Have you ever heard someone say that they were waiting to close on their house and had no idea what that meant? Maybe you imagined some people in a conference room negotiating on a price until the last minute? Fortunately, or unfortunately, this is not what is happening the vast majority of the time. I am going to break down the major aspects of closing.
- Purchase Agreement – This is the first step in a closing. A Purchase Agreement or Purchase Contract is the initial agreement between the Buyer and Seller and includes the terms of the sale. Typically this will include the sales price and a determination who will pay what portions of the closing costs.
- Title Search – A title search involves an individual, usually called an Abstractor, reviewing the chain of title on a property. This involves searching the County Recorder to locate deeds, and any other property encumbrances.
- Title Review – At this point an Attorney reviews the title search to make sure that the title is clean and there are no hindrances to ownership. Some potential issues are old, unreleased interests in property, life estates, liens and mortgages.
- Deed Prep – Upon reviewing the title search the attorney can then draft the Deed for the property transfer. A deed is essentially the title to the property/home. This document will be signed at closing and then recorded in the County Recorder so that there is clear record of who owns the property
- Title Clearing – Title clearing is the process of removing the potential encumbrances that would be attached to the land. This involves removing those previous mentioned life estates, interests, liens, and even back taxes. Sometimes the title company will reach out and work alongside the Buyer/Seller to ensure transparency and to extinguish any outstanding issues.
- Lender Document – This is usually a somewhat large collection of documents that a Lending institution will draft in order to attach a mortgage: This can include a Mortgage, Promissory Note, Institution Specific Documents, any relevant forms for the IRS, and a few other miscellaneous documents.
- Signing the Parties – This is the final step when the parties come together to sign all of the documents for closing including the Deed, any Lender Documents, and Documents that the Title Company keeps for their own records. The Documents are then recorded and the Property is officially transferred.