In real estate, the term “Closing” is the last process in buying and financing a home. In fact, the “Closing” has also been called “Settlement,” which means all the other parties in a transaction of mortgage loan sign the necessary documents.
When a home is purchased from a loan, the Closing of the loan (when the loan becomes final and funds are distributed) and the Closing of the home purchase (when an individual becomes the owner of the new home) usually happen at the same time. Once the Closing is complete, an individual is legally required to repay the mortgage.
Who Are Included In The Closing?
In general, the Closing may include some or all of these entities:
- The real estate agent or realtor
- Title insurance company
- An escrow company
- The attorney (if coming from a state where attorneys perform closings or if hiring a legal representation for Closing)
- The seller’s attorney
- The lender may or may not attend
All the parties may sit and sign all the documents at once, depending on the state. In addition, the Closing could take several weeks since the signatures of each party are separately collected. In fact, some companies allow signing documents electronically, whether in advance of Closing or at the closing table.
What’s The Difference Between Settlement and Closing?
There’s an important distinction between two closely-related but separate terms: Settlement and Closing. Here’s the real difference between Settlement and Closing and why that difference is so important.
- Settlement: When everyone signs the loan documents and deed.
- Closing: When the deed is recorded with the Register of Deeds.
It is often what people mean when they say “closing” or “the closing table.” The buyers, their agent, and the closing attorney meet to walk through the Closing Disclosure, Loan Contract, and Deed.
The closing attorney leads the conversation and takes everything line-by-line. Once everything is signed, the buyers receive their copy, a relatively hefty pack of paperwork. This is the final step because it’s the last active step for homebuyers. But the closing attorney still has one more task.
This is when the attorney records everything with the county’s Register of Deeds. Legally speaking, possession of the home does not occur until the deed is recorded. This is important because the new owners aren’t entitled to keys (garage door openers, etc.) until that time.
How Do Settlement And Closing Work?
Step 1. Starting the Process
An “escrow” or “sales” contract (sale agreement) starts the process by opening a title order. Then the file gets processed, which includes the order of legal papers, such as loan payoffs, tax information, survey if necessary, homeowner/maintenance fees, inspections/reports, hazard, and other insurances, as well as title commitments / preliminary reports, are reviewed and sent out.
Step 2. Title Search and Examination
A search is made of the public records, which include mortgages, deeds, liens, paving assessments, wills, divorce settlements, and other documents that can affect the property’s title. In fact, title examination examines the documents found during the title search that can affect the property’s title. That said, this is when the legal owner is verified and determines the debts owed against the property.
Step 3. Document Preparation
The process involves:
- Reviewing lender instructions/requirements
- Reviewing instructions from other parties to a transaction
- Reviewing legal and loan documents
- Assemble charges, and prepare closing statements
- Set Closing
- Settlement / Closing of the Transaction
Step 4. Settlement Officer Oversees Closing
The seller signs the deed, the buyer signs a new mortgage, the old loan is paid, and the new mortgage is signed. This is where sellers, attorneys, real estate professionals, and other parties involved in the transaction are paid. Where the property or county is located, the documents are being recorded.
Step 5. Post-Closing
Before recording the documents with the county, the title agent will forward the payment to any prior lender, as well as pay all parties who performed services connected with the Closing and pay out the seller for any net funds once the signing has been finished. As a matter of fact, this all happens without any needed involvement from the buyer or seller.
Who Attends A Property Closing?
Multiple people are involved in real estate sales transactions, especially on closing day. These people can roughly be divided into two categories – those who are directly involved in the sale and those who are neutral third parties helping to facilitate the transaction.
As indicated, those directly involved include buyers, sellers, and real estate agents. Escrow agents, title agents, and real estate attorneys are third parties facilitating the legal transaction. Additionally, loan officers forward paperwork and funds from lenders for the settlement process.
Buyers, Sellers, and Their Real Estate Agents
The buyers are the ones who are purchasing the property. Buyers typically use a real estate agent to assist them in finding and negotiating for property and guiding them through the home buying process. Sellers own property and wish to sell it, and often work with real estate agents to list their property for sale, negotiate the sale and provide advice on preparing and marketing the home to get top dollar for it.
A closing agent ensures that all steps of a settlement are completed. A closing agent may be an escrow agent or a title agent. The closing agent prepares the final paperwork, collects the necessary signatures, and records the information with the local government.
An escrow agent is a neutral third party who accepts funds on behalf of buyers and sellers for disbursement at Closing. Sometimes a real estate attorney conducts the Closing and functions as an escrow agent.
A title agent offers research into the title status of the home and insurance services. Title agents ensure that the seller is the legitimate or legal owner of the property and there are no legal defects in the title which would prevent the transfer to the buyer.
For Closing, the loan officer is responsible for providing mortgage information and funds on behalf of a lender. As a lender’s representative, the loan officer sends the funds taken out as a loan and gives them to the closing agent to complete the sale.
The closing agent will also need the supporting documents giving details of the mortgage so that the title acknowledges the mortgage. Loan officers do not usually attend or conduct the closing process.
The Bottom Line
In real estate, one small detail can make a huge difference, such as in the case of “Closing” and “Settlement.” Title Guarantee is here to help make it as smooth as possible. They help you with Settlement and Closing to have proper expectations for funding, recording, and ultimately possessing the Property. Ultimately, they offer clients, customers, and employees a no-compromise approach, which is the best of what the title industry can offer.