Pro Tips for Closing on a Home
You’ve put in the work, found a good real estate agent and attended or hosted showing after showing, until finally finding the perfect house or perfect buyer. House-hunting and house-selling can often feel like climbing a mountain, with so many crucial steps required before reaching the summit. But before you can exchange keys, there is one final step: closing on the house. Closing is a detailed, weeks-long process that requires buyers and sellers to complete numerous tasks before they can seal the deal. Here are some pro tips for buyers and sellers to help facilitate a smooth, stress-free closing.
PRO TIPS FOR BUYERS
1. Meet all contingency requirements before closing day. Most purchase agreements contain contingencies that buyers must meet to make the contract binding. These include:
- Home inspection, which gives buyers the right to have the condition of the home professionally inspected;
- Appraisal, which (in non-cash sales) allows a third party hired by your mortgage lender to evaluate the fair market value of the home, as compared to the sale price;
- Financing, which gives you the right to back out of the transaction without penalty and with a refund of the earnest money deposit, if your mortgage approval falls through (according to the time period specified in your contract); and
- Sale of the buyer’s home, which gives the buyer the right to terminate the contract if their home does not sell by a certain date.
2. Have settlement funds ready before closing day. Whether you intend to wire funds or pay with a certified check, don’t wait until closing day to make arrangements. Some banks require an appointment to wire funds, so contact your bank ahead of time to find out their hours and procedures.
3. Carefully review wiring instructions and be wary of any last-minute changes. Fraudsters are increasingly using email, text and phone calls to trick buyers into wiring funds to the wrong bank account. Keep the names and phone numbers of your closing agent and lender handy and always verify wiring instructions before transferring funds.
4. Be available and prompt with communication. Be prepared to provide and sign a lot of paperwork. Some documents can be signed online, while others may need to be signed in-person in the presence of a notary. Prepare yourself and your work schedule accordingly, so you can respond promptly. Remember that it takes a team to close, and that good communication between the buyer, real estate agent, lender and closing agent is vital for a smooth closing. If you have any out-of-town obligations or trips within the last two weeks of closing, be sure to tell your real estate agent and closing agent.
5. Be flexible. Every transaction is different. Expect the unexpected and remember that everyone involved in the closing process is working hard to close your transaction.
6. Bring all closing-related documents to closing, including, but not limited to:
- A valid, government-issued photo ID
- Proof of homeowners insurance
- Copy of the executed sales contract
- Home inspection reports
- Any loan approval documents from the bank
- Any other relevant documentation (e.g., separation agreements, divorce papers, living trust documents, etc.)
7. Be prepared for final fees. At closing, buyers sign several legal documents and are generally required to pay closing costs for things such as their application, loan origination, mortgage brokerage, title search, title insurance, appraisal and property tax. Most of these are one-time fees and vary from state to state. Recent industry studies have revealed that 50 percent of buyers were “surprised” by how much they were charged at closing.
8. Review documents carefully. You can do your due diligence by reviewing your Closing Disclosure (CD) prior to closing day, which includes pertinent details of your loan and estimated monthly mortgage payment. Your lender is required to provide you with your CD three business days in advance of the closing date, and the Consumer Financial Protection Bureau provides a convenient checklist to guide you. A few baseline items to confirm include:
- The correct spelling of your name
- Correct address and contact information
- The interest rate
- The loan amount, type and terms
- Information related to any seller concessions, warranties and fee coverage
During the closing process, you will also receive both an Estimated Settlement Statement and Final Settlement Statement from your closing agent. It is important to review them for accuracy and immediately alert your closing agent if you find any discrepancies.
9. Ask your closing agent when the sale will be final. What signals the end of your transaction can vary from state to state. In some instances, it’s when you sign final documents and money is disbursed. In others, it’s when the county recorder enters the documents into the public record. You do not want to open credit lines, make any other major purchases or change jobs until after the transaction is officially closed. Doing so could impact any last-minute credit checks or verification of job status, which could jeopardize the sale.
10. Do a final walk-through of the property, confirming that the repairs you requested from the seller have been made. Be sure to test appliances, the HVAC system, hot water heater and electronics, and check the yard for any major changes or items the previous owners left behind. If there’s an issue, be sure to let your real estate agent know as soon as possible.
11. Stay calm and take time to celebrate! It’s normal to feel nervous when the reality of becoming responsible for a mortgage sinks in. Think of your purchase as an investment in real estate, rather than a depletion of your savings. You’ve worked long and hard to get here, so take a moment to celebrate this exciting milestone.
PRO TIPS FOR SELLERS
1. Gather your documents to bring to closing:
- A valid, government-issued photo ID
- Any unanswered questions regarding the Settlement Statement
- The key(s) to the home to give to the closing attorney or your real estate agent, if applicable in your state
- Any final utility bills to be paid or collected
- Wiring instructions for your seller proceeds
2. Notify all important parties that you’re moving. That includes your bank, doctor’s office, children’s school and phone company, as well as family and friends. And don’t forget to file a change-of-address through the post office!
3. Cancel any insurance or utilities that no longer apply to your home.
4. Be considerate and gracious to the new owners:
- Hire a professional housecleaner to give the house a deep clean.
- Don’t leave unwanted belongings behind.
- Gather all keys, remotes and access codes in one place for the new owners, as well warranties and manuals for appliances, security systems, etc.
- Turn off the lights and water, unplug appliances, close the curtains and lock all the windows and doors.
5. Do a final walk-through to ensure the house is presentable and that all requests from the buyers have been met.
Closing on a home is the final step for a major life transition, and all parties involved should feel confident and prepared for the final details.