Kevin Poi, Realtor, MBA, CLHMS
Exceptional Real Estate Service, Exceptional Results
Buying Step 9: Signing the Deal: Closing / Settlement / Escrow
It might seem as though once a sale agreement has been signed that the buying process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.
Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® can help buyers complete the transaction process by assisting with the many requirements found in a typical sale agreement. The REALTOR® also helps the buyer prepare for closing, that is, finalizing the sale.
What’s in a Sale Agreement?
A sale agreement sets a purchase price for the home and a series of terms and conditions. For instance:
When Should You Close?
With online transaction management now available, closings can occur within a week in some areas - at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.
While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it's possible that the buyer will no longer be able to afford the home and thus the deal may fall through.
The result of these considerations is that most homes close 30 to 45 days after a sale agreement has been signed.
What Happens during Closing?
Before closing, buyers typically have a final opportunity to walk through the property to ensure that its condition has not materially changed since the sale agreement was signed.
“Closing” is also known as "settlement" or "escrow." It is usually a brief office meeting to sign the paperwork needed to complete the sale transaction. All necessary papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties in the transaction to verify their interests.
Settlement is increasingly computerized and automated. One of the best parts of settlement is that there is very little that buyers and sellers need to do. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery. Some areas have services that allow most of the transaction to be completed online. If buyer and seller are present, they may be at the same table, or they may complete their papers separately.
Whatever the process, the outcome of the closing is the following: