The Closing
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This is really the realm of the Closing Attorney. Quite often conducted at the Attorney’s office, this is where Sellers, Buyers and their respective agents get together for the final paperwork. An average closing with no complications can take about an hour.
It has become the norm for both parties to be present for the closing, but technically, Seller or Buyer can sign their part of the paperwork at different times. This is a good option for those parties who had a contentious negotiation period where bad feelings may have been raised. It is also good for those who may not feel it necessary to go over their loan information with other parties present. The Seller, likewise, may not wish to sit in on a closing where for the most part, they have to listen to the attorney explain the terms of the buyer’s loan and watch them sign one form after another while they sit twiddling their thumbs. It’s up to you.
At the closing table, the attorney will review the HUD Settlement statement with both parties and explain the details. All parties must sign all copies of this form and receive an original copy. The Attorney will then, as a representative of the Lender, review all the mortgage documents with you, the Buyer, and obtain your signatures. There are many pages to sign so bring your favorite pen, make sure your hand is limber and be prepared.
At this point comes the disbursement. Normally, the attorney would collect the down payment from the Buyer plus any other costs for which the Buyer is responsible. This next part is now a little tricky. Technically, at closing, the Lender should have already sent the amount of the loan to the attorney. He should then collect the down payment from the Buyer along with any other fees for which the Buyer is responsible. That being done, the attorney should now have the total sales amount plus fees in his possession. He can now cut a check to the Seller’s mortgage company to pay off their loan, cut a check to the real estate brokers for their commission, and cut a check for the remaining balance to the Seller as their profit from the sale.
Since most lenders were not able to physically get the money to the attorney in time for closing, most attorneys worked off good faith. The lender would provide a funding number (verification that the funds were indeed allocated to the Buyer and were on their way), and the attorney would go ahead and fund the closing out of their own accounts knowing that later that day or the next day, that money would arrive from the Lender off-setting the deficit. See? Well, that all changed a few years ago when banks began having trouble and that ‘good faith’ was shattered. In 2007, attorneys in Atlanta were left holding the bag on $38.0 million of closings they had funded when Homebanc, a major mortgage company closed their doors suddenly.
Today, if the funds are not physically in the possession of the closing attorney, the attorney will probably do something called a ‘dry closing.’ A dry closing is one where everyone goes through the motions like normal, including the part where the Buyer hands over his downpayment. The attorney will then wait until he actually has the funds from the lender before he will cut the checks to the Seller and the real estate brokers. This may take place later in the day… or up to several days later depending on the Lender.
Barring any funding issues from the bank… once the checks have all made their way across the table, keys & garage door openers should be passed over and hands are usually shaken and you are officially the owner of this particular home! Congratulations!
This however, is a generic scenario. Each transaction in real estate is different with it’s own levels of complications and drama. This is why I can’t stress enough the importance of having a licensed professional on your side to ensure everything goes smoothly with minimal risk and stress to you.
