Real Estate FAQ Part 2 - The Closing

What Happens at the Closing

The simple answer is that the Purchaser gives money to the Seller and the Seller gives a Deed to the Purchaser.

Of course there is a little more detail than that, so here goes.

Let’s start with who will be there.

1.       Seller and his/her/their attorney

2.       Purchaser and his/her/their attorney

3.       The Title Closer

4.       The Lender’s attorney

5.       Real Estate Brokers

6.       Representative from the Mortgage Broker

There are a few exceptions to this rule.  Sometimes the Seller can’t be there and his/her attorney is there on their behalf with a Power of Attorney.

It is possible there is no lender.

The Real Estate Brokers may not be there, but they usually are so that they can pick up their commission checks.

The Mortgage Broker may not be there.

Where will the Closing take place?

If there is a lender involved then the closing will most likely be at the office of the lender’s attorney since they have the money.

If there is no lender, most likely at the office of the Seller’s attorney.

But, it can be anywhere that is convenient for all parties.

How long will it take?

That is impossible to say.  I’ve never had a closing take less that one hour.  If there is no lender then the process is much quicker.  If there is a lender, the average is about two hours, but I’ve had them take three or four.

Why so long with a lender?

If there is a lender involved, the Purchasers have to sign all the mortgage documents and that is often a stack 2 – 3 inches high.  Their attorney will review each document and explain to the Purchasers and they will sign.  It can take a while.

Then once the papers are signed, the lender’s attorney must send some of them by fax or email back to the lender for approval.  So everyone has to wait.  Once the approval comes, the lender will send the money to the lender’s attorney’s bank account by wire transfer.  So everyone has to wait.  Once the funds are in the account, the lender’s attorney writes the checks, and if some need to be certified or bank checks, someone has to take then to the bank get them.  So everyone has to wait.  Finally they lender’s attorney can hand out the checks and the closing will be complete.

So what actually happens?

The quarterback of the closing is the title closer.  He or she will be responsible for making sure the deed is correct, filing the deed, mortgage, and transfer tax forms, paying off the Seller’s mortgage and issuing the title insurance policy.  They also act as Notary Public for the closing.

The Seller’s attorney will have prepared the deed and other transfer documents in advance and circulated them among the title company and other attorneys.  The Seller will sign the deed and transfer documents and they will be passed on to the title closer for approval.

Meanwhile the Purchasers are busy signing all their loan/mortgage documents.  The ones that need a Notary go to the title closer, then all go to the lender’s attorney.  The Purchaser’s attorney will be explaining all this paper to the Purchasers and making sure they sign in all the right places.

The Purchaser and Seller’s attorneys will discuss any other issues that may have arisen, like adjustments of property taxes, fuel oil and so on.  Any issues that may have arisen during the walk through, like damage or broken appliances or a mess left behind.  They will come to an agreement with their clients and discuss the final numbers for the closing.  Generally they will have worked this out in advance and there shouldn’t be any changes.

The lender’s attorney has been reviewing the loan documents and sent them off to the bank for approval, gotten approval and received the wired funds and cut the checks and gotten them certified.

The Sellers hand over the keys and garage door openers.

The lender’s attorney hands out checks to the Sellers, the title closer, and the real estate brokers.  If the Purchasers have brought additional funds, they hand that over to the Seller and the title closer gives the Purchaser a copy of the deed.  The original deed will be filed with the county clerk and returned to the Purchaser’s attorney.  The title closer will give the Purchaser’s attorney the title insurance policy.

Everyone shakes hands and the Closing is complete.

Real Estate FAQ Part 1

What follows are some of the more common questions we encounter in a residential real estate transaction. Whether you are buying or selling, these questions come up all the time. Remember, real property law is unique to each state and while the law is the same within a state, customs will differ in different regions of a state. The following answers apply to New York State and Long Island and New York City in particular.

Q. When will my closing take place?

A. The contract of sale you entered into generally has a closing date written in, but that is known as an “on or about date”. It is when the parties hope to get the closing done, but is not written in stone. Variables such as attorney and bank schedules, schedules of the parties, the time it take for the lender to be ready, moving truck availability and so on, all contribute to the uncertainty. As a general unwritten rule either party can postpone the closing date for 30 days without penalty. The courts have used the term “reasonable time”, most attorneys consider that to be 30 days, but there are plenty of situations where it could be much less. Once everyone is ready, the attorneys for the buyer, seller and lender will try to find a time when everyone can get together for the closing. They will set a date and time, usually 2 to 7 days in advance, so you may not have much notice.

Q. Do I need to be out of my house when the closing takes place?

A. As a general rule, yes. You are selling your house. As of the closing it is no longer yours, it belongs to the buyer and he/she expects to have a clean, empty house to move into. If this is a real problem for you, it is more and more common for sellers to stay in the house for up to 5 to 7 days after the closing to move out or complete the closing on the house they are buying. You will need to leave a deposit in escrow to guarantee that you will get out and cover any damage. You will be expected to pay the new owners carrying costs, i.e. their per diem mortgage interest, which can be in the $50 to $200 per day range, depending on the size of their loan and interest rate. Attorneys don’t like this, it makes them nervous to have things unsettled and we would generally prefer to postpone the closing for a few days.

Q. What is title insurance and do I need it?

A. Title insurance is insurance you buy when you purchase real property. It is a onetime payment and is good for as long as you own the property. How do you know the person selling you the property actually owns the property and has the legal right to sell it to you? How do you know there isn’t a mortgage on the property from the seller, or a judgment or lien against the seller that gives someone else rights to the property. You don’t want to buy a house and a few years later have a bank foreclosing on your property for a loan the seller didn’t pay. The title insurance company will research all the public records and provide you with insurance that the title is clean. If some question comes up down the road, the title company will cover it, up to the value of the house as of the day you purchased it (or current value if you choose the extra coverage). All attorneys will tell you to get “fee insurance”, coverage for your ownership interest. All lenders will require you also get “mortgage insurance”, separate coverage for the lender’s interest in the property. So yes, you need title insurance.