Closing Time: Step-by-Step Walkthrough of the Closing Process
Buying a home is a major investment that requires careful planning, research, and attention to detail. One of the most crucial steps in the home-buying process is closing. Closing is the final stage of the home buying process where the sale of the property is completed, and ownership is transferred from the seller to the buyer. This process can be complex and overwhelming, but following the right steps can make it much easier.
"Each transaction is different," he says. "But in every transaction, there are several contingencies in place that are fairly common."
Here are the different steps buyers and sellers typically take to complete the closing process.
Review the Closing Disclosure
When you are buying a property, you may be required to deposit earnest money into an escrow account as part of the purchase process. This money serves as a good-faith deposit and shows the seller that you are serious about buying the property. The amount of earnest money required is typically a percentage of the purchase price and is agreed upon in the purchase contract.
Once you have made the deposit, the money is held in an escrow account by a neutral third party, usually a title company or an attorney. The purpose of the escrow account is to protect both the buyer and the seller by ensuring that the funds are securely held until the terms of the purchase agreement are met.
The escrow agent will typically provide you with a receipt or confirmation of the deposit, and you should keep this for your records. The funds will remain in escrow until the closing date when the sale is finalized, and the funds are released to the appropriate parties.
If the sale falls through for any reason, the earnest money may be refunded to you or forfeited to the seller, depending on the terms of the purchase agreement. It's important to carefully read and understand the terms of the purchase contract before making an earnest money deposit to avoid any surprises or misunderstandings.
Conduct a Home Inspection
The home inspection process involves a thorough examination of a property by a qualified home inspector to assess its condition and identify any potential problems or issues.
The inspection typically takes several hours to complete and covers the major components of the property, including the roof, exterior, foundation, plumbing, electrical, heating and cooling systems, and appliances. The inspector will also look for evidence of pests, water damage, and other issues that could impact the property's value or safety.
After the inspection is complete, the inspector will provide a detailed report outlining their findings, including any defects or areas of concern. This report is usually shared with the buyer and their agent, who can use the information to negotiate repairs or adjustments to the purchase price.
It's important to note that a home inspection is not a pass/fail test, and there is no such thing as a perfect home. Instead, it's an opportunity for the buyer to gain a better understanding of the property's condition and make an informed decision about whether to move forward with the purchase.
In some cases, the inspection may uncover serious problems that could make the property uninhabitable or unaffordable to repair. In these cases, the buyer may choose to back out of the deal or negotiate a lower purchase price.
Have a Final Appraisal
The purpose of the final appraisal is to determine the current market value of the property and ensure that the agreed-upon purchase price is reasonable and reflects the property's actual value.
The final appraisal is typically conducted by a professional appraiser who is licensed and trained to assess the value of the real estate. The appraiser will typically visit the property and perform a thorough inspection, taking into account factors such as the property's location, size, condition, and amenities, as well as recent sales of similar properties in the area.
Once the appraisal is complete, the appraiser will provide a written report outlining their findings and their assessment of the property's current market value. This report will be used by the lender to determine whether the agreed-upon purchase price is reasonable and whether they are willing to provide the necessary financing for the sale.
If the appraisal comes back lower than the agreed-upon purchase price, the buyer and seller may need to renegotiate the terms of the sale. This could involve the seller lowering the price, the buyer increasing their down payment or some other type of compromise.
In some cases, the appraisal may also identify issues with the property that could impact its value, such as a defect in the foundation or a major repair that is needed. In these cases, the buyer may choose to back out of the deal or negotiate with the seller to address the issue before moving forward with the sale.
Conduct a Final Walkthrough
The final walkthrough is an important step in the home-buying process that typically occurs a few days before the closing date. Its purpose is to allow the buyer to do a final inspection of the property to ensure that everything is in order and that any agreed-upon repairs have been completed.
During the final walkthrough, the buyer and their agent will typically visit the property to check for any new issues that may have arisen since the home inspection and to verify that any repairs or agreed-upon changes have been made. The buyer should also confirm that all of the appliances, fixtures, and other items that are included in the sale are still present and in good working order.
If the buyer identifies any new issues during the final walkthrough, they may need to negotiate with the seller to address them before the closing date. This could involve the seller making additional repairs or adjustments to the sale price to compensate for the issue.
It's important to note that the final walkthrough is not the time to renegotiate the terms of the sale or to raise new issues that were not previously disclosed. The purpose is to ensure that the property is in the same condition as it was at the time the purchase agreement was signed and that any agreed-upon repairs have been completed.
Get the Keys
After all documents are signed and closing costs are paid, the seller will provide you with the keys to your new home. Congratulations, you are officially a homeowner!
Closing on a home is an important step in the home-buying process, and it requires careful attention to detail. By following these steps, you'll be prepared for the closing process and have a better understanding of what to expect. Remember, buying a home is an exciting milestone, and closing day is just the beginning of your new journey.