If you’re looking to buy or sell a home, you’ve probably heard the term real estate closing. What exactly does this process entail?
Familiarizing yourself with the essential steps in residential real estate closings can help to ensure that you don’t skip any crucial procedures during a transaction and that you better understand what’s ahead so that you can prepare accordingly.
Contract negotiation and acceptance
The journey of a residential real estate closing begins with the initial offer. As a buyer, you’ll work with a real estate agent to make an offer on a property you’re interested in. This offer includes:
- The purchase price
- Contingencies
- The proposed closing date
Negotiations may take place as the seller considers your offer, and they may choose to accept, reject or counter it. Once your offer is accepted, the inspection and appraisal are next. You’ll typically have a specified period to conduct a home inspection to help ensure the property is in the condition you expect. A professional appraiser will also assess the property’s value to confirm it aligns with your agreed-upon purchase price.
Mortgage and financing
Securing financing is a critical part of the residential real estate closing process. You’ll need to apply for a mortgage and provide your lender with essential financial documentation, such as:
- Bank statements
- Tax returns
- Employment verification
After your loan application is submitted, it undergoes a thorough underwriting process. During this stage, the lender assesses the risk associated with lending to you. They will examine your credit score, debt-to-income ratio and the property’s appraisal value. If everything checks out, you’ll receive a formal mortgage approval.
Title search and insurance
One crucial aspect of residential real estate closings is helping ensure a clear and marketable title to the property. A title search is conducted to uncover potential issues affecting your ownership rights. This search may reveal:
- Outstanding liens
- Unpaid taxes
- Ownership disputes
Resolving these issues is essential before proceeding with the closing. To help protect your investment, you’ll need to purchase title insurance. Title insurance provides coverage in case any unforeseen title issues arise after the closing. It offers peace of mind, knowing you won’t be responsible for any hidden defects in the property’s title.
Understanding the essential steps in residential real estate closings is helpful but remember that enlisting the help of experienced professionals can make all the difference. When the stakes are this high, the benefits of seeking legal guidance cannot be overstated.