The Home Closing Process

by Ron Haynes

The process of buying a home is exciting and scary at the same time. It’s a huge, unnerving financial decision (taking on a mortgage is probably the largest amount of debt you’ll ever incur) and the whole “closing process” is something shrouded in mystery.

Up until “the closing”,” almost everything associated with buying a home is generally understood. Walking through houses, deciding what you like and don’t like, evaluating neighborhoods, measuring distances to work and shopping, it’s all pretty easy. But making the actual purchase becomes more complicated. You’re just borrowing money via a mortgage to make a purchase. Relatively simple, right?

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house_keys Closing on a home is a step-by-step process

The closing process is made up of four steps that end with you receiving the keys to your home:

invest, investor, investing, lending
  1. Escrow
  2. Inspection
  3. Final walk-through
  4. The “closing”

1. Escrow

Any money that has changed hands so far in the deal will be kept in escrow. This is a third-party account that neither the buyer nor seller can access and is overseen by an escrow officer (usually hired by the seller’s agent). This escrow agent handles the transfer of money into the escrow account (usually just called “escrow”) and takes care of the various details of the closing process.

2. The Buyer’s inspection

Buyers should always demand a professional home inspection, regardless of whether the seller has already conducted an inspection. I know I would … and did. The purpose of the buyer’s own inspection is to discover any problems with the property that might cause him or her to back out or to demand a pricing concession. Make certain your purchase agreement is contingent on a BUYER’S inspection! Purchase agreements generally do allow the buyer to renegotiate or walk away, depending on the outcome of the home inspection. What are your options should your inspection uncover the need for major or minor repairs, upgrades, or other problems that the inspection reveals?

  1. Ignore the problems and know you’ll be repairing your new home very soon.
  2. Renegotiate the selling price by the estimated cost of the repairs.
  3. Insist the seller pay for and make the repairs before the closing.
  4. Have the seller deposit money into escrow immediately that you can use to make repairs after closing but before you move in.

Ignore Option 1 – I hope you don’t take that one! I did once and I learned a powerful lesson.

Option 2 is relatively easy to work through but it will require that you handle the situation yourself, though controlling who does the repair will give you the chance to insure the repairs a properly completed. Option 3 may not work out since the seller may not have the cash available to repair the house – plus you don’t know whether the repair will be completed by a competent professional. If the seller agrees to Option 3 and can get the repairs done in a short time frame, that’s a no brainer. With Option 4 you get the seller to pay for the repairs AND you get to determine who completes the repairs. The problem is that should the repairman discover more repairs are needed after closing, you may run into problems and the need to get more cash from the seller. That isn’t always easy.

3. The buyer’s final walkthrough

Buyer’s visit the home one final time before the closing to inspect the property and verify that its condition has not changed. This walkthrough usually occurs on the morning of the closing, or at most a few days before. Occasionally buyers will find more problems during the walkthrough and those can delay the sale. At this stage in the process, sellers usually agree to deposit money into escrow that the buyer can use to resolve the problems rather than make repairs.

4. The closing meeting

The “closing” is the meeting where the buyer, the seller, and their real estate agents and attorneys come together to finalize the real estate transaction. The settlement agent — usually an attorney or an escrow officer — conducts the closing, handling the exchange of money and the keys. This settlement agent also ensures that the buyer and seller sign all the required documents to finalize the deal. Count on signing your name 30 times or more. While it’s important to read all these documents carefully to confirm that they reflect the terms of the deal accurately, the reality is that no one ever does. A closing would last two days if that happened! Still, glance over the numbers on each document you sign and if anything feels wrong or makes you uncomfortable, ask about it. Even at this late stage, you can still back out if something isn’t correct.

After the closing

Most sellers agree to vacate the property on or just prior to the day of the closing. Sellers should plan to move well in advance to avoid delaying the buyer’s move. If you’re the seller, a few weeks before your vacate date, contact your insurer to cancel or transfer your homeowners insurance policy The cancellation or transfer should take effect on the day the property officially changes hands. Also call your electric company, gas company, cable provider, and any other utilities to cancel or transfer those accounts as well.

Photo by nezumichuu

About the author

Ron Haynes has written 988 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.



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