I Signed the Contract. Now What?

    by Tara Riley

    After the contract has been signed, buyers and sellers enter into the closing process to finalize the transfer of title and sale of the home. During the closing process, realtors, lenders and closing agents work closely together with the buyer and seller to consummate the transaction.

    Buyers typically purchase homes in one of two ways: financed purchase or a cash purchase. With a cash purchase, the buyer will simply be required to signed a few closing documents and provide the closing agent with funds on or before the closing date. In a financed transaction, the Buyer will be required to apply for the loan with a lender of their choice and then sign the standard closing documents and as well as those documents provided by the lender.

    From the time the contract is signed, a typical closing will occur within 30 to 45 days. If the Buyer is purchasing the property using cash this time period maybe shortened. On the other hand, if the buyer is obtaining a loan, the time period may be extended if the lender cannot secure a clear to close within that time frame.

    Selecting a Closing Agent

    Based on the terms of the contract, either the buyer or the seller will have the ability to chose a closing agent. Closing typically occurs with a title company with licensed title agents or in a law firm by attorneys who specialize in real estate. Whoever is selected will prepare the closing documents and handle the transfer of funds from one party to another as needed to finalize the transaction.

    Once the Buyer or Seller has selected the closing agent, the realtor will provide the agent with the contract and the closing process will begin by ordering a title search of the property.

    Title Search

    With every closing, a title search of the property will be conducted or ordered from a third party. This search tells all parties involved in the transaction several things:

    • Who is the rightful and actual owner of the property – the lender and closing agent want to be sure that the person representing themselves as the seller is the actual person on title
    • What encumbrances are affecting title – this includes tax liens for unpaid taxes or creditor liens which have attached to the property in attempt to collect debt as well existing mortgages
    on the property

    • If there is a homeowners association in connection with the property – the closing agent then communicates with the HOA to determine that dues have been paid and what dues will be required
    from the Buyer in the future

    After the title search has been conducted, the closing agent works to resolve any and all title issues. All issues must be resolved before closing can occur. If any issues cannot be resolved, the Buyer and/or Lender will be unable to obtain title insurance on the property.

    Title Insurance

    There are two types of title insurance:
    • A lender’s policy – The lender’s policy protects the lender in the event that a flaw in the title is detected after the property has been bought. The lender’s policy does not protect the
    buyer/new owner – for protection, the buyer must obtain an owner’s policy. Each lender requires a lender’s policy be issued but does not necessarily require that the Buyer obtain an owner’s

    • An owner’s policy – The owner’s policy protects you, the buyer/new owner. This title insurance is available to all buyers and protects the buyer/new owner for as long as they own the property and up to the full amount of the purchase price.

    Typically, the seller may pays the cost of the owner’s policy and the buyer pays for the lender’s policy. However, this is negotiable within the sales contract so it is important to discuss with your realtor who is paying for the title insurance at the time of executing the contract.

    Further, in Florida, the lender’s policy is discounted to $25 if it is issued simultaneously with the owner’s policy. Sellers can also receive a discount on title
    insurance by providing their previously issued owners policy.

    Setting the Closing Date

    Once all title issues have been resolved, the file is ready to close. If the buyer has chosen to seek financing, Lenders will supply their closing documents to the closing agent. The parties will then set a date to sign all necessary documents and transfer appropriate funds. Typically, closing agents require all buyers’ funds to be sent via wire on or before the day of closing.

    Following the signing of the closing documents, the settlement agent will finalize the transaction by disbursing the necessary funds to each appropriate party as disclosed on the Settlement Statement. The closing agent then records the Deed and the title transfer becomes public record.

    What the Buyer Should Bring to Closing

    • A cashier’s check or proof of wire transfer for the exact amount of money you need to close.
    • Your driver’s license or another form of Photo ID (i.e. passport).
    • Your Closing Disclosure – This is provided by your Lender prior to closing and discloses all costs and total cash to close. You’ll want to compare it to the final documents one more time.
    • A trusted friend, advisor, or lawyer, if you want an advocate at the table. — If you worked with a Realtor, they typically are present at closing and serve in a similar capacity.
    • Your co-borrower or the person who is co-signing your loan.
    • Your spouse – even if they are not a borrower on the loan, your spouse will be required to sign certain documents such as the mortgage.
    • Your check book, in case there are any last minute changes.

    What the Seller Should Bring to Closing

    • Wiring Instructions if you want your proceeds wired after closing – otherwise the closing agent will provide you with a check.
    • Your driver’s license or another form of Photo ID (i.e. passport).
    • A trusted friend, advisor, or lawyer, if you want an advocate at the table. – If you worked with a Realtor, they typically are present at closing and serve in a similar capacity.
    • Your spouse – even if they are not currently on title, your spouse may need to sign the deed to ensure any interest they might have as your spouse is transferred to the buyer.
    • Your check book, in case there are any last minute changes or invoices forgotten.
    • Keys to the property – the buyer will want the keys once the transaction has been finalized.

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