenders, real estate agents, surveyors, and the title company throughout this process.
IN SIMPLE TERMS
During this stage, the buyer, lender, attorneys, and other professionals verify the condition, value, financing, and legal aspects associated with the transaction.
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04
PREPARING FOR CLOSING
As closing approaches, the settlement agent begins coordinating the final financial and transactional components necessary to complete the sale.
This can include obtaining payoff statements, lender instructions, tax prorations, transfer taxes, recording costs, commissions, and other figures necessary to prepare the final closing figures and balance the transaction.
The final Settlement Statement is then prepared showing all financial amounts associated with the transaction, including credits, debits, prorations, fees, and required closing funds.
IN SIMPLE TERMS
The title and settlement team organizes the documents, financial figures, and final calculations needed to complete the transaction.
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05
SIGNING & CLOSING
Depending on the transaction, closing documents may be signed in person, through a real estate office or law office, remotely where appropriate, through a properly prepared Power of Attorney, or by other coordinated methods depending upon the needs of the parties involved.
Some transactions may also involve newer technologies such as Remote Online Notarization (RON) where legally permitted and operationally appropriate.
It is also increasingly common for sellers to pre-sign certain documents with their attorney and not physically attend closing.
Once all required documents and funds have been received, reviewed, and approved, the transaction is ready for final funding and completion.
IN SIMPLE TERMS
The parties sign the required legal and financial documents necessary to complete the transfer of ownership and financing.
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06
FINAL FUNDING & RECORDING
Once all required documents and funds have been approved, the transaction is finalized and funds are disbursed according to the Settlement Statement.
After final funding, the settlement agent coordinates the official recording of the deed, mortgage, and other required documents with the appropriate governmental office.
Recording establishes the official public record of the ownership transfer and lender rights associated with the property. Once recording is completed, final title insurance policies are generally issued.
IN SIMPLE TERMS
After the transaction is funded and the documents are officially recorded, the transfer of ownership is completed.
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07
FINAL THOUGHTS
While every real estate transaction is unique, the closing process is ultimately designed to help ensure ownership, financing, funds, legal documents, and public records are properly coordinated before property ownership officially changes hands.
Consumers’ Choice Title Group helps coordinate buyers, sellers, lenders, attorneys, and real estate professionals throughout the transaction with a focus on transparency, organization, convenience, and secure transaction coordination.
IN SIMPLE TERMS
A real estate closing is the coordinated legal and financial process of transferring ownership of property from one party to another while ensuring documents, funds, title rights, and lender interests are properly reviewed, balanced, signed, and recorded.