Closing Day: What to Expect at the Closing Table
Gain clarity on what to expect during the final stages of your real estate transaction's closing day, from start to finish.
Closing day marks the official transfer of home ownership from the seller to the buyer. This event finalizes the real estate transaction, with all necessary funds exchanged and legal documentation completed.
Pre-Closing Preparations
Days leading up to closing involve preparations for a smooth transaction. A final walk-through of the property is a standard step, typically conducted within 24 to 48 hours before closing. This inspection allows the buyer to confirm the property’s condition, ensure agreed-upon repairs are complete, and verify included appliances and fixtures are present and operational.
Reviewing final documents, particularly the Closing Disclosure (CD), is a necessary task. The lender is legally required to provide the buyer with this five-page document at least three business days before closing. This period allows the buyer to compare the CD with the initial Loan Estimate, ensuring accuracy in loan terms, interest rate, projected payments, and associated costs. Any discrepancies or unexpected changes should be immediately addressed with the lender or closing agent.
Arranging funds for closing costs and the down payment is a preparatory step for buyers. These funds, which can include loan origination fees, title insurance, and prepaid property taxes, are transferred via wire transfer or certified check. Verify wire instructions directly with the closing agent through a confirmed method, such as a phone call to a known number, to prevent fraud. Both buyers and sellers need valid government-issued identification, such as a driver’s license or passport, for document notarization at closing.
The Closing Meeting
The closing meeting is where the real estate transaction is finalized. Attendees typically include buyers, their real estate agent, and potentially their attorney. Sellers may not be present, often pre-signing documents or being represented by their agent or attorney. A lender representative and a closing agent or attorney are also usually in attendance.
The closing agent, also known as a settlement agent or escrow officer, facilitates the process. This neutral third party coordinates all aspects of closing, including preparing and reviewing legal documents, explaining their purpose, and ensuring compliance with legal requirements. They also manage the collection and disbursement of funds involved in the transaction.
During the meeting, many legal documents are signed. Buyers sign the promissory note, a promise to repay the loan, and the mortgage or deed of trust, pledging the property as loan collateral. Other buyer documents may include an updated loan application, escrow account statements, and various affidavits.
Sellers sign the deed, conveying ownership to the buyer. They also sign a bill of sale for any personal property and various affidavits, such as an affidavit of title. The closing agent ensures all signatures are obtained and documents are properly notarized.
Financial Aspects of Closing
The closing meeting also involves the settlement of financial obligations. Closing costs, ranging from 2% to 5% of the loan amount, are paid at this time. These costs are detailed on the Closing Disclosure and are divided between the buyer and seller according to the purchase agreement and local custom. The closing agent collects these funds and disburses them to the appropriate parties, such as title companies, lenders, and real estate agents.
For buyers with a mortgage, loan funds are disbursed by the lender to the seller or their representatives through the closing agent. This transfer of funds makes the purchase possible. The seller receives net proceeds from the sale. This amount is calculated after deducting outstanding mortgage balances, prorated property taxes, real estate commissions, and other agreed-upon closing costs.
New homeowners establish an escrow account at closing if they have a mortgage. This account, managed by the mortgage servicer, holds funds from monthly mortgage payments to cover future property taxes and homeowner’s insurance premiums. This ensures these recurring expenses are paid on time, protecting both the homeowner’s investment and the lender’s collateral.
After the Signing
Once documents are signed and financial transactions complete, steps follow the closing meeting. A highly anticipated moment for buyers is the exchange of keys, which often occurs at the closing table, signifying physical possession of the property. However, key transfer might be delayed if there are agreements for seller occupancy or if funding is not immediately confirmed.
The deed, which formally transfers ownership, is submitted for recording with the local county recorder’s office. This public recording legalizes the transfer of title and updates official property records. The closing agent handles this step.
Buyers and sellers receive final confirmations or copies of important documents from the closing agent shortly after the meeting. These documents serve as official records of the transaction. New owners arrange for the transfer of utilities, such as electricity, water, and gas, into their name, effective on the day of closing or possession.