Congratulations! If you’re reading this, we’re assuming that you’re looking to buy or sell a home. Either way, you’re about to get started with a harrowing yet rewarding experience.
Luckily, you stumbled upon us. We’re going to teach you everything you need to know about real estate closing and the home selling process in general.
Whether you’re from the buying or selling side of the real estate closing process, you need to understand what’s going on. If you keep reading, you’ll learn every single step that you need to take in order to complete a house closing.
Let’s get started.
0. Get Pre-Approved for a Mortgage
This is step zero. Before you even get started with the real estate closing process, you need to get pre-approved for a mortgage.
Of course, this only applies if you’re looking to buy a house. (There are a few steps that sellers need to take before selling their home, too.)
If you don’t get pre-approved before you start the closing process, you may end up at the end without a mortgage to use.
Plus, with a pre-approval letter, you’ll have more negotiating power when you’re trying to settle on the terms and conditions of the sale. If the seller knows that you already have the money lined up, they’re going to be more willing to do what you want.
1. Open an Escrow Account
An escrow account is managed and owned by a third party that is not related to the buyer or seller. Bringing in a neutral third party can make the home closing process much smoother.
This third-party entity is the one that holds all of the money and documentation until the transaction is complete. Once this happens, the third party moves all of the money and documents to the buyer and seller as permitted.
This process can eliminate fighting and conflict during the real estate closing process.
2. Conduct a Title Search and Get Title Insurance
Both a title search and title insurance are important in terms of providing safety legally and mentally. In other words, performing this step will give you peace of mind.
A title search involves looking in public records to ensure that the seller is who they say they are and that they have the right to sell the property. It lets you know that the sale would be legitimate if it were to go through.
Title insurance protects the holder from any losses that they may have from defects in the property title. In other words, it protects real estate owners and lenders from any liens, defects, or encumbrances on the title.
3. Hire an Attorney
Legal aid is optional yet essential. We highly recommend that you invest in legal help through the home selling process as well as the home buying process. No matter which side of the closing process you’re on, you need legal guidance to ensure that everything is going in your favor.
An experienced real estate attorney can help you find problems in the paperwork, issues with the property, and more.
4. Enter Into Negotiations
If you’ve made it this far in the closing process, you’ve likely paid so many fees that you’re starting to wonder if the house is worth it. Unfortunately, both the buying and selling processes are riddled with fees and small expenses that start to add up.
Over time, these small payments can add up to some big money.
You need to keep these fees in mind as you enter into negotiations. If you have hired a real estate attorney as we suggested, you can use their expertise to find hidden fees throughout the paperwork that you may not have been able to see.
Some of these fees are expected like junk fees, application review fees, processing fees, and more. However, some lenders like to push in extraneous fees that aren’t worth the investment.
If you’re willing to stand your ground, you may be able to completely remove these fees from questioning. At the very least, you may be able to reduce some of these fees so that you can focus your money on the house.
5. Inspect the Home
A home inspection is crucial for buyers. If you want it done right, you need to hire a certified home inspector. With their expertise, they can find physical deformities in and around the home.
Likely, these professionals can see small details that you may not have noticed.
If the inspection professional finds a serious problem with the home, you’ll be able to back out of the deal. Alternatively, you could ask the seller to fix it.
6. Complete a Pest Inspection
In addition to the home inspection, the home needs a pest inspection. This is a separate walk through the home that looks for wood-destroying insects.
If the property is made of mostly wood, a pest inspection is necessary to determine whether or not there are potential structural damages. Even if there is only a small pest problem, you need to get these fixed before you finalize the sale.
Small problems can turn into big mishaps fast, and you need to make sure that you’re protecting yourself and the home that you’re interested in buying.
If there is a pest problem, your home inspector will likely see damage from the pests. However, getting a separate pest inspection can give you more information about the kinds of pests that the seller is dealing with. Then, the seller can make the necessary steps to get rid of those pests before you invest in the property.
7. Renegotiate as Needed
If the seller has accepted your offer, that’s great. However, you still have the ability to renegotiate the price. This is especially if there were any significant findings from the home or pest inspections.
There are two popular ways of going about this:
- You could ask the seller to pay for the necessary repairs
- You could ask for a reduction in the buying price so that you can handle the repairs yourself
If the seller can’t or won’t fix a problem with the home, you have the ability to back out of the sale completely. This is a situation during which having a real estate attorney would be useful. They can help you figure out what your options are legally so that you can make the best decision for yourself and your family.
8. Lock Your Interest Rate in Place
Interest rates are constantly changing. This includes mortgage interest rates.
These numbers are determined by a number of factors, like geographic location, property type, type of loan, credit score, and more.
If you’ve decided that this is the house for you, you need to lock in your interest rate. If your mortgage lender will let you place an interest rate on hold for your mortgage, do it now. This keeps the interest rate from fluctuating with market changes in the future.
Even a small change in interest rate could cost you thousands of dollars. So, you need to try to lock in an interest rate when the rates are low. This is especially if you suspect that the interest rates are going to increase soon.
9. Resolve Any Holds
There are five holds/contingencies that could be on the property at this step in the closing process:
- Being able to get financing that the buyer can afford
- The home inspection did not reveal any significant or worrying findings
- The pest inspection did not reveal any significant or worrying findings
- The seller is fully disclosing any and every known issue with the home
- The seller agreed with any repairs (if applicable)
As each contingency is met, you can remove it in writing by placing a specific date with each term in the purchase offer. This process is known as active approval.
Both the seller and the buyer must understand their roles in the closing process if each party is going to meet their terms. Yet again, this is another situation in which a real estate attorney would be helpful.
With a real estate attorney on your side, you’re not going to go against the contractual agreement between you and the other party. Your real estate attorney will make sure that you understand each contingency and what you need to do to remove it from the list.
Often, buyers and sellers will agree on a date by which each contingency should be met. If the buyer or seller doesn’t meet their end of the deal, the sale may end before it’s completed.
After removing all of the contingencies from the agreement as agreed, the closing process between the buyer and seller can continue.
10. Review Required Payments
As we mentioned, there are plenty of small fees during the real estate process. Unfortunately, they don’t stop when you get to the end of the closing process. There are fees before and throughout the closing process.
Most likely, you had to deposit an earnest money fee when you signed the purchase agreement. This fee is something that the buyer puts in the third-party escrow account to show good faith. This is a sign that the buyer is serious about buying the property.
Without this chunk of cash, the seller has no reason to believe that the buyer is actually going to lay down money for the property. This would lead the seller to look for other potential buyers who are going to be serious about investing in the property.
If the buyer did put down their earnest money and backed out before the deal was done, the seller would get the money as compensation for the time and energy lost on that particular deal. However, if the seller backs out after the buyer puts down earnest money, the buyer gets that money back.
Other than this required payment, there are a few other payments that you need to think about for the escrow account. Since the escrow money is usually a part of the downpayment for the house, the buyer needs to arrange to deposit the rest of the downpayment on the property.
As with the contingencies, it’s important to make your payments on time. Otherwise, the sale may get canceled with the earnest money going to the seller. The buyer could also incur more fees by not following the contractual agreement between the buyer and the seller regarding payments.
11. Look Over Everything
Before you sit down and sign the papers, you should take one last look at the property.
During this time, you should make sure that nothing has happened since the last home inspection. In addition, you should verify that the seller made the repairs that you agreed upon. Lastly, you should make sure that the seller hasn’t removed anything that was in the purchase agreement.
12. Sign and Close
The last step of the real estate closing process includes understanding and signing the paperwork. Before laying your pen on the paper, you need to go over the papers with your real estate attorney. Make sure that you understand what every single signature means.
You could read through all of the papers yourself, but it’s unlikely that you’ll understand every statement with legal jargon in it. So, you should have your real estate attorney ready to explain everything to you.
Do not feel pressured by anyone else in the room. Take your time to understand and sign each page.
As you’re going through the paperwork, you and your real estate attorney should be making sure that the interest rate is correct. With this, you should be checking all other agreements and terms, especially the fine print.
Dispute as needed before signing.
Get a Quick Real Estate Closing in North Carolina
The real estate closing process is long and tiring. It’s not easy for the buyer or seller. Oftentimes, both parties are exhausted by the end of the process.
Luckily, if you’re a seller, we have a solution. Our team at Smith Liquidations in North Carolina wants to buy your home fast. Even better, you don’t need a real estate agent when you’re working with us.
All you need to do is fill out a form, set up an appointment, and let us make an offer.
Get started today to see what you could get for your house.