What is the Process of Real Estate Closing? Part 1

Real estate sales are complex. Much of this complexity occurs during the closing process, which includes the buyer, seller, lender, real estate attorneys, and more. Closing is also a process most people only encounter a few times in their lives. That’s why we’ve created this two-part post to break down and explain the steps of real estate closing.

The Steps to Expect During a Real Estate Closing

Apply for Your Mortgage

The closing process starts once the seller has accepted an offer from the buyer. With a purchase agreement, it is time to apply for a mortgage, which you need to do, even if you have pre-approval. During this stage, the lender will verify your financial stability, including income, credit score, and employment status. They’ll also want information about the specific property you plan to buy.

Opening Escrow and Earnest Money

With the home under contract and mortgage approval in place, you must deposit earnest money on the sale. Earnest money is a deposit the buyer makes to demonstrate their intent to follow through on the purchase. The buyer typically opens an escrow account for the earnest money. An escrow account ensures security for the funds during the closing process. The escrow agent will release the funds once the buyer and seller have met all conditions. If the deal falls through due to the buyer’s fault, they may forfeit the earnest money. However, if the seller is at fault, the buyer should get the deposit back.

Title Search and Insurance

Your lender will require a title search before issuing a mortgage. However, a title search is also beneficial to the buyer. This process involves a thorough search of public records to verify the property’s legal ownership. It will also identify existing liens, claims, or encumbrances. Beyond being a requirement for mortgage approval, it protects buyers and lenders from potential legal disputes. Additionally, it is a requirement for obtaining title insurance, which is another requirement for mortgage approval.

Arrange a Home Inspection

A home inspection is another crucial step in the real estate closing process. During the inspection, a licensed inspector examines the home for structural issues and potential maintenance concerns. An inspection report can reveal issues the buyer needs to know about before completing the sale. For instance, they could negotiate repairs into the contract or a lower price to cover repair costs.

Property Appraisal

The mortgage lender will also want a property appraisal before final loan approval. Appraisals assess the fair market value of the property to guard against overpaying. The appraiser will determine value by considering factors like the home’s condition, location, and recent sales of comparable properties. If the appraisal is lower than the purchase price, the lender may require new negotiations to complete the sale.

This post only covers the early stages of the closing process. Come back for part two to learn more about real estate closings.

Do you need help closing on a home? Click here to contact First National Title & Escrow. We offer complete title and closing services. Reach out now to learn more!

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