Residential Real Estate Closings: Let’s Review Closing Day
Let’s talk about closing day. For sure the buyer is going to want to bring their down payment to closing. This will likely be a cashier’s check made out to themselves, or to the title company. Most title companies either will not accept personal checks or small checks under $1000 if they do. It’s recommended that you view the HUD-1 closing statement 24 hours before closing. That’s really the rules. Now if you want me to be realistic with you, most who have been in the business awhile say that last minute changes hours before closing is common most of the time. It’s just a good idea to view most of that info ahead of time. You can go over it with your agent or your loan officer. There are a lot of fees on there, I’ll just tell you now upfront, be prepared.
For years, I wanted to call all of these fees in my own mind, “junk fees”. Let me assure you that 95-99% of all of those fees have real live people performing hard work to get those fees. Most of the lenders fees are non negotiable anyways. Appraisers, loan officers, agents, title people, most people all get paid at closing. Some appraisers and inspectors will get paid upfront(paid at the door). Appraisals in my state are $350-400. If it’s a duplex, or very large home it can be $750.
On the HUD-1 settlement statement, please keep in mind the first page is really a summary of your credits and debits. Your money coming in and your money going out. For example “seller paid closing costs” is a credit. Where is a down payment “going out”, is a debit. The right side of the HUD-1 settlement statement will show the debits and credits for a seller as well. For a seller the debits will be closing costs they have to pay, commissions they have to pay, taxes, etc. Usually this is all added up into one line. They will also have payoff of current loans. For credits it will show the loan coming in from the buyer’s lender.
The 2nd page of the HUD-1 shows about everything in detail. I could write many posts on just the 2nd page of the HUD-1 line by line, and maybe I will later. It will include prorated taxes, interest. It will include loan fees on the buyer’s side, lender fees. The seller’s side will include taxes, commissions, etc. There will be county fees you have to both pay. Their will be recording fees, courier fees, closing fees. The title company makes a lot of their money from owner’s insurance policies. Owner’s insurance policies will be covered in another post. The seller will want to know their addresses from the past 10 years, this may have changed, last 10 years may not be needed anymore. Seller will need to sign a deed, and will need to provide a forwarding address. Both buyer and seller will need to sign the HUD statement. I’d say that the buyer has 8-10 times more paperwork to sign then the seller. This is in the cases where the buyer is getting a loan, it’s mostly paperwork for the lender. After you close, usually 45minutes to 1 hour, checks will be cut, and most title companies
will give you a nice folder with a copy of some of the paperwork. Seller’s will need to sign some forms for 1099, etc, tax forms about how long they’ve lived in the property, etc.
Usually the buyer will only see the buyer’s side of the HUD, and the seller only sees the seller’s side of the HUD, that’s for privacy reasons. I find most closings go pretty smooth because most all of the work has been done ahead of time. After everything is signed, typically the closer goes in the other room and makes copies for 10-15 minutes. and faxes the lender. Hopefully the lender releases funds so everyone can be paid, with checks cut. If you sign all paperwork, and it doesn’t fund, no payouts that day, it’s said to be a dry closing. If you close late in the day like 3 or 4pm, it’s mostly likely going to be a dry closing, but not always. often the wire is already at the title company before signatures, but not always. I know many people get nervous at a closing because it’s such a big moment, or they are afraid to say something. I would say buyer’s should bring their hand and get ready to sign a lot of papers. Have that down payment. Both parties should have ID’s. Seller’s should have the spouse, or others on title at the closing to sign as well. Buyer’s just need to make sure they don’t make any new or big purchases before closing as this could really kill the entire deal. Seller’s need to make sure to bring the keys, front door, back door, garage keys, shed keys, they should bring the garage door openers. Any warranties they may have for appliances, or warranties to transfer. You can actually get very use to closings after you have done a lot of them, and understand the process.
I had a closing 4 days ago, and I drover right over, knew it would take 25 minutes, and I wasn’t even 1% nervous as the seller, I knew the hard work had already been done, and to me it was like just stopping
at the store for 20 minutes, it’s something you can get use to. I find that reviewing the HUD-1 3-24 Hours ahead of time really helps me feel more comfortable. email me at ron@minnesotainvestors.com with any questions
Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/
