What Are the Steps and Documents Involved in a Real Estate Closing Process?
July 15, 2023Real estate transactions take weeks before everything is ready for closing. On average, reviews and negotiations take between 30 and 45 days, but the process can span months under specific circumstances.
You have to complete many steps before reaching its final stages, and it's probably not surprising to learn that there's a lot of paperwork involved. A real estate transfer requires the evaluation of years' worth of documents (property titles, contracts, tax returns, etc.) before putting even more documents on the record. There's really no way to speedrun through the process if you want to avoid legal conflicts or a sudden claim on your property.
Still, you can make early preparations and have everything ready beforehand. At the very least, having this information will save you some stress during the negotiations, and you'll know what to expect from the real estate agents and representatives on your side.
The Real Estate ProcessThe start of the process can take a particular shape from where you're standing. For sellers, the process begins with the preparations before listing the property on the market. This usually entails calculating the price range for the sale, making specific repairs/renovations, and crafting a schedule for future showings. Most sellers will already have secured the assistance of a real estate agent by this point, so they've already started the process even when there's still no ongoing transaction with a buyer.
For buyers, the process begins soon after finding a property they're interested in buying. More specifically, when they present their purchase offer to the seller. Once the seller responds, both parties can begin the negotiations and work on an agreement.
From here, the real estate transaction moves along the following steps:
- Opening an escrow account once the initial signatures are collected. In most cases, real estate agents are in charge of opening, monitoring, and managing the account until the closing date. It's common practice for buyers to make an earnest deposit after their offer has been accepted. This will be followed by periodic deposits to the down payment under an agreed-upon schedule. Depending on the method of payment, the agent managing the account will have access to the buyer's personal and financial information. The credibility of a renowned escrow company can do a lot for your peace of mind throughout this process.
- Home inspections to ensure that the property is in good condition. Real estate agents can take note of specific issues and suggest repairs as needed. They can also help communication if there are last-minute changes to the schedule. The first inspection takes place before reviewing most of the records, but more appointments can follow along the way.
Many lenders in Florida and other parts of the country also require a home appraisal to confirm the property's market value.
- Conducting a title search to verify the seller's ownership of the property. Title searches also help reveal potential liens, pending debts, third-party entities with ownership rights, and inaccuracies that could put the whole process into question even after closing.
Other relevant documents are also reviewed and compared to catch potential discrepancies. According to Investopedia, local records will hold documents related to mortgages, deeds, easements, foreclosures, estoppels, leases, licenses, and fees, all of which are relevant during the title search.
- Issuing an insurance policy to protect new owners from the problems mentioned above. A title and escrow company will have advanced resources to leave no stone unturned during the title search, but the right coverage provides long-term protection to avoid the financial losses of a sudden legal process.
- During the last stretch of the process, preparations are done for settlement. Real estate agents procure a notary authorized signature for the documents that call for it and check all the party's compliance to go on with the property transfer according to state laws. They will also oversee the progress of any pending repairs so that all conditions are met before the deadline.
- During the closing, the title and escrow company records the transaction and finalizes the transfer under the new owner's name. This is done after the final deposit has been transferred and all parties have signed the purchase contract.
Preparing for a Real Estate Closing?We've gone over some of the records involved while going over each stage of the process. Now, let's take a closer look at the documents you need to draft or review while preparing for closing.
- Buyer's offer: A purchase offer works as a statement to show the buyer's interest in acquiring a property. It lists a proposed price, along with the buyer's preferences and requirements for the seller to analyze, often leading to one-on-one negotiations. Real estate agents help draft a purchase offer to grab the seller's attention with an appealing deal and flexible terms.
- Purchase agreement:The purchase agreement defines the main steps in the real estate transaction, like the purchase price, home inspection schedule, and closing date. By signing this agreement, all parties agree to fulfill the stipulated conditions before the transfer and commit to follow the process to its completion.
- Seller disclosure: It displays problems with the property, like cracks, leaks, faults in the electric/plumbing system, roof/foundation damage, areas vulnerable to mold and pest infestations, etc. This list should be as detailed as possible, so owners can protect their investment in case an old problem compromises the property's safety and value after the purchase.
- Title insurance:In general terms, insurance coverage protects the owner's right to use and occupy a property in any way they want within the local/building regulations. In practice, the right insurance policy provides financial protection from the legal effects of a faulty title. A title insurance policy is the main line of defense when dealing with hidden liens, fraudulent signatures on documents, or encumbrances (third-party claims over the property) that could otherwise hinder your rights as an owner.
- Home inspection reports:As the name suggests, this report describes the results of the property inspection, giving an overview of its condition. It also lists potential issues that need attention, so real estate agents can track the progress of the repairs during the home appraisal and before settlement.
- Closing statement: Bankrate defines a closing statement as an itemized list of all the buying or selling costs associated with that transaction. It displays all the money that has been transferred as down payment, along with any additional credits, charges, and fees. Through this detailed record, buyers and sellers can revise the financial transactions that need to be completed before the title transfer.
- Property deed: It's the document that all new owners receive at the end of the transaction. It conveys their status as property owners and carries both the buyer's and seller's signature.
It might look like a lot, especially for those starting their first real estate process. The good news is that escrow companies, real estate lawyers, and other professional services are there to streamline the process. They are adept at finding gaps in public records, have an intimate understanding of the law, and know how to adapt the process to the local real estate conventions.
If you want to purchase a new property in South Florida, Key Title & Escrow can help you keep all your paperwork in order. We review all relevant documents and provide the most effective approach to resolve issues like hidden liens, undisclosed heirs, and inaccurate information. Likewise, we can help sellers with the best insurance and notary services. You don't have to split your time between different tasks and real estate companies, Key Title & Escrow provides the best services by the hands of well-rounded industry professionals. Just call (305) 235-4571 or toll-free at (800) 547-0006, and we'll answer all your questions. You can also expect a prompt response after filling out the contact form on this page.
Whether you want to buy your dream house, start a new business venture, refinance a property, or take your realtor services to the next level, Key Title & Escrow has what you need to simplify your real estate transaction.