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Closing a real estate deal, signing the papers to make a home yours, can be stressful and long and it involves many steps and procedural formalities. Many things must happen before you arrive at the closing. Here are a few important guidelines that need to happen between the moment your offer is accepted to the moment you get the keys to your new home.
Open an Escrow Agreement
An escrow account can be held by a neutral third party on behalf of the two principal parties involved in the transaction. They will hold all the money and documents related to the transaction until all is settled. A contract or escrow agreement is drafted, which the closing agent reviews for completeness and accuracy.
Title Search is Conducted and Title Insurance is Obtained
Once the title order is placed, the title company conducts a search of the public records. This should identify any issues with the title such as liens against the property, utility easements, and so on. If a problem is discovered, most often the title agency will take care of it without you even knowing about it. After the title search is complete, the title company can provide a title insurance policy.
There are two kinds of title insurance coverage: a Lender’s policy, which covers the lender for the amount of the mortgage loan; and an Owner’s policy, which covers the homebuyer for the amount of the purchase price. If you are obtaining a loan, the bank or lender will typically require that you purchase a Lender’s policy. However, it only protects the lender.
It is always recommended that you obtain an Owner’s policy to protect your investment. The party that pays for the Owner’s policy varies from state to state, so ask your settlement agent for guidance before closing.
Obtain a Closing Disclosure
Your lender must provide a Closing Disclosure to you at least three days prior to closing. Your lender may also have a closing agent provide the Closing Disclosure to you three days before you close your transaction.
If you or your lender makes significant changes between the time the Closing Disclosure form is given to you and the closing, you must be provided a new form and an additional three-business-day waiting period after receipt of the new form.
If the changes are less significant, they can be disclosed on a revised Closing Disclosure form provided to you at or before closing, without delaying the closing.
Be Ready to Close
As the closing day approaches, your agent will order any updated information that may be required. Once the agent has confirmed with the lender and the seller, a final date, time and location of the closing will be set.
On the day of the closing, all the work is complete. You are clear to close. A good Realtor will have been managing and making sure all the paperwork is done and getting the closing process prepared for you.