How To Navigate The Closing Process When You Sell Your Home
By Cathy Goodwin
Many homeowners confuse the term “closing date” with the term “closing process.” At the closing date, your home’s ownership will be officially transferred to your buyer. Time to celebrate! The closing process, on the other hand, begins the day you accept an offer and ends at the closing date
Here is what you need to do during the closing process.
- Be ready to respond to the title search if problems turn up.
As a first step, a title company reviews public records to make sure you have the right to sell this property. You would not be able to sell if the company uncovers liens, claims or judgments against the property. For instance, a local agent may put in a claim against your home if you have allowed certain kinds of work to be done without a permit. After establishing that you have the right to sell, the title company issues an insurance policy, protecting the buyer in case claims arise that could not be anticipated today.
Who pays title insurance? The answer depends on your state and even your city. For instance, the buyer usually pays title insurance policy in Pennsylvania, and the buyer has the legal right to select the title company. In Southern California the seller typically pays title insurance but in Northern California the parties split the cost.
- Be ready to respond to concerns about the appraisal.
Your buyer will need to order an appraisal in order to get a mortgage. Suppose you’ve negotiated a selling price of $300K. Now your appraisal comes in at $250K.
If your buyer has an appraisal contingency clause, she can back out of the purchase or ask you to lower the price. If he has a mortgage contingency clause, he can do the same thing, because mortgage companies rarely lend amounts above appraisal price.
Occasionally in a hot market, or for a particularly desirable property, a seller who’s not in a hurry to sell will refuse to agree to an appraisal or mortgage contingency. You can discuss this option with your real estate agent or lawyer, who will make sure your paperwork clarifies your intention.
Normally you do not have the right to see the buyer’s appraisal. If the property appraised at $300K and you accepted $250K, you might never know. Occasionally, to speed up negotiations, a seller will initiate an appraisal before putting property on the market. Typically, an experienced agent will come very close to the appraisal number, but you may be surprised when the final number comes in.
- Respond to the buyer’s inspection.
Before placing your house on the market, discuss with your agent the best way to handle the inspection. Most homeowners will insist on an inspection and will set up an “inspection contingency,” i.e., they have the right to stop the sale based on any results turned up in the inspection.
Occasionally proactive sellers will initiate an inspection of their own property. They can then take care of minor repairs before issues arise during closing. Some buyers will accept their report, speeding up the process.
As a seller, you can also set terms of response to the inspection. When the market is hot or when you’re not in a hurry, you can advise the buyer, “We will not be making repairs based on the inspection report. You can inspect and decide not to buy.”
You can also decide that you will not be making the repairs yourself, although you will issue a seller’s credit at closing. Experienced sellers often insist on this option for many reasons. When you make the repairs, you’re responsible if something goes wrong. Repairs may take longer than expected and delay the closing. Buyers often prefer this option because they control who makes the repairs. They choose a contractor or plumber they trust.
If you’re still occupying the home you sell, you can also make a similar condition for cleaning. Sellers sometimes issue a small credit to cover the buyer’s cleaning cost, so they won’t get into negotiations over dust left in the corners.
- Give the buyer’s agent access for the walk-through.
Buyers and their agents usually ask for a walk-through the day before the closing date. They verify that the property hasn’t changed and that repairs have been made as agreed. Some buyers complete the walk-through on their way to the closing table.
By this time, as the seller, you’ve vacated the property. You took down the staging and removed everything that’s not part of the sale. You handed over your keys, garage door openers, and anything else unique to the property. In some locations, anything you leave behind will become the seller’s property, so do your own walk-through after the moving van comes.
- Sign the paperwork.
As the seller, you do not have to attend the buyer’s closing. Many homeowners have an image of all the parties sitting at a table together and exchanging documents and keys. That can happen and sometimes the closing even feels like a little party, complete with refreshments.
But many experienced agents encourage the seller not to attend the closing, but instead to sign all the paperwork ahead of time. Apart from the inconvenience, your buyers may feel overwhelmed or may wonder if they’ve made a mistake. Your own feelings could create tension: are you sad to be leaving or relieved to be gone?
Hold the celebration! It’s rare, but occasionally a buyer will back out at the last minute, even forfeiting a deposit. Experienced real estate agents say they take the sign down the day after the closing.
Your final steps after the buyer has signed
If you’ve taken out a loan against the equity in the property, make sure you notify the lender. Don’t forget to notify your utility companies, homeowners insurance agency, and post office.
You may get a check immediately or you may have to wait till the sale has been registered with the local government agency. Usually, you can arrange for a check to be mailed or picked up by your agent. Alternatively, you can usually ask to have the funds wired to your bank, usually for a small transaction fee.
And now…you get to celebrate! Your home is no longer yours, and it’s time to move on.