Buying a house – what your closing will involve
A closing (also sometimes called a “settlement”) is a meeting or a nearly simultaneous series of events during which you pay the seller and the seller transfers ownership rights to you. All of this will be orchestrated by your closing agent or, in some states, your respective attorneys.
The closing can’t happen until both you and the seller have either met or renegotiated all the terms of your purchase agreement. The two of you have, no doubt, been working hard to bring this about for weeks, by having inspections and repairs done, arranging for financing, and removing other contingencies. But during that time, you were still hanging onto your purchase money, and the seller still owned the house. The closing was created so that each of you could feel safe handing over what you own to the other.
Of course, if you’re not paying in cash, your lender actually holds much of the money for this transaction. The lender will be doing some last-minute investigating behind the scenes—don’t be surprised if your employer gets a call on closing day to make sure you still work there! When the lender decides that all is clear, you’ll be able (as part of the closing “ceremony”) to sign off on your loan and transfer your down payment to the seller. Your lender will then pay the seller the bulk of the purchase price (like you, using the closing agent as intermediary).
But enough generalities: What about your closing? The biggest logistical questions in the days leading up to it are:
• When will it be?
• Where will it be?
• Who will attend?
When. The exact date of your closing, or an approximate date, should have been specified in your purchase agreement. If the date wasn’t made absolutely clear, your closing agent will help you and the seller decide when you’ll all be ready.
Don’t schedule your closing on a weekend. Marge and her husband Theo lived a long way from their escrow agent’s office, so, as Marge explains, “We thought we were lucky when the escrow officer volunteered to come in on a Saturday. But then she got really annoyed when we wanted to read everything (our agent hadn’t given us drafts) and when a complication arose with our loan. Our mortgage broker wasn’t available by phone, and it took three hours to sort everything out. By the end, we were all exhausted. Theo and I had to force ourselves to go out and celebrate afterwards, but I’m glad we did.”
Where. The meeting will most likely take place at the office of either your escrow officer or attorney, the registry of deeds, your builder’s sales office, or (in rare cases) your lender. The choice of location depends on local custom.
Who. Of course you’ll be there, preferably well-rested and fresh, along with any cobuyers. Don’t bring children! A closing is a serious, sometimes intense experience demanding your full attention. Hire a babysitter (for double the time you think it will take), and give yourself plenty of time for the meeting (and maybe an adult-only celebratory meal afterwards).
What if an emergency comes up and you or a cobuyer can’t be at the closing? One possibility is to arrange to sign everything a few days beforehand, for example, if you’ll be traveling. Another is to prepare a document called a “power of attorney” giving signing power to a trusted friend, relative, or lawyer. The power of attorney should include an expiration date—perhaps a few days after the closing. Check with your attorney or closing agent for details of how the power of attorney needs to be formatted and possibly recorded with a government office.
Your real estate agent should definitely be at the closing, offering support and carrying a packet of documents in case anyone forgot anything. You might also be accompanied by your mortgage broker and your attorney, if you have one. If you haven’t used an attorney up to now, but are worried about any last-minute issues or complications—for example, if a recently completed survey reveals that the house’s garage is over the neighbor’s property line—you can hire one before the closing.
Save on attorney fees. Attorney Fred Steingold notes, “Bringing an attorney to the actual closing can get expensive if the attorney’s time is mostly spent watching people sign papers. Often, a good middle course is for the attorney to receive the key documents for review the day before the closing—which is probably the earliest they’ll be ready—and to report any findings to the buyer by phone. The attorney may also agree to be reachable by phone if a problem comes up at the closing table.”
Have my lawyer there on closing day. Mackenzie and her husband Don had agreed to buy a fixer-upper within walking distance of their jobs on the University of Michigan campus. “But,” says Mackenzie, “We had a feeling our seller wasn’t the most scrupulous character. He’d been renting out even the damp, gross basement spaces to students, and the place was a total wreck. Our suspicions were confirmed on closing day, when our lawyer discovered an outstanding water bill of some $800. The seller tried first to pretend that he’d paid it (he hadn’t), then to argue that it wasn’t up to him to pay it! It was quite a scene. But our lawyer eventually helped make him understand that he had to pay it in order to transfer the deed.”
Unless you’re meeting at the lender’s office, the lender won’t normally send a representative, but will send the documents straight to the closing agent. If questions come up, your mortgage broker will normally contact the lender. The lender feels safe doing this because it knows the closing agent won’t actually finalize the transfer (by recording the deed) until the lender gives its final okay, even if that’s after you’ve all gone home.
Who will answer last questions about your loan? Many buyers develop new questions on closing day when all the documents are in front of them, such as why the lender is charging certain fees. Closing agents can’t answer these. Make sure that your mortgage broker or, if you have none, your lender, will either be represented at the closing or give you a direct-line phone number and a promise to be available on closing day.
Another person who may be in the room is a notary public, charged with the brief but all-important task of making sure that you and anyone else signing documents are, in fact, who you say you are (they’ll check your photo ID) and stamping the documents to confirm this.
Whether the seller and the seller’s agent or attorney will come to the same meeting as you also depends on local custom. They may handle their end of things separately—the seller has far fewer documents to sign. And signing documents—anywhere between ten and 75 of them—will, in fact, be your main task at the closing.
Differences with co-op closings. Co-op buyers normally meet at the co-op attorney’s office, and a representative of the seller’s bank or lender will be there (to bring the stock certificate proving the seller’s ownership of the co-op, which they’ve been holding as security for their loan—and must destroy before you get a new certificate). Other folks in attendance will include an attorney or other representative of the co-op, the attorneys and real estate agents for both sides, a representative of your bank or lender, probably a paralegal who brings the checks, and the seller. Instead of recording a deed, your lender’s attorney might record a UCC-1 financing statement to publicly show its lien on your co-op shares.