The Closing Process: 3 Ways to Avoid Common Pitfalls

Closing a home is the final step in the home buying process. It’s the meeting where all parties involved in the transaction come together to sign the necessary paperwork and transfer ownership of the property from the seller to the buyer. Here is everything you need to know about the closing process.

What to Expect When You’re Closing on a Home

Before you can experience the magic of holding the keys to your new home, it’s essential to go through five crucial steps in the closing process.

Final Walkthrough

Before the closing, the buyer will typically do a final walkthrough of the property to ensure it’s in the same condition as when they agreed to purchase it.

Settlement Statement Review

The settlement statement, also known as the closing disclosure, outlines all of the costs associated with the transaction, including closing costs, lender fees, and any prorated property taxes or utility bills. The buyer and seller will review and sign this document.

Sign the Paperwork

The buyer and seller will sign all of the necessary paperwork, including the deed and mortgage documents.

Payment

The buyer will provide the funds for the purchase price and closing costs, which are typically paid by certified check or wire transfer.

Recording

The deed and mortgage documents are recorded with the local government office, officially transferring ownership of the property to the buyer.

Key Exchange

Once the recording is complete, the buyer will receive the keys to their new home.

The closing process can vary depending on the location and specific circumstances of the transaction. It’s important for buyers and sellers to work with a trusted real estate agent to ensure everything goes smoothly.

Prepare Your Budget for Closing Costs

As a homebuyer, it’s crucial to be prepared for the expenses that come with purchasing a property. Unfortunately, some buyers are caught off guard by the closing costs, which could put a dent in their budget. According to a recent survey, 41% of homebuyers were surprised by the number of closing costs they had to pay. To avoid being one of them, here’s what you need to know about closing costs.

Understanding Closing Costs

If you’re not familiar with the term, closing costs are the fees and charges you have to pay during the home-buying process in addition to the purchase price. These fees cover various expenses, such as lender fees, title insurance, government processing fees, upfront tax payments, and homeowner’s insurance.

Common Closing Costs

While closing costs may vary depending on your situation, here are some of the common fees you can expect to pay.

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  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

How Much Do You Need to Budget for Closing Costs?

Typically, closing costs range from 2% to 5% of the total purchase price of your home. For instance, if you’re buying a home with a median price of $350,300, your closing fees could be anywhere between $7,000 and $17,500.

Knowing how much you need to save for closing costs is crucial to achieving your home-buying goals. To have a better idea of what you need to save, you can work with a trusted real estate professional who can provide you with an estimate of your closing costs based on your specific situation.

Closing Time

It’s best to know all the costs involved in buying a home, from your down payment to the closing costs. By doing so, you’ll be able to budget accordingly and avoid any surprises when it’s time to close. Additionally, working with a team of trusted real estate professionals, including an agent and a lender, can help you prepare and provide you with the necessary information and guidance to confidently navigate the closing process.

A real estate agent can help you avoid scams during the home-buying process.

Verification of Sellers and Properties

Real estate agents can verify the identity of sellers and the ownership of properties to ensure that you are dealing with legitimate parties. They can also check if there are any liens, judgments, or other legal issues associated with the property.

Market Knowledge

Real estate agents have extensive knowledge of the local real estate market, including pricing, property values, and neighborhoods. They can help you identify potential scams or fraudulent listings by providing you with valuable market insights.

Referral to Trusted Professionals

Real estate agents work with a network of trusted professionals, such as attorneys, inspectors, and lenders. They can refer you to these professionals to ensure that you are working with reputable and trustworthy individuals throughout the home-buying process.

Assistance with Contracts and Paperwork

Real estate agents can review contracts and paperwork with you to ensure that you understand the terms and conditions of the transaction. They can also help you identify any red flags or suspicious clauses in the documents.

Communication with Listing Agents

Real estate agents can communicate with the listing agents to obtain additional information about the property and the sellers. They can also negotiate on your behalf to ensure that you get the best possible deal without falling victim to any scams or frauds.

Remote Closing

Remote closing, also known as virtual closing or e-closing, is a process of closing a real estate transaction remotely using technology, such as video conferencing, email, and electronic signatures. It allows buyers and sellers to complete the closing process without physically meeting at a title company or attorney’s office.

To ensure the safety and security of remote closings, several precautions are taken. Firstly, a secure video conferencing platform is used for the virtual closing, and all parties involved must verify their identity before joining the conference. Secondly, all documents are shared and signed electronically through a secure portal, and a digital notary is used to notarize the documents.

During the virtual closing, the parties will review and sign all necessary documents, including the loan documents, closing disclosure, and title transfer documents. The notary will confirm the identity of the signatories and ensure that all signatures are valid. Once all documents are signed and notarized, the closing agent will disburse the funds, and the transaction will be recorded with the appropriate government agencies.

Overall, remote closings offer a safe and convenient option for buyers and sellers during the home-buying process. Your real estate agent can assist you in finding a reputable title company or attorney that offers remote closing services and guide you through the closing process.

A real estate agent can provide you with invaluable assistance throughout the home-buying process to ensure that you avoid scams and fraud and make a successful purchase. When preparing to purchase a home, it’s crucial to be aware of the closing costs and budget accordingly. By working with the right professionals, you can be confident and prepared at closing time.

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