Real Estate Closing Process: Buyer and Seller Guide

Real Estate Closing: Step-by-Step Process for Buyers and Sellers

This guide will cover the frequently asked questions about real estate closing. Do real estate closing costs vary from state to state? John Strange of Gustan Cho Associates explains real estate closing costs. All home purchase and refinance transactions require closing costs, which are the costs of creating the mortgage loan. We will first start discussing real estate closing and how the real estate closing process works on home purc

hase and refinance transactions. We will then dive into real estate closing costs. What real estate closing costs entail will be covered in this guide. Closing costs are any costs associated with making a loan, such as origination charges, appraisal, title, attorney costs, pre-paid, transfer stamps, recording fees, and any third-party fees incurred for the origination of the loan.

Closing Costs on Real Estate Closing

Real estate closing on a home purchase is often a very exciting time for home buyers and sellers. Buyers will get the keys to their home and the home’s title transferred into their name. The home sellers will get the proceeds from the sale of the property. However, it can also be confusing due to the complicated mass paperwork that needs to be signed.

Unlike purchasing other items, buyers need to pay for the merchandise and get a one-page receipt, and the transaction is complete.

Over 80% of the borrowers we represent go through major stress during the mortgage process or get a last-minute loan denial. The only reason is that the loan officer did not properly qualify the borrower. All of the pre-approvals at Gustan Cho Associates close, and they all close on time. In this section, we will cover tips for borrowers and loan officers to ensure the real estate closing closes on time without stress.

What Is a Real Estate Closing

A real estate closing marks the finish line in buying or selling a home. Here, buyers and sellers sign the last round of paperwork, exchange funds, and officially transfer ownership. The details can shift depending on your state, contract, lender, and local traditions. Most often, buyers receive the keys and can step into their new home only after everything is recorded and the money has changed hands.

The real estate closing is a process finalizing the home purchase process. Once a buyer enters into a real estate home purchase contract, there is a closing date on the contract that states the date of the real estate closing.

Real estate closing dates can get delayed and often does. Marga Jurilla, the National Operations Manager at Gustan Cho Associates, explains delays in real estate closing. There is no reason why a buyer should not meet the home closing date. However, the loan process is a process where delays can happen. The most important part of the mortgage loan processis the pre-approval stage.

How the Real Estate Closing Process Works

Explain the process of signing the purchase contract, delivering funds, recording ownership, and the seller handing over the property.

Step 1: The Buyer and Seller Sign the Purchase Agreement

• Explain the closing date, deposit, contingencies for financing, inspection, and appraisal, seller concessions, terms of possession, and deadlines.

Step 2: Escrow Opens, and the Title Order is Started

• State who holds the deposit and documents. List possible parties handling the transaction, considering state laws and local customs.

Step 3: The Buyer Completes the Mortgage Application and Underwriting

• Discuss the buyer’s finances and required documents like bank statements and proof of employment.
• Cover loan approval, temporary finances, and the need to avoid new financial activity until closing.

Step 4: The Property Is Appraised

• Discuss the difference between the lender’s and buyer’s property appraisals.
• Explain the buyer’s ability to request repairs and the lender’s need to approve those requests.

Step 5: The Title Search Identifies Liens and Ownership Problems

Explain how a title search informs the buyer about unpaid property taxes, mortgages, liens, ownership disputes, and inheritance issues.

Step 6: The Parties Satisfy Their Contract Contingencies

• Discuss buyer loan approval, agreements on property inspection and appraisal, attorney review, required insurance and repairs, and any condo or HOA agreements.

Step 7: The Mortgage Reaches Clear-to-Close

• Explain what ‘clear to close’ means and why buyers should avoid new credit, employment changes, and significant purchases.
• Advise avoiding major financial changes.

Step 8: The Buyer Receives and Reviews the Closing Disclosure

• Explain that the buyer will generally have three days to review their mortgage paperwork.
• They should compare the final interest rate and payment, closing costs, credits, prepaid fees, and the cash required with the original Loan Estimate.

Step 9: Final Walk-Through

• State that the final walk-through does not replace the home inspection.
• It lets the buyer check the home’s condition, verify repairs, see remaining appliances, confirm the seller’s belongings are removed, and ensure no new damage exists.

Step 10: The Closing Funds and Wire Instructions are Verified

• Describe when a buyer must provide a cashier’s check or certified wire transfer.
• Warn about wire fraud. Buyers should verify payment instructions by calling a trusted number, not one from an email or text.

Step 11: The Buyer and Seller Sign the Closing Documents

• Describe how buyers and sellers may sign some documents together, but others separately, online, or in person at different times.

Step 12: The Loan is Funded and the Deed is Recorded

• Explain the process, including signing documents, loan payments, fund disbursement, recording ownership, and the buyer taking possession.

Step 13: Buyer Gains Possession and Seller Gains the Sale Proceeds

• Describe the purchase agreement and local or state laws about possession and key transfer.
• Explain that the seller usually receives the sale proceeds after the loan funds and the deed are recorded.

Closing on Real Estate Purchases

The closing adventure starts the moment the purchase contract is signed, not just when you put pen to paper at the end. Along the way, you’ll navigate underwriting, appraisals, title checks, insurance, disclosures, and funding before reaching the finish.

What To Expect in The Real Estate Closing Process

Again, the most important mortgage process stage is that the loan officer properly qualifies borrowers. A pre-approval should never be issued to close home loans on time unless the borrower is fully qualified. There are protocols loan officers can take to avoid real estate closing delays, explains Alaina Phillips, a dually licensed loan officer, and real estate agent.

Loan Officers must thoroughly review borrowers’ credit reports and look for credit disputes. Credit disputes on non-medical collections and charge-off accounts are not allowed.

Credit disputes on late payments are not allowed. Credit disputes on zero balances on non-medical disputes are exempt and are allowed. Credit disputes on medical collections are exempt. All documents submitted need to be completed with no missing pages.  Once borrowers get conditional loan approval, get the conditions ready and as complete as possible and submit.

How Long Does the Real Estate Closing Process Take

Borrowers who are experiencing a lack of communication with their loan officers and are getting delayed with a clear to close, contact us at Gustan Cho Associates. Transferring a loan from one lender to another is simple. FHA appraisals can be transferred. Again, there is no reason for stress during the mortgage process or closing delays. Homebuyers and home sellers are present. Much paperwork needs to be signed by the home buyer, especially paperwork by the lender. Attorneys, if used, are present at real estate closings. Realtors or loan officers may be present at closings. Once all paperwork is signed, it gets emailed back to the lender, where the lender gives the thumbs up to fund the loan.

What Is the Closing Disclosure

Three days before a real estate closing, borrowers must receive a Closing Disclosure from their lender. The Closing Disclosure is a five-page document stating the mortgage loan details. The CD will list the key points of the home closing and the number of fees and costs involved in getting the mortgage loan closed.  Ami Thakkar, a senior loan processor at Gustan Cho Associates, explains what happens at the real estate closing:

Paperwork needed to be signed can be overwhelming, especially for first-time homebuyers. Most buyers sign massive amounts of paperwork without thoroughly reading all the fine print.

However, a title agent or attorney will brief them and summarize their signing paperwork. The HUD-1 Settlement Statement was replaced with the Closing Disclosure or CD. The Closing Disclosure is an extension of the Loan Estimate, which was disclosed during the initial loan application stage of the mortgage process. The Good Faith Estimate or GFE replaced the LE or Loan Estimate. All line items disclosed on the Loan Estimate cannot increase by more than 10% except for the home appraisal, or the lender needs to cover the overage.

The Makeup of the Closing Disclosure

Again, the Closing Disclosure is a five-page document that needs to be disclosed three days before the real estate closing. Below is what is covered on the CD:

• Page 1: The first page of the CD contains information and the terms of the loan and anticipated fees and costs at closing
• Page 2: The second page of the CD contains the details of the closing costs and other fees incurred with the loan
• Page 3: Page 3 of the CD discloses the cash that is needed to close and the overall outline of the loan transaction
• Page 4: Page 4 of the CD contains additional detailed information on the loan terms
• Page 5: Page 5 is the final page of the CD, and it discloses the terms, loan calculations, and contact and disclosure information.

There may be little cost and pricing adjustments that need to be done at the closing table. Cost and fee adjustments at closings include adjustments for property taxes and other expenses, such as sellers’ concessions or overages of seller concessions.

Closing Without a Mortgage

Mortgage approval typically takes the longest in the closing process, but title work, inspections, meeting contract deadlines, and settlement work still need to be completed.

Closing Process

How ready the buyer is, the type of property, the type of loan, Buyer readiness, property and loan type, appraisal, title issues, insurance availability, condo checks, document return speed, state rules, and holidays all affect closing duration. The buyer and co-borrower must provide identification, financial and insurance documents, final payment, and signatures. They are also responsible for checking closing costs.

The Seller

• The seller must prove ownership, sign transfer papers, pay off liens, complete repairs, and transfer possession as outlined in the contract.

The Mortgage Lender and Loan Officer

• The lender handles final loan approval, prepares closing documents, approves the closing payment, and communicates with the settlement company.

The Title, Escrow, or Settlement Company

• The title, escrow, or settlement company verifies ownership, prepares the closing cost statement and documents, disburses funds, and records ownership.

Real Estate Attorneys

• The need for an attorney to close real estate transactions varies by state.

Real Estate Agents

• Explain how buyer and seller agents manage timelines, final walk-throughs, contracts, repairs, and possession.

Real Estate Closing Documents Buyers May Sign

Promissory Note

• Discuss the borrower’s obligation to pay back the loan and how the loan is secured by the property.
• Also, state that the document name may vary by state.

Closing

• Summarize the loan, monthly payment, closing costs, cash-to-close calculation, and the transaction.are projected and will be included in the borrower’s escrow account.

Occupancy and Identity Affidavits

• Explain why borrowers may need to confirm their residence, legal names,
• Social Security numbers, and other transaction details.

State and Local Transfer Documents

• Indicate that required forms depend on locality and property type.

Real Estate Closing Documents Sellers May Sign

Deed Transferring Ownership

• Describe how the deed will be recorded in the public records and transfer the seller’s ownership interest.

Seller’s Settlement Statement

• Explain how the settlement statement shows the sale price, mortgage payoff, taxes, commissions, credits, fees, and the seller’s final proceeds.

Mortgage Payoff Authorization

• Describe how mortgage debts are paid and cleared, along with tax and title documents.
• Discuss seller affidavits, certifications, transfer and lien documents, and other locally required papers.

Real Estate Closing Costs for Buyers and Sellers

Common Buyer Closing Costs

• Consider expenses for arranging a loan, appraisal, and credit checks. Include title services, lender’s title insurance, and recording fees.
• Also consider prepaid interest, homeowners’ insurance, the first escrow payment, tax payments, and discount points, if applicable.

Common Seller Closing Costs

• Consider expenses from paying off your mortgage, agreed seller credits, and real estate commissions, if any.
• Include transfer taxes, title fees per local customs, attorney fees, and property payments for utilities and related expenses.

Prepaid Expenses Versus Closing Costs

• Explain prepaid interest, insurance, or escrow deposits, which are not lender fees.
• However, they will affect the total cash to close.

Seller Concessions, Lender Credits, and Other Closing Credits

• Explain credits that cover closing costs. Seller concessions, lender credits, and other credits are not cash and cannot be given to the buyer.

Property-Tax and HOA Prorations

• Explain that taxes, fees, rent, or dues may be divided between buyer and seller according to the purchase contract, local customs, or law.

How to Review the Closing Disclosure Before Closing

Compare the Closing Disclosure With the Loan Estimate

• Confirm loan type, term, interest rate, monthly payment, mortgage insurance, escrow amounts, lender credits, and closing costs.
• Also, verify cash to close.

Which Closing Costs Can Change?

• Explain zero-tolerance, 10% total tolerance, and no-tolerance rules. Not all costs fall under the same policy.

What Modifications Can Restart the Three-Day Review Period?

• Clarify that not all changes restart the three-day review. For example, an APR within tolerances, a loan product change, or a prepayment penalty.

What Happens When the Closing Disclosure Has a Mistake?

Buyers should call the lender and settlement provider to get a corrected Closing Disclosure before signing.

Final Walk-Through Checklist

• Verify that all necessary repairs were done and that there are no signs of damage.
• Check all systems to ensure they are functional, and confirm that all fixtures and appliances are still in the property.
• Ensure the property is empty if required.
• Check all less accessible spaces and surfaces.
• Record any issues before signing the closing documents.

What Issues May Postpone or Prevent a Real Estate Closing?

• Taking On New Debt or Credit
• Job or Income Changes
• Large Cash Transfers or Deposits that are Unexplained
• Conditions of the Closing that are Unfulfilled
• Appraisal Issues or Concerns Regarding the Condition of the Property
• Title Issues, Liens, or Ownership Concerns
• Problems with Home or Flood Insurance
• Issues with the Closing Documents or Cash to Close Calculations
• Seller Repairs or Concerns During the Final Walk-Through
• Funding or Recording Delays

Real Estate Closing Wire Fraud: How to Keep Your Money

Criminals impersonate lenders, attorneys, title companies, escrow officers, or real estate agents. Don’t trust sudden changes to wiring instructions sent by email. Always confirm wiring instructions using a trusted, independent phone number to contact before sending the payment.

Wet Closing vs. Dry Closing

Wet Closing

• In a wet closing, funding and disbursement occur during closing without delay.

Dry Closing

• In a dry closing, signing of documents is permitted prior to the funding and disbursement of the transaction, in accordance with applicable state law and lender requirements.

In-Person, Remote, and Hybrid Real Estate Closings

Electronic signatures, remote online notarization, mobile notaries, mail-away closings, powers of attorney, and their availability are determined by state law, lender requirements, the title company, the type of documents, and the type of transaction.

When Do Buyers Receive the Keys After Closing?

Immediate possession may not be given after signing the closing documents. The funding and recording of the transaction, the terms of the contract, the seller’s possession agreements, and local customs may affect when the keys are delivered.

When Does the Seller Get Paid After Closing?

Proceeds are typically disbursed after the closing settlement agent verifies that funding and recording are complete. The closing process, the disbursing bank, the state, and the type of transaction will determine the time frame.

What Happens After the Real Estate Closing?

• Verify the deed was recorded as instructed.
• Retain the Closing Disclosure and settlement documents.
• Watch for the first notice for your payment.
• Verify mortgage payment, tax, and insurance payment status.
• Change the locks and secure the property.
• Deed, Title, and Mortgage Solicitation Scams

Real Estate Closing Example: Accepted Offer to Funded Loan

Include a GCA Transaction Example with the Following Anonymized Details:

• Purchase price and loan type
• Time from contract to close
• Appraisal and title milestones
• Underwriting conditions
• Closing Disclosure delivery
• Final walk-through
• Funding and recording
• Name one team-related issue

When Can You Move In After Real Estate Closing

Homebuyers can move in after the real estate closing. The real estate closing is when ownership changes hands. The buyer gets the title, the keys, and home ownership. The seller relinquishes ownership, forfeits all property left in the home, surrenders all keys, and gets paid.

There are certain states, like Illinois, where property taxes are paid in arrears. Illinois home buyers will get property tax prorations from home sellers.

Buyers can use property tax prorations for their down payment and closing costs. However, they cannot use sellers’ concessions for their home purchase down payment. Any overages of seller concession must go back to the home seller, and no kickback is allowed—Real Estate Closing normally at a title company or attorney’s office. The mortgage lender will send important mortgage loan documents and wires to the title company. A title officer quarterbacks the real estate closing. Real estate closing is normally a happy occasion for all parties.

Final Thoughts on the Real Estate Closing Process

Closing on a home involves more than just signing papers. Everyone involved—buyers, sellers, lenders, agents, and settlement staff—needs to finish their parts of the contract, title work, financing, insurance, disclosures, and funding.

Buyers can help avoid surprises by staying on top of last-minute financial changes, reviewing the Closing Disclosure, double-checking wiring instructions, and doing a final walk-through.

Because closing steps and legal requirements can vary by state and situation, it’s important for buyers and sellers to check with their lender, settlement provider, real estate agent, or attorney to understand which rules apply to their deal.

Frequently Asked Questions About Real Estate Closing