How to Prepare Closing Documents in a Residential Real Estate Transaction? Well, preparing such documents is not an easy task. It needs a lot of effort and time. Let’s begin our discussion.
Buying a house or any residential property is an adventurous and exciting process. But the complexity and stress are unmatchable. Selling or buying a home can be the biggest event of one’s life. It is valid for first-time buyers or even experienced investors.
Among the steps, one of the most important things is to know how to prepare closing documents in a residential real estate transaction. In this step, both parties have to provide various documents: from fundamental to advanced financial records. For this reason, you need an experienced lawyer for a house closing.
In today’s article, we will discuss how to prepare real estate documents and how you can manage all this. Hang in there!
- 1 Documents Needed to Close any Residential Real Estate Transaction
- 2 How to Prepare Closing Documents in a Residential Real Estate Transaction?
- 2.1 Step 1: Getting an Lawyer
- 2.2 Step 2: Inspect the Home for a Final Check
- 2.3 Step 3: Open an Escrow Account
- 2.4 Step 4: Search Title and Insurance
- 2.5 Step 5: Renegotiate the Deal (If Necessary)
- 2.6 Step 6: Finalize the Interest Rate
- 2.7 Step 7: Start the Fund Transfer
- 2.8 Step 8: A Final Check-Up
- 2.9 Step 9: Seal the Deal
- 3 What Does Your Lawyer Need to Close the Purchase?
- 4 Typical Fees You Should Be Prepared to Pay
- 5 Frequently Asked Questions
- 6 Final words
Documents Needed to Close any Residential Real Estate Transaction
Closing any residential transaction is a complex process involving a lot of documents and papers. What kind of document? Well, these are some certifications that provide some official information about the seller and buyer.
Here are some of the important papers that you will need:
- Home inspection report;
- Deed of sale of the property;
- Cadastral plan;
- statement of adjustments;
- Mortgage certificate of the property;
- Documents certifying the regularity of the property and systems;
- Closing package;
- Personal documents
- ID card
- Tax information
- Social security number
- Residency permit for immigrants.
Get In Touch with a Residential Real Estate Lawyer
How to Prepare Closing Documents in a Residential Real Estate Transaction?
After you have all your documents at hand, it’s time to prepare for closing. The closing starts when both the seller and buyer sign the contract. This contract has everything you need: all the dates, money, terms and conditions, price, etc. this contract is also known as APS or the Agreement of Purchase and Sale. Many consider this initial step as an “in escrow” period.
Here are all the steps of house closing in brief:
Step 1: Getting an Lawyer
A third party or escrow agent is essential for a clean settlement. Get a lawyer specialized in real estate. He will make sure if all the documents are correct.
The documents are complex and tricky. Your lawyer is an experienced and skilled professional. He will be able to check all the documents, deeds, and other points on contracts. Then, after all the necessary steps, he will start the transaction.
Step 2: Inspect the Home for a Final Check
This can be done by an expert or a third party for a neutral opinion. However, this inspection is essential for your interest. Moreover, this inspection will come in handy when you wish for faster loan approval.
Another thing you need to do before buying a property is a pest inspection. This can be a serious problem once you buy the house.
When you approach a mortgage company, they insist on a formal inspection report.
Step 3: Open an Escrow Account
An escrow account means a third-party account on behalf of the buyer or the seller. This step is done to prevent any scam from happening. The third-party holds the money and the related documents until the deal is finally done.
Step 4: Search Title and Insurance
Title searching is a crucial step in the closing process. It is done to make sure that there is no other owner or party involved with the property. In addition, it will clear all the points relating to the shared agreements, mortgages, access, etc.
Also, get the title of insurance of the property. So, after buying, no one else can claim your house.
Step 5: Renegotiate the Deal (If Necessary)
It doesn’t matter if you are near the closing event; you can still renegotiate your deal. However, if you have a better offer in your mind, this is the time to discuss it. For example, ask for the repairs, get an upgrade or even try a slight discount. There is no harm in asking.
Step 6: Finalize the Interest Rate
The interest rate is volatile and changing. So before closing the deal, make sure the interest rate is fixed. It will save you from further misunderstanding and a great deal of loss. So, finalize the interest rate when applying for a loan.
Step 7: Start the Fund Transfer
You already have most likely to deposit your down payment or deposit to the escrow account. At this point, you need to add some more money to start the fund transfer process. The initial money was considered a down payment. This money is used for various other payments and fees. That’s why it is imperative to arrange funding before closing the deal.
Step 8: A Final Check-Up
Before signing the contract, it is time to check and re-check every step one last time. You have 24 hours before the fund is transferred. After that, it’s time to review the property. Make sure you are getting everything promised in the initial contract.
Step 9: Seal the Deal
Here comes the final step- signing the contract. It can take some time as the agreement can be larger with many pages. Take your attorney with you, and analyze the claws and terms. Check the interest rate, the title, and other important points. Your lawyer can help you understand if there are any hidden facts.
What Does Your Lawyer Need to Close the Purchase?
Your layer is there to help you close on a house. But for that, he needs your cooperation. To help you with the whole situation, he will need the following information:
- The contract papers;
- The Deed;
- Property inspection result;
- The mortgage details;
- Your personal information (photo, ID, DOB, etc.);
- Insurance papers;
- Title information;
- Closing money.
Typical Fees You Should Be Prepared to Pay
Closing costs vary depending on the position, area, and some other factors. Therefore, it is good to prepare and keep some extra funds for these types of costs. You should manage at least 5% of the total purchase.
This is the maximum amount. Usually, it takes not more than 3-5%. But with changing circumstances, the cost can change too. So, it will be wise to be prepared. However, if the money is not needed, you can improve the house, furniture, or decoration.
Here are some typical costs that you will need to spend:
Land transaction fee: This is the most considerable fee to pay. You pay a lump sum of money at once. There are no other fees regarding this.
The goods and services tax (GST): Generally, GST is paid for only new construction. However, depending on some circumstances, you may need to pay GST while purchasing a property.
Appraisal cost: You spend an appraisal cost to make sure that the property is okay. It ensures that you are getting a fault-free house.
Legal cost: when you hire an attorney or a lawyer, you pay them for their services.
Title insurance transfer fee: To ensure there is no property dispute, you need to buy title insurance through a lawyer.
Property Inspection cost: As we said before, you need to inspect the property by an expert thoroughly.
Frequently Asked Questions
What To Look for In Closing Documents?
The most important thing to check is the Deed. It is the public record that confirms the owner of the property. Also, check the dates, amounts, loan details, title, or any other loopholes.
What Are the Steps in the Closing Process of Real Estate?
In simple words, the steps are step 1: getting an attorney, step 2: inspect the home for a final check, step 3: opening an escrow account, step 4: searching title and insurance, step 5: Renegotiating the deal (if necessary), step 6: finalizing the interest rate, step 7: starting of the fund transfer, step 8: a final check-up, step 9: Seal the deal.
What Are Home Closing Documents?
Home closing documents involve Deed, map, insurance paper, mortgage approval papers, personal information, etc.
How Many Days Before Closing Do You Get Mortgage Approval?
In general, it can take up to 30 days to approve your loan before closing. But the timeline can change depending on how faster the system works. So it can take more or less time.
It can’t be discussed in short how to prepare closing documents in a residential real estate transaction. The whole process is lengthy and complex, involving few legal matters. That is why we recommend contacting experienced and skilled personnel. Why do we emphasize this matter? Because we know, owning a property means the world to you. And the least we can do is make the process easier.