What are the key steps and parties involved in a real estate closing?
At closing, the seller delivers the deed, the buyer pays the purchase price (less earnest money already paid), the lender funds the mortgage, title is transferred, and the deed and mortgage are recorded. A closing agent or attorney conducts the process and prepares closing documents.
Key Takeaways
- A closing agent or attorney conducts the process and prepares closing documents.
Transfer of Property on the Real Estate Exam
Closings are the culmination of every real estate transaction. Understanding what happens at closing, who is responsible for what, and the order of events is essential for agents, brokers, and property managers. Exams test both the procedural steps and the documents involved.
Understanding Transfer of Property: Key Concepts
What It Means
A real estate closing is the final step where ownership of the property transfers from seller to buyer. The closing may take place in person or remotely, depending on state law and the parties' preferences. A closing agent (often a title company employee or attorney) oversees the process. In some states, real estate attorneys are required to conduct closings; in others, title companies or escrow agents handle it.
Before closing, the buyer completes a final walk-through inspection to confirm the property condition matches the contract and agreed repairs are complete. The lender typically requires this walk-through before releasing funds. The buyer and seller review the Closing Disclosure (required by federal TRID rules), which shows all fees, loan terms, and cash to be paid or received. This document must be provided at least three business days before closing.
At closing, the buyer signs the promissory note and mortgage documents (or deed of trust in some states). The seller signs the deed and any required affidavits or disclosures. Both parties may sign a settlement statement showing all charges and credits. The escrow agent collects funds from the lender and buyer, pays off any existing liens, pays the seller's net proceeds, and pays closing costs for both parties. Title insurance policies are issued. The deed is signed, notarized, and handed to the buyer.
After closing, the closing agent records the deed and new mortgage in the county recorder's office where the property is located. Recording creates constructive notice and completes the transfer of ownership. The buyer receives the recorded deed, title insurance policy, keys to the property, and any required disclosures. The seller receives the net proceeds. The lender keeps a copy of the recorded mortgage as evidence of its security interest.