From Contract through Closing Day

The finish line is in site.  The actual concept of owning your new home is becoming a reality.  Here is some insight into what is going on behind the scenes during the final stages of your purchase and steps you need to take to prepare for your big day.

What Role Does the Title Company Play?

All contracts that have been agreed to and executed by both buyer and seller will be delivered to the title company (or lawyers office in some instances) along with the earnest money deposit.  The representative at the title company will “receipt” the contract and the earnest money will be held and deposited in an escrow account.  Over the course of the transaction or “escrow period” (from contract to closing), the title company will perform various tasks such as researching, reviewing and insuring clear title to the property, coordinating the transfers with the homeowners association, coordinating releases and payoffs of existing liens, preparing the final documents for closing  and helping both buyer and seller with the transfer of the property on the day of closing.

Here is an excellent diagram depicting the simultaneous processes that are occurring during the “escrow period.”

Behind the Scenes

From the day in which the contract is accepted to the day when you pick up the keys at the title company to move into your new home, there is a lot of work that goes on behind the scenes.  The truth of the matter is that if the parties to the transaction all handle their business in a responsible and professional manner, you might not be aware that much is going on at all.  The title company will handle much of the preparatory work for actually transferring ownership of the house from seller to buyer.  You (as buyer) will work closely with your lender to make sure that everything is ready for your loan to fund on the day of closing.   The listing agent (seller’s Realtor) will help facilitate the transaction on that end.  Finally, I (as your Realtor) will make sure to stay on top of all of the details.  Transaction coordination is one of the areas where I shine.  If we are diligent in staying on top of everything from day one, it will be easier to navigate the inevitable potholes in the road.

STEP 1: Finalize Your Home Owners Insurance Policy

Unless you are paying cash for the property (and even then it is a best practice), you will be responsible for carrying a homeowner’s insurance policy on your new house at all times.  The lender will not even think about lending you the money to purchase the house until there is a commitment for insurance.  Once the terms of the contract have been finalized, you should get in touch with your insurance agent of choice to set up this policy.  I find that many repeat buyers already have coverage with an agency on an existing property and they just transfer that coverage to the new house.  However, if you do not have existing coverage or want a second opinion, I can introduce you to a couple of responsible (and local) insurance agents who are more than capable of helping you out in this situation.  You can access their contact information here.

STEP 2: Select Your Home Warranty Coverage

In almost every contract that I negotiate for a buyer, I make sure to push for a one year residential services contract for the house (paid for by the seller at closing).  These contracts are often referred to as “home warranties” because in most respects they act as additional insurance or warranty against major repair costs within the first year of home ownership.  This type of contract is not as inclusive as a comprehensive warranty would be from a home builder during the first year but they serve the purpose of giving the home buyer additional peace of mind.  As we near the day of closing, I will provide you with links and brochures to residential services companies that my clients have had success with in the past and using the funds that have been allotted in the contract, you can make your selections for coverage.

WARNING: Do Not Make Any Changes to Your Credit Profile.

I’ve mentioned this before, but it bears repeating.  Whatever you do, please refrain from making any major purchases or transferring large sums of money between accounts until you have closed on the house.  In a typical scenario, the lender that you are working with  accessed your credit profile and history at the time in which you applied for loan pre-approval.  At that point in time, you were qualified based on that information and the documentation provided when you filled out your loan application.  Sometimes that might have been as much as 5-6 months before the actual date of closing.  The lender is required to pull your credit (and verify your account funds) again right before closing to make sure that nothing has changed in regards to your score and overall qualification.  If for some reason your credit profile is altered because of a large purchase like a car or you decided to take the bulk of your cash savings and transfer it to some other kind of investment, your ability to close on your new home may be in severe jeopardy.  Please check with your lender before making any major purchase decisions or transfers of money.

STEP 3: Prepare for Moving Day

Moving day will soon be here.  Make sure that you take all the proper precautions and make the necessary arrangements to assure your belongings actually show up the day you plan to move in.   If you are moving from a rental property and still have time remaining on your lease or if you are living in a house that you are not yet in the process of selling, you can take a more leisurely approach to your move.  However, if you are selling one house and buying another on the same day or perhaps have a couple days to move out, you need to do as much preparation as possible in advance.  I’ve put together some resources for you in regards to Moving Day, Movers and a checklist to follow to make sure you don’t miss anything.

STEP 4: Set Up Your Utilities

I’ll work with the listing agent and the sellers to find out exactly when the existing utilities are going to be turned off.  Typically, most responsible sellers will not terminate the existing utilities until a day or two after closing just in case something gets delayed or there is another issue.   However, that’s assuming that the house is not already vacant or perhaps a foreclosure in which case all utilities have already been turned off well in advance.  Just to be safe, you’ll want to make sure that your utility accounts at the new house are turned on for the actual day of closing.  That way you don’t show up expecting to move in (and spend the night) only to find out there is no water and electricity.  You may also be able to avoid connection fees and/or service fees by transferring your existing service or activating service before the seller’s accounts have been turned off.   Like I said, I make it a point to remind you to take care of the utilities but as a point of reference, you can usually find the utility information in the sellers disclosure notice.  Here is a list of helpful phone numbers for local utility providers.

Step 5: Final Walk-through Before Closing

Sometime in the 24 hours before your scheduled closing we will make an appointment for a final walk-through at the house.   You may have not been inside the house since your inspection day.  Therefore, the walk-through serves to allow you to see the house one final time before you sign on the dotted line.  What we are looking for during the walk-through is to make sure that any appliances and fixtures that are noted in the contract have been left, that requested repairs have been completed and documented, that the house has been left in a livable state and there is no major issue that has arisen since the last time you saw it.  Keep in mind that in some cases, the sellers may not have completed their move prior to our walk-through.  They are required to be out on the day of closing.

STEP 6: Closing Day is Here! What Do I Need to Know?

Funds Needed for Closing – A couple of days in advance you will want to make sure that you get a good estimate from the lender and the title company as to the amount that you are going to be responsible to bring to closing to complete your side of the transaction.  I’m talking about your down payment and your closing costs.  The lender will take care of the funds for the actual loan.  Remember, there are some items that you have already paid for in advance like your earnest money and option fee that will be credited back to you at closing.  You may not know the exact amount you are going to need until a day beforehand.  However, having a general ballpark figure will help you assure that the money is in the proper account to access on the day of closing.

Wiring Instructions – Title companies will not accept personal checks above a certain amount (usually $1500).  Therefore, its a best practice to bring a cashiers check from your bank or better yet, have the necessary funds wired to the title company’s account.  If at all possible, I recommend a bank wire because its more efficient and less risky.  Check with the title company in advance for a copy of the wiring instructions to provide to the financial institution that will be wiring the funds for closing.

What to Bring?  besides bringing yourself and your patience, you will want to make sure you bring your official ID (driver’s license in most cases) and your personal checkbook just in case.

How Long will Closing Take?  The buyer in every transaction has more paperwork to sign than the seller does.  In addition to the paperwork that both sides sign to transfer ownership of the property, the buyer is responsible for signing the final loan documents and disclosures.  Rest assured you are going to sign some of the same paperwork that you have already signed perhaps 2-3 times previously.  I hate to say it but it can be a pretty inefficient process.  With that in mind, if you budget about an hour (maybe a little more), you should be fine.  If you are applying for two separate loans – a first and a second – it can take longer since you have twice as much documentation to sign.

Take Precaution – There is always a chance due to some unforeseen (and sometimes foreseen) issue that pops up last minute that your closing is going to be delayed.  It does happen from time to time and though it’s inconvenient, its not the end of the world.  We will take the necessary steps to reschedule the closing for a day that works for everyone.  However, with that in mind, please do everything possible not to schedule travel or vacation around the date of closing.  If we are scheduled to close on Thursday and you are scheduled to leave for vacation on Monday and we get delayed by 2 days, we are in trouble.  Please let me know well in advance if you have travel obligations so that we can choose a closing date that takes those obligations into consideration.

When Will I Get the Keys?  If the loan is going to be “table funded” which means that the lender has wired the loan proceeds in advance and all the title company is waiting for is for both parties to sign off, the sellers may allow you to take the keys with you after you are done signing.  However, that is not always the case and you shouldn’t assume that you are going to walk out with keys in hand.  In most cases, once both buyer and seller have signed and the loan has “funded” the title company will declare it an official sale and you will be able to swing by and pick up the keys to your new home.

Whew . . . . That’s it – You are a NEW HOME OWNER – Congratulations!!

If you have further questions about the process or specific procedures, please do not hesitate to ask me.  I’m always happy to point you in the right direction.  You may also look back through the other various home buyer resources included in this site.  Ive gone to great lengths to make this an education site for both home buyers and sellers.