In the process of purchasing real estate, closing the deal is the last step. This section gives more on the closing process.
The buying procedure for any property, be it residential or commercial, is the same. You make a checklist of the various aspects like budget, neighborhood, insurance, begin your search, decide on a property, inquire about the price, see if it fits in your budget, arrange the loan and mortgage, make a counter offer, and finally, when everything is acceptable, buy the property. Once you decide to buy the property, the settlement process begins. The procedure is given in detail below.
The closing comes last in the home-buying process, and is the most important part of a real estate deal. It begins once the purchase offer, or counter offer, is accepted by the seller of the property. Any last-minute changes regarding the property are made, and the final offers are accepted. A number of documents like the contract, the proof of title, mortgage and insurance, reports from the home inspector, are all required for this process. You can also involve an attorney for the same. The step by step closing process is explained below.
Earnest Money: Earnest money is that money which the buyer pays to the seller. Payment of earnest money means that the buyer is interested in buying the house. When the seller receives this payment, he may consider the home-selling process to have started. The buyer may pay by cash or check.
Check the Title: A closing agent or title company is selected to verify the correct title of the property. They assess the seller’s legal claim on the property, check for any other lien on it, and also confirm if all the necessary taxes have been paid by the seller. Once the title is cleared, the last-minute real estate negotiations can be completed.
Disclosures: A buyer needs to look through the house once again in the last 24 hours to ensure if the seller has left the house in the manner promised in the sales contract. The buyer will have to appoint a home inspector for the inspection process. On the basis of his report, if the buyer feels that there are some unresolved issues, he can delay the closing process.
Appraisal: Every buyer will require real estate financing from a lender. The lender will conduct an appraisal to determine the value of the property. If the lender is satisfied, he can speed up the closing process.
Approval of The Loan: Property appraisal becomes important from the lender’s perspective. If the lender is happy with the property, he will approve the loan amount, after which the title company will receive all the documents from the lender’s side. These documents will be signed on the closing day, which is set up by the title company. The seller will need to settle all the past loans on the house before the buyer can sign the papers. An escrow account is opened at this stage for smooth financial transactions.
Cashier’s Check: The buyer needs to get a cashier’s check for the balance amount. The final amount is calculated after considering all the related fees and price of the property after consulting with the closing agent or title company.
Closing: The buyer signs all the important documents like the loan papers, the title deed, and others. The seller either signs it all earlier or on the same day. This varies according to the states in which the transactions are taking place.
Final Touches: After the documents are signed by the parties, the next step is recording of this transaction by the county. Then the possession of the property is formally changed from the buyer to the seller.
The closing process for commercial real estate is the same. However, there are some additional elements that need to be looked at. Commercial real estate is an investment property, and so the entire process needs to be taken care of without errors.
- As the commercial property is owned by entities and rarely by an individual, all the entities are checked thoroughly due to the high risk of liability involved.
- A formal escrow account is opened due to the large amounts of money involved.
- Title is complex as there is an organization involved.
- A diligence period is fixed, where all the documents and the leases are agreed upon by the seller and purchaser.
- Apart from the regular documents, there are a few additional documents to be signed and handed over by the buyers and the sellers. For example, the buyer may want the same servicing company for the maintenance of the elevators or the same housekeeping staff. Documents related to these issues are to be handed over and signed.
Real estate investment needs to be handled with caution. Appoint an attorney for your property management after the closing process so that you do not have to worry about any problems related to the property.