The Closing Process: What to Expect and Where it Can Go Wrong
You’ve accepted an offer on your property – congratulations! You may think the hard part is over, and we hope you’re right. Often, the process between contract signing and closing can be full of surprises if you aren’t fully prepared or represented by a team that is proficient in navigating these challenges. The closing process kicks off on the binding agreement date (the date all parties sign off on accepted terms). This date can be found on the last page of the standard contract you signed when you accepted the offer.
Week 1: The Home Inspection
Typically, within a week of signing the binding agreement the buyer will hire a licensed inspector to visit your home. The inspector will spend several hours checking the age and condition of major systems, visually inspecting the exterior (roof, siding, brick etc.) and looking for any defects that could become an issue for the buyer after closing. We have suggestions of the steps you can take to successfully pass the home inspection successfully. The inspector will provide the buyer with a comprehensive and detailed report.
Potential Roadblocks: If the inspector finds any issues, the buyer may request that you repair those issues prior to closing. The buyer may either ask for a price reduction or to have the issues corrected. To avoid any potential misunderstanding about exactly what and how items should be repaired, we usually recommend negotiating a price reduction unless the repair is something an appraiser would typically require.
The buyer’s agent will typically suggest an amount of money that they believe will cover the cost of the repairs requested. Once all parties agree to the new terms, an amendment is then added to the contract clearly stating changes and removing inspection contingency.
Weeks 2 – 3: Buyer Financing and Home Appraisal
If the buyer of your property is obtaining a loan, it’s likely they have made their offer contingent on their ability to obtain a mortgage. A loan exhibit is attached to the contract that sets out the timeline for the buyer to make loan application and complete an appraisal. All of these dates hinge on the binding agreement date.
In this period it’s imperative that all parties have an open line of communication. Immediately after going under contract, the buyer should make loan application and the lender should order the appraisal.
We often try to assist in providing the appraiser with additional comparable properties we believe are most representative of your property, helping them to understand the value of your home. We may ask you to leave these comparable listings at your home for their review.
In the last step of removing the finance contingency, the lender states that the buyer is well-qualified, has submitted all required documents, that the property has been appraised and the loan can proceed to the closing team. The closing team then finalizes all documents and makes sure the package goes out to the closing attorney.
Potential Roadblocks: the lender is only allowed to lend up to the appraised value. If the appraiser assigns a value that is below the negotiated sales price of the property, this can create a problem because the buyer is required to make up the difference in cash. If we believe an appraiser may have a hard time understanding your unique market and property we request that the buyer sign the contract stating they will pay any difference in appraised value and sale price at closing.
Appraisers can also list critical repairs they want done before closing to protect the borrower and lender. The lender will require the repairs be completed and the appraiser must go back out and re-inspect the property for completion of the work. This is usually more common with an FHA loan.
Weeks 4+: Scheduling the Closing
After the buyer has taken care of financing, it’s time to schedule the closing. Choosing a closing attorney you trust is always one of the first items discussed during offer negotiations. We like to control the attorney choice during negotiation whenever possible. In Georgia, the closing attorney typically represents the lender.
Potential Roadblocks: Closing attorneys can make or break your desired timelines. Leading up to closing, the attorney will order title, arrange documents, coordinate with the lender for funding instructions, and create a preliminary settlement statement for all parties to view. All of this must be done in a timely fashion. The HUD Settlement Statement cannot be prepared until the loan package has been sent to the attorney. We like to have the packages at the closing attorney’s office at least a day before the scheduled closing date.
Finally, the closing
The seller can anticipate signing relatively few documents on closing day. While a closing typically takes less than an hour, you should block off about two hours to be on the safe side. Before you leave, the attorney will give you the proceeds from the sale.
Bring all house keys to the closing; we recommend leaving garage openers, access cards, and other necessary items at the home in the kitchen drawer closest to the garage.
Properly a lot behind the scenes to ensure you don’t have to deal with potential roadblocks before you hand over the keys. With the right team and a basic understanding of the closing process, you can better equip yourself to handle any surprises along the way.