If you’re new to the home buying or selling process, or inexperienced with real estate transactions, the closing process can be confusing. There are many steps that go into the details of home buying and selling. You’ll hear the terms “closing team” and “closing costs”, but what exactly do those terms entail? Here’s a quick glance at what your closing team does to finalize the sale on a property. You may be surprised to realize how many people are involved in securing funds, negotiating terms, evaluating the property, handling documents, and dispersing the funds.
- LOAN OFFICER: First, there’s your loan officer. Your loan officer typically works for the bank that will be funding your mortgage.
- LENDING OFFICER: The lending officer, employed by your lender, is required to verify your qualifications, such as employment and credit history.
- HOME INSPECTOR: Once your qualifications have been verified, the bank wants to make sure the home you’re buying is worth the amount you’re borrowing. To do this, the lending officer secures a home inspector and an appraiser. The home inspector evaluates the condition of the home to make sure everything is in good, working order and that nothing is in a state of disarray or disrepair. Often times, if a home inspector does evaluate a home with malfunctions, the contract can be negotiated. When the contract is negotiated because of problems with the home, the buyer can request that the seller make repairs, or that the seller reduces the price of the home to account for repairs needed. This is one of the few places in the home-buying journey that the contract can be negotiated with allowances. Any reductions or extensions for repairs are documented in the contract and must be completed by the day of closing unless otherwise stated in writing.
- APPRAISER: When the home inspection is complete and the property is verified to be in good condition, then an appraiser comes in to determine the value of the home. Many factors contribute to determining the value, including location, lot size, and features of the house. When the appraiser agrees that the home is worth what the seller is charging and the buyer is borrowing, the closing process continues to the next step. If the appraiser does not agree that the house is valued at the amount being asked, the contract can again be negotiated and the price of the home may need to be reduced.
- TITLE COMPANY: The title on the home being sold is also searched to ensure the house is not bound by liens or other restrictions.
- REAL ESTATE AGENTS: There will likely be two real estate agents involved in the transfer of property. The seller employs one real estate agent, and the buyer employs the other. It’s never a good idea to engage in real estate transactions without securing a professional realtor to help you with the process. Your real estate agent will help you shop various properties, and when you find the home of your dreams, your agent will help you put in an offer. In the event of multiple offers, your agent helps you negotiate terms. The inspector, appraiser, and loan officer do not get paid until the day of closing, along with the seller and real estate agents. It’s a good idea to be pre-approved for your home before you begin shopping. By getting pre-approved, you know what you can afford, which makes working with your real estate agent easier.
- ESCROW OFFICER: In most situations, a third party, neutral escrow closer becomes involved after the loan officer secures verification and the home inspection and appraisal are complete. The escrow officer prepares documents for signing, holds the funds, and then distributes funds as appropriate to the inspector, appraiser, attorneys, real estate agents, clerks, and any other professionals who were involved in the sale of the property. The escrow officer then records the documents and deeds. In some states, there are no escrow companies, so the delegation of documents and funds may be handled directly by the real estate company or real estate attorney.
Buying a home can be an incredibly exciting experience, as can selling a house. But transferring a property from one owner to another owner takes an entire team of professionals to secure. Prepare in advance for a successful real estate experience.
Want to know more? Give us a call at 210-639-9403.