Closings typically take place in an office environment to allow for all the document signing. You and the seller will be doing all the signing, but other participants on hand may include:
Your real estate attorney
Seller's real estate attorney
Your real estate agent
Seller's real estate agent
Mortgage loan officer
Closing agent--usually the attorney for the buyer or seller.
The closing agent looks over the purchase contract and figures out what payments are owed and by whom; prepares documents for the closing; conducts the closing; makes sure taxes, title searches, real estate commissions and other closing costs are paid; ensures that the buyer's title is recorded; and ensures that the seller is paid.
Electronic fund transfers, fax machines and overnight couriers are making it more and more common to conduct closings from across the state or across the country. In such cases, you might simply go to your real estate attorney's office to sign the paperwork. When the closing agent-keeper of all the documents--receives everything in good order, he or she proclaims the closing official.
Closing is mainly about wrapping up the details of processes that were started many days or weeks before. The ultimate goal is simply a "transfer of title," or transfer of ownership.
Does that mean you simply stand facing the seller while everyone else in the room shouts, "One, two, three--swap!" Well, no. A lot of paperwork needs to be processed simultaneously in order for the lender to give you the loan, the seller to be paid, and you to walk away a homeowner.
As you're wading through a seemingly endless pile of paperwork, it's impossible to read every word of everything you're signing. If you tried, your closing would take a week! That's why you need the peace of mind a real estate attorney brings to closing day. He or she knows what it all means--and what it all means to you.
Squaring the deal.
Before the title actually changes hands, though, there is some financial housekeeping to make things fair between you and the seller. This involves all the miscellaneous, ongoing expenses of homeownership:
Fire district taxes
Common expense assessments (for condominiums or homeowners associations)
Some of the above expenses are paid in advance, so you'll have to compensate the seller for the items that have been prepaid and extend into your ownership. These expenses are generally prorated up to the day of closing. Your real estate attorney can determine the value of these expense adjustments for you before closing, so that you can be sure the deal is fair and there won't be any unpleasant surprises on the big day.
Sign here, please.
Among the many documents you'll be signing at closing are:
Mortgage note. The promissory note that's secured by a mortgage; it's your personal promise to pay back the loan.
Mortgage. Similar to the "trust deed" or "deed of trust" used in other states, mortgage in this sense refers to the document that places a claim on property held by the lender as a security for the money borrowed.
Closing statement. Also called "HUD-1 settlement statement," this is a full list of all the costs involved in the closing, from your earnest money and the expense adjustments (see above) to the closing costs, real estate agent's commission and the exact amount of the loan and the amount due to the seller.
Buyer's funding check. The funding check from your lender may be payable to you or jointly to you and the closing agent; you'll have to endorse it over to the closing agent.
Miscellaneous. You'll sign a variety of other forms required by the lender, such as documents making you promise that you've been honest with the lender about your financial status, that the home will be used for your primary residence, etc.
If it all seems overwhelming, fear not. Bringing in a real estate attorney early in the home-buying process helps ensure a smooth closing day. Without an attorney involved before the contract is signed, here are some things you might face:
Unnecessary taxes or expenses because contract terms weren't negotiated in your favor
Title (ownership) taken in a way that is inconsistent with your needs or your future plans for the property, such as building a pool or storing a boat in your driveway
A purchase contract that is not enforceable, complete or consistent with what you originally intended
A discovery at post-closing that the seller borrowed money against the property hours before closing