The following is a visual representation of the Prepare For Closing process when buying homes as a Nomad. It is part of the Closing process that you'd use for closing on a property.
Closing: Prepare For Closing
Let's look at each step in more detail. I've tried to list them in mostly chronological order, but some may overlap. I encourage you to read through everything first, then act in the order that makes sense to you and your contractual deadlines.
IMPORTANT NOTE: If you are wiring money to the Title Insurance Company for Closing you should always get wiring instructions straight from them by calling them. Do NOT rely on emailed wiring instructions without verifying them by calling the Title Insurance Company or in person.
Then, at Closing, you can quickly compare them to the ones you've read to make sure they're the same ones and sign them.
Only about 1 in 50 clients do this so it is relatively uncommon.
Great Lenders will do this for their clients as well. Some don't.
Your Real Estate Broker will not know the terms and agreed to expenses of your loan so you'll want to review those numbers with your Lender.
This is usually done a few days prior to Closing in an ideal world with a great Lender. Often, it happens the day before or even the day of Closing. Some less-than-great Lenders never do it unless you insist they go over it with you.
We like to schedule this just prior to Closing so about 30 minutes or an hour before Closing depending on how far the property is from the location for Closing.
You'll usually meet your Real Estate Broker at the property for this final walkthrough prior to Closing then head directly over to Closing after.
Review Closing Docs
Some people read through every line on every closing document at closing. If you plan to do this, let your real estate agent and closer (from the title company) know this ahead of time. They can almost always provide you with copies of all the forms you will be signing ahead of time so you can just confirm they're the same prior to signing them at closing instead of having to read them in detail again.
Most of the time, you'll want to switch over the utilities on the property into your name to start on the day of closing. Closing day belongs to the buyer, so if you're buying then the utilities should technically start on the day of closing for you. You may not have ALL of the utilities listed below and some may be combined like water/sewer in our local market; if you have questions, talk with your real estate agent.
IMPORTANT NOTE: If you're going to be renting the property right away or if there is already a tenant there, make sure you put a landlord policy in place with utility providers that support it. That way if the tenant cancels the utilities it will automatically revert into your name.
IMPORTANT NOTE: One notable exception is some new construction properties do not want you to switch utilities until after closing.
Review Closing Disclosure with Lender
You will usually go over your Closing Disclosure with your lender. I think they should be willing to go over this with you in person or over the phone. They should not just email it to you to review on your own.
They should go over:
- The loan you're getting including the interest rate, term, monthly payment, down payment amount
- If you have Private Mortgage Insurance, how much that is and whether it is an up-front fee, a monthly fee or both
- The closing costs for you real estate closing and the closing costs for your loan
- Contract determines who is paying the “real estate” closing fee. Very common and some would say it is customary to split it so you may be paying half.
- There is a separate “loan” closing fee that buyer typically pays regardless of what it says in the contract. This is for closing company to present and assist with closing the loan portion of closing.
- Some title companies will “bundle” the real estate closing fee and the loan closing fee together into one higher closing fee.
- The amount you'll need to wire or bring to closing
- When your first payment will be due
- Remember, interest is paid in arrears, you're likely to have a month where you do not need to make a mortgage payment.
- Improves cash on cash return if you're buying immediately as a rental. They catch up when you sell though.
- What percentage of your Seller Concessions you're using. It should always be 100%. See IMPORTANT NOTE below.
IMPORTANT NOTE: It is important to discuss with your Lender early to make sure you're using ALL your Seller Concessions. If you're not using all your Seller Concessions, consider discussing with your lender and real estate agent some strategies to use them all. In Colorado, any Seller Concessions not used will be credited to the Seller so it is important to use all of them.
Some ideas to discuss with your lender, real estate agent for using all your Seller Concessions are:
- If there is time to do it with the lender that will not delay closing, ask the Seller to complete an Amend/Extend to to reduce the amount of Seller Concessions.
- If there is time to do it with the lender that will not delay closing, ask the lender to buy down your interest rate.
- If there is time to do it with the lender that will not delay closing, ask your insurance agent to lower your deductible and/or raise your insurance coverage limit and/or charge you for the entire year up front to increase the cost of your insurance.
Estimating Cash Required at Closing with Lender
In some cases your lender will be hustling at the last minute to get your settlement statement approved by coordinating with their underwriting department and the title company closer. In those cases, you may not have an exact amount for the amount for the check to bring to closing. In those cases, your lender and real estate agent will often suggest you bring an estimated amount (usually one that is slightly higher than expected). If your lender estimates high and you bring too much, you'll receive a refund check back from the title company. If you end up being short, often times the title company will allow you to write a very, very small personal check for the difference; that's why you should bring your checkbook to closing.
Verify Good Funds With Title Company
Most Title Companies will allow you to bring a certified check from a bank as good funds to closing, but some have unusual/odd policies, so it is always a good idea to check with the closer to make sure the form of funds you plan to use to bring your “Cash Required” to close to closing is acceptable to the Title Company.
Real Estate Agent Reviews Settlement Statements
Usually, once your lender review the settlement statement with you, it is also sent to your real estate agent. Your real estate agent should be double checking the following, but them checking it is not a good reason for you not to check each of these yourself:
- Verify that Buyer/Entity name is correct (2 spots usually)
- Verify that signature line is correct (if LLC and signing as manager, etc.)
- Verify that property address is correct
- Verify that Legal Description is correct
- Verify that Date of Proration is correct
- Purchase Price Correct?
- Was there a Counterproposal that affects Purchase Price or other Terms?
- Seller Concessions Credited?
- All Earnest Money Deposits Credited?
- Review Any Amend Extend(s) and Inspection Resolution for Changes That Impact Settlement Statement
- Owner's Title Policy Paid for as Specified in the Contract?
- Owner's Extended Coverage (OEC) Paid for as Specified in the Contract?
- Closing Services Fee Paid for as Specified in the Contract?
- Verify annual taxes by looking up on County Public Records Page AND calculate current mill levy – before calculate proration
- Prorations For Taxes Calculated Correctly?
- Prorations For Rents Calculated Correctly?
- Security Deposits Credited Correctly?
- Prorations for HOA Assessments Calculated Correctly?
- Are There Any HOA Special Assessments Due?
- Other Prorations Calculated Correctly?
- HOA Status Letter Charged as Specified in Contract?
- HOA Record Change Fees Charged as Specified in Contract?
- Verify HOA charges by referencing Status Letter
- Check Additional Provisions in the Contract For any Other Credits, Charges, Etc.
- IF HOME WARRANTY: Verify Home Warranty is included on Settlement Statement
- Check that Realtor Commission is Correct
- If Corrections – Email Closer Right Away and BCC Client
- Forward Copy of Settlement Statement to Buyer/Seller
- If this is a 1031 – may be special requirements.
It is common in Northern Colorado for buyers and sellers to show up at one table for closing. However, you may request that we have two separate closings (at different times, in different rooms and sometimes on different days). This is especially true if the negotiation was tense and maybe one party felt like they lost and is harboring bad feelings. If the title company can accommodate the request for separate closings they will. Better to request this far in advance to increase the chance they'll be able to accommodate the request. I have not seen a title company charge an extra fee for separate closing, but I suspect they could.
If you're not going to be in town for closing, in most cases you could request a mail-away closing that will allow you to sign closing documents in front of a notary out of town. There may be extra fees associated with a mail away closing.
Another alternative to a mail away closing is to grant someone you trust power of attorney to sign on your behalf. This will never be your real estate agent. You may also need to get lender approval for someone to sign on your behalf and it is not always an automatic yes.
Kids at Closing
Closing usually takes about an hour and requires your attention, so many clients prefer to arrange to have their kids watched by a family member, day care or a babysitter.
Bring To Closing
You should plan to bring the following to closing:
WARNING: There have been several scams going on where a hacker will hack into a real estate agent or lender's email account and send an email to a buyer telling them to wire the cash required to close to the hacker's account. If you do this, the money is lost. If you're going to wire money to the title company for closing, please independently verify wiring instructions directly by calling the title company (and not from the phone number in an email in case the hackers gave you a false phone number too).
This is a big deal and we're going to have an attorney prepare a special disclosure about this for clients to make sure clients are aware.
We usually walk through the property on the way to closing (usually scheduled to meet at the property 30-60 minutes prior to closing time at the title company) to make sure of the following:
- Seller is moved out (unless they have a Post-Closing Occupancy Agreement or it is tenant occupied)
- If Seller is not moved out and they're supposed we should discuss submitting an Amend/Extend to agree with Seller to delay closing and what the consequences are if you don't close (you're in default) or closing then evicting and trying to collect per day fee for failing to give possession after closing. You will likely want to talk to an attorney about this prior to closing.
- Work they were supposed to do prior to closing for Inspection Resolution has been done.
- If work was not done or was done inadequately, we should discuss submitting an Amend/Extend to agree with Seller to delay closing and what the consequences are if you don't close (you're in default) or closing then going after seller in court to complete the repairs they agreed to. You will likely want to talk to an attorney about this prior to closing.
- Inclusions that are supposed to be there are still present in the property.
- If inclusions are missing, we should discuss contacting the Seller's agent and/or submitting an Amend/Extend to agree with Seller to delay closing and what the consequences are if you don't close (you're in default) or closing then going after seller in court for the inclusions agreed to. You will likely want to talk to an attorney about this prior to closing.
- All the stuff that was supposed to be removed has been removed.
- If there is still a lot of stuff left behind, we should discuss contacting the Seller's agent and/or submitting an Amend/Extend to agree with Seller to delay closing and what the consequences are if you don't close (you're in default) or closing then going after seller in court to remove the stuff they agreed to or paying for the people you had to hire to remove the stuff they did not. You will likely want to talk to an attorney about this prior to closing.
Most of the time we're discussing proceeds from closing for the seller, but in some rare cases the buyer also walks away from closing with proceeds from the purchase.
One example might be buying a home where the earnest money was more than the amount you needed to bring to closing. For example, you may need to put up earnest money when buying a home with a VA loan, but a VA loan can be nothing down. That means you'd get your earnest money back when you close.
Another example is when your lender suggests you bring an estimated amount to closing because they don't know the exact amount you'll need and they estimate too high. You'd receive a refund at closing.
Usually you would receive these closing proceeds as a check or wired to an account. Know in advance who you'd like the check made out to (it may your LLC if you're buying in an LLC). Or, bring the wiring instructions for your bank to closing if you plan to have it wired.
Next: Closing “Real Estate”
See the Closing “Real Estate” process next.
IMPORTANT NOTE: This checklist is based on what I personally use with clients in Northern Colorado and is based on the Colorado Real Estate Commission approved Contract to Buy and Sell Real Estate. Please rely on your local real estate agent for how it works in your local real estate market. This process will definitely vary in different States.
In the future, I will be adding/updating/modifying the following:
- Make a dynamic checklist version of the Real Estate Agent Reviews Settlement Statements on the real estate agent only page.