Closing Real Estate Deals In 10 Simple Steps

A real estate transaction is typically a lengthy and tedious process including numerous phases and procedural formalities. Closing on a house occurs when you sign the paperwork that make the house yours, but there is a long list of things that must happen before that fateful day arrives. Between the time your offer is accepted and the time you receive the keys to your new home, there are 12 stages to follow.

1. Open an Escrow Account

A third party holds an escrow account on behalf of the buyer and seller. A property sale entails a series of stages spread out over several weeks. As a result, bringing in a neutral third party is the best method to protect either the vendor or the buyer from being duped. This third party can keep all of the money and documentation associated with the transaction until it is completed. Following the completion of all procedural formalities, funds and papers are transferred from the escrow account to the seller and buyer, ensuring a secure transaction.

2. Title Search and Insurance

A title search and title insurance provide legal protection and comfort of mind. They ensure that no one else can claim a property after you have purchased it. A title search is a review of public documents to establish and validate a property’s legal ownership and to determine what claims, if any, are pending against it. If any claims exist, they may need to be settled before the buyer may take possession of the property.

Title insurance is an indemnity policy that protects the policyholder from financial loss caused by faults in a property’s title. It safeguards property owners and lenders against loss or harm caused by liens, encumbrances, or title flaws.

3. Hire an Attorney

While legal assistance is not required, it is usually a good idea to have a professional legal opinion on your closing documents. Even for well-educated people, the intricate jargon in them might be difficult to comprehend. An professional real estate attorney’s perspective can provide several benefits for a reasonable charge, including clues of any potential difficulties in the documentation.

4. Negotiate Junk Fees

It’s a terrible truth, but it’s a reality: there are lots of real estate companies that are totally comfortable with charging “junk fees.” While the exact definition of a garbage fee is debatable, it usually includes terms that prey on consumer misunderstanding. Administrative fees, application review fees, appraisal review fees, ancillary fees, email fees, processing fees, and settlement fees are examples of common garbage fees. While one of these fees is as unclear as the next, naïve buyers and sellers must contend with them.

It’s important to remember, though, that information is power. It’s quite possible to negotiate, if not completely eliminate, the fees connected with typical closing costs. Those willing to admit and possibly challenge these fees may be able to have them removed entirely from their bills. Remember that even legal closing expenses can be negotiated; you’ll never know unless you ask.

 5. Conduct A Home Inspection

While some may say that a house inspection isn’t necessary, I disagree. In fact, I believe that a comprehensive home inspection is critical to completing a real estate transaction. When determining whether or not to hire an inspector, there is only one question you should ask yourself: Why wouldn’t you? A home inspection is inexpensive and can save you a lot of money in the long run. Any issues discovered during the inspection will allow you the option to back out of the agreement, or at the very least, ask the seller to fix the issues before the transaction is completed (as long as your purchase offer included a home-inspection contingency).

 6. Consider Subsequent Negotiations

You may have understood by now that closing real estate agreements has as much to do with protecting oneself as it does with completing the transaction. And you’re absolutely correct: concluding a contract should be accompanied by strong safety precautions. But don’t lose sight of why you’re there in the first place: to close a sale. With that in mind, assess everything you’ve done so far and determine whether your original offer price has to be adjusted. If the inspection revealed any major flaws or unforeseen conditions, you may have grounds to negotiate a better deal on your behalf.

 7. Remove Contingencies

A wise real estate investor knows that a great deal isn’t complete without contingencies, which are phrases in a contract that allow you to back out of a purchase if something goes wrong. It’s also worth mentioning that by this point, any contingencies should have been addressed. While this is fine, most contingencies must be written off once they have been met. In other words, the contingencies must be removed (in writing) by a particular date, which is usually specified in the purchase offer.

 8. Final Walkthrough

A final walkthrough should be conducted before any agreement is taken to the closing table. Most everything should be in place at this stage, and all that’s left is a last inspection to ensure the home is in the condition you were promised. Verify that no additional damage has occurred and that the repairs have been completed.

9. Sign The Papers

The most critical step in finishing a real estate deal is signing the required papers, which should go without saying. Feel free to start signing once everything is in place. And believe me when I say there will be a lot of documentation; far more than most people expect (up to 100 pages is not uncommon). It’s important to note that the sheer number of signatures required should not compel you to rush through this crucial process. I strongly advise you to read each page carefully before signing anything unless you are certain you understand what you are agreeing to (especially the fine print).

10. Meet Funding Requirements

When you signed the purchase agreement, you most likely put down earnest money. A deposit provided to a seller to demonstrate the buyer’s good faith, earnestness, and real interest in the property purchase is known as earnest money. If the buyer backs out, the earnest money goes to the seller as compensation. The money is returned to the buyer if the seller cancels.

You’ll need to deposit more monies into escrow to complete your transaction. Because the earnest money is usually put to the down payment, making arrangements for the many additional essential installments before the sale is closed is critical. If you don’t, the transaction may be terminated, and your earnest money will be returned to you. Furthermore, you may still be billed for the services you used prior to the agreement falling through.

How Long Does It Take For A Real Estate Closing?

It shouldn’t be underestimated: the real estate closing process might be intimidating, but that’s only because the succeeding procedures are so critical. Each duty and decision bears a significant amount of weight, and none should be taken lightly. However, the procedure can take a long time. There’s no need to rush because each step has significant consequences, which prompts the question: how long does a real estate closing take?

To be fair, a real estate transaction will take as long as each side requires. A closing should not be hastened, hence the timeframe is set by the transaction’s slowest mover on both sides. A contract will most likely close faster between two experienced parties than between two inexperienced buyers and sellers. However, there are certain exceptions.

some timelines to use as a foundation for a schedule A mortgage application, for example, can take anywhere from 30 to 45 days to complete. Without the application, there will be no close, thus the application process will set the tone. However, once all parties are at the closing table, a deal can be completed in under an hour. Experience plays a role once more. While some parties will conclude sooner than others, the closing table can take many hours to chat over.

The Changing Dynamics Of The Real Estate Closing

Closing times, like everything else in the real estate business, are continuously changing. Due to recurring factors such as the season and how busy the market is, there are regular swings. Then there are even more significant variables to consider. Major interest rate and market direction changes, as well as new laws, are examples.

While sellers and their agents appear to be more motivated than ever to close as quickly as possible, many homebuyers may face longer closing periods. Closing timeframes should be extended, according to the National Association of Realtors.

What Can Slow Down Your Real Estate Closing?

There are numerous elements that may have an impact on your closing times:

Your mortgage company’s and loan officer’s efficiency
You’re awaiting condo or HOA approvals.
Occupancy certificates
Problems with title and liens
Inspectors and appraisers are behind schedule.
Underwriting conditions are difficult to come by.
Agents that are slow and unresponsive
Parties who don’t have sufficient identification and aren’t ready to close

To simplify your real estate closing, get a head start and anticipate as many of these obstacles as possible. Develop relationships with the many parties involved, for example, to ensure that they are looking out for your best interests. Responding to all contacts in a timely manner and maintaining strong connections with all parties involved are two solid ways to do this.

How to Speed Up Your Real Estate Closing

The most important thing you can do to speed up the closing process is to plan ahead for each phase. However, there are certain additional procedures you may take to ensure a smooth closing. These are some of them:

Begin looking for properties as soon as possible.
Inquire with your loan officer about any possible conditions that may arise.
Before signing the contract, gather more than enough paperwork. Request preliminary title searches, condo documents, and more.
Establish ties with vendors to ensure that your orders are prioritized.
Check for valid IDs and additional cash well in advance of the closing.
Don’t overextend your credit or borrow in a way that will affect your credit score.
Try to avoid closing at the end of the month or over the holidays.
Encourage all parties involved to complete the transaction on time.

How To Protect Yourself In A Stalled Closing

Closings sometimes stall, but you can reduce the chances of this happening by asking sellers and their representatives to put more’skin in the game’ in the form of higher deposits. The higher the deposit a seller may try to haggle for the further out your closing is. Sellers may be ready to provide an extension in specific instances, although this may necessitate additional expenditures.

Buyers, on the other hand, are at a disadvantage. The less money you put up, the less money you risk losing. Break up the deposit into many portions if necessary, and at important points. For example, after the inspection, a second deposit is required, followed by a third deposit once title, appraisals, and loan commitments have been received. It matters who you put your money with. Select a political party that is more likely to support you, or is at the very least completely impartial and neutral.

Common Real Estate Closing Costs

Closing on a real estate transaction entails a number of additional expenses. Instead of lumping them all together, let’s look at a few of the closing charges that one can encounter at a real estate closing:

Fees for Mortgage Origination
Points for Savings
Fees for Appraisals
Insurance on the title
Fees for Real Estate Agents
Prepaid Fees
Recording Fees & Taxes for Private Mortgage Insurance (PMI)
Costs of Miscellaneous Items

What To Do After Closing A Real Estate Deal

After you’ve closed a deal, the first thing you should do is protect your investment. Make sure the property is insured on the day of closing. If you’re getting money from a bank, you’ll have to do it. Even if you’re paying in cash, you should take actions to ensure the property as soon as the paperwork is finalized. You’ll also want to make sure the property is secure. Start by replacing the locks and covering any damaged windows with plywood. Next, secure any basement or garage doors with a padlock. You can protect yourself from any potential problems by implementing the steps outlined above.

As you close on the property, you should have a few home renovation projects in mind. If not, now is a good moment to consider what you need to do, who will do it, and how much it will cost. Inquire among your contacts for dependable contractors, or work with one of your current contacts. Make an appointment for a walkthrough.

Examine your property’s plans. Make it clear what you want from the project and when you want it to be completed. Keep in mind that this is your home. You are not obligated to hire the first contractor you speak with. Rather, take the time to identify someone you can trust to complete the task. Rehabbing and selling a home should be simple if you have the right plan in place. However, you are not finished once the property is sold. Even when you’ve made your money, there’s still a lot of work to be done.

You must track your results in order to ensure that your next deal goes as smoothly as this one. Going from transaction to deal, or marketing plan to marketing plan, can become a never-ending loop with no real gains. Even if you’ve already set your sights on another house, document the steps you took to close this one. Make a list of the purchase price, the closing date, the profits, and other details. This can not only show you where you can save money and concentrate your future business, but it can also help you make new contacts.

After you’ve closed a deal, the final thing you should do is add the completed property to your real estate portfolio. If you haven’t done so previously, make it a practice to add to your portfolio for each deal you work on. A spreadsheet, word document, or even a presentation with images of your completed homes could be used to keep track of your progress. Find a system that works for you and keep it up to date. Any future private money partners, investing partner candidates, and anybody else with whom you try to collaborate can use this information. The more information you can give them, the better they will understand how you work and what you offer to the table.