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Understanding The Closing Process |
The closing is where the final legal transactions take place, which allows a buyer to purchase a home or a seller to transfer the title to the buyer. The closing involves some or all of the following parties: buyer, seller, buyer’s realtor, seller’s realtor, seller’s and buyer’s attorney (optional), the lender, and the closing officer from the title company. The closing officer from the title company represents the lender.
A typical closing at Chicago Title usually lasts about an hour and involves a series of stages in which certain things are done to allow for the proper collection, processing, and dissemination of information. For a list of items that will help us close your real estate transaction efficiently, please visit our Closing Checklist page. |
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| Collection |
| One of the first things that will take place in a typical closing is the collection of conditions or documents that are required by the lender and by the sales contract. These items usually include the insurance policy, the POA (Power of Attorney), pay stubs, the HUD from the sale of the previous property, the termite report, gas line warranty, and the home warranty. These warranties are collected, reviewed, and signed by both the buyer and the seller. |
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| Buyers' Expenses |
After the collection phase has been completed, the closing officer reviews the actual costs that the buyer will incur from the purchase of a new home. These costs include the actual cost of the home, closing costs, lender fees (appraisal, application, underwriting, and document preparation, etc.), interest, and escrow monies for property tax, a closing fee, a title insurance fee, delivery fee, county deed and recording fees to the seller. The seller credits the buyer to bring the property taxes current.
The loan amount and tax credit is subtracted from the cost of the home. The difference reflects the amount of money needed by the buyer to purchase the home. The buyer then signs signature pages to endorse his/her approval with the numbers. A copy is signed by the buyer’s and seller’s realtor, which allows them realtor to receive his/her due commission. |
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| Seller Expenses |
| After the numbers for the buyer has been completed, the closing officer now turns his/her attention to the costs incurred by the seller. These costs include a brokerage fee for the realtor (commission), a closing fee, a title search fee, a title binder fee (title document provided to the buyer), a Deed preparation fee, a title insurance premium fee, an overnight delivery fee (to ensure that the lender receives the documents and monies on time), costs for county transfer tax, Termite & Gas Line warranty fees, a Home Warranty fee (if applicable), condo dues (if applicable) and a credit to the buyer for the year’s real estate property taxes. (If the seller has an escrow account, he/she will recoup any money that is left over from the said account. The expenses are subtracted from the agreed upon sale price of the home to show the net amount that is due to the seller. |
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| Signatures |
| Because the purchase of a home is a legal transaction, buyers and sellers are asked to sign many different kinds of forms with each of them having their own unique purpose. You will be asked to sign all documents using your full legal name. Be consistent when signing each form by using the same name on each form. |
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| Buyers' Documents |
| After the costs have been reviewed and after required mutual signatures have been obtained, the next phase of the closing turns toward an explanation & signature of the buyer’s documents. These documents include but are not limited to a Name Affidavit (a legal acknowledgment of the buyer’s name(s) such as Jon Smith or Jonathan D. Smith to declare that both names refer to the same person); an Address Certification (for properties that might have a double mailing address); a Payment Letter (a letter that goes back to the lender indicating the buyer’s intent to repay the loan); Escrow Disbursement Statement (a breakdown of escrow payments for future property tax bills); Private Mortgage Insurance – PMI; a Truth & Lending Statement (a summary of agreed upon terms of the loan); a Lender’s Note (a promise to the lender to repay the loan broken down by the number of years, the dollars per month, etc.); the Mortgage (a description of monthly payment); a Mortgage Rider (if necessary); a Survey (a drawing that shows the buildings, boundary lines, and property improvements); a Flood Certification form; the Lender’s Loan Application (1003) (tells the lender that the buyer’s financial condition is the same as when they made the initial loan application); an Earnest Money Receipt; W-9 (45.06 IRS Forms); a Compliance Agreement (an agreement signed by the buyer and seller stating that they will cooperate in the event of clerical or typographical errors); a county Conveyance Form; and an Occupancy Affidavit (notifies the lender of the buyer’s intention to occupy the home). |
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| Sellers' Documents |
| Likewise, the seller has documents to sign but not nearly as much as the buyer. The documents include a Compliance Agreement; a Payoff Cover Letter (a letter that the title company includes with the payoff check when paying off the seller’s lender for the current mortgage of the seller’s property); a Seller Affidavit (a declaration that all taxes paid in fill; no hidden charges, only buyer has the rights to property today, etc.); the Deed (a legal document that declares the transfer of title from seller to buyer); and an IRS 1099 Form to be completed with a forwarding address and a social security number. |
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| The Final Stage |
| At this point, the closing has been completed except for a few housekeeping items. The closing officer will collect a form of ID (usually a driver’s license); required funds; acknowledgements by notary public, and copies of all paperwork will be made and given back to all parties along with disbursements. | |
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