LibGuides: Real Estate Transactions By Gilles Baillargeon: Understanding Real Estate Transactions

What are the Steps for Closing a Real Estate Transaction?

Because the closing process is undoubtedly an essential part of the real estate transaction for all parties involved, it is good to understand each step in the process:

Choose the title company or attorney.
Give the initial deposit, initial deposits are also called "earnest money," to the escrow agent to be retained in the title company escrow account.
Research homeowner’s insurance and find the best price and terms for the coverage you need. The mortgage company will require proof of insurance before closing.
Check with the title company to make sure they are issuing title insurance on the clear title.
Meet the conditions of the mortgage. The mortgage company will give the buyer a list of items that must be completed before they provide the “clear to close”.
Prepare to move. Don’t forget moving day is coming up, hire movers and start packing early.
Review the closing disclosure. A closing disclosure may also be called a HUD-1 settlement statement. The title company sends the disclosure before closing and outlines all the closing costs associated with the home purchase. The final amount due from the buyer must be wired to the title company before closing.
Do the final walk-through of the home. The real estate agent will arrange and accompany the buyer on a walk-through of the house before closing. The walk-through is to verify that all the repairs are done, and the home is in the same condition as it was during the offer period.
Prepare the documents for closing. Photo identification, preferably a driver’s license, proof of the wire transfer to the title company’s escrow agent, and a checkbook will be required for closing.
Get the keys! Closing takes place at the title company’s or attorney’s office. If the buyer is obtaining a mortgage, there is a mountain of paperwork to sign. At least an hour should be allowed for this process. After everything is signed and the title company has received the mortgage company’s funds, they will give the buyer the keys, and the home is officially transferred to the buyer.
Don’t forget if this home purchase is a primary residence, homestead exemption can be claimed on the property taxes in most states. In some states, it is necessary to apply, and some are automatic. This is a significant benefit of homeownership. In a Google search, type homestead exemptions, and your state and you should be directed to the information you need to apply.
Remember that the new mortgage payment is due each month on the 1st of the month. It will take a few months for the mortgage company to send out monthly coupons. It is a good idea to set up an automatic bank withdrawal each month for the mortgage payment. The worst thing that can happen after closing is missing a mortgage payment.

What is the role of a title company?

The role of a title company is to verify that the title to the real estate is legitimately given to the home buyer. Essentially, they make sure that a seller has the rights to sell the property to a buyer.

Once a title insurance company has done its verification, it will back that guarantee with title insurance, which protects the lender and/or owner in the event that someone comes along and makes a claim to the property in the future.

The title insurance company also may be responsible for conducting the closing. It will maintain escrow accounts where your closing costs are kept until the day you close your loan. In some cases, the company that handles closing and the company dealing with title and title insurance will be different.

Understanding Escrow

Escrow is a process used when two parties are in the process of completing a transaction, and there is uncertainty over whether one party or another will be able to fulfill their obligations. Contexts that use escrow include Internet transactions, banking, intellectual property, real estate, mergers and acquisitions, and law, and many more.

Consider a company that is selling goods internationally. That company requires assurance that it will receive payment when the goods reach their destination. The buyer, for their part, is prepared to pay for the goods only if they arrive in good condition. The buyer can place the funds in escrow with an agent with instructions to disburse them to the seller once the goods arrive in a suitable state. This way, both parties are safe, and the transaction can proceed

Deed vs. Title

What is a mortgage?

The term mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and ensure they meet several requirements, including minimum credit scores and down payments. Mortgage applications go through a rigorous underwriting process before they reach the closing phase. Mortgage types vary based on the needs of the borrower, such as conventional and fixed-rate loans.