Closing Day Preparations
Closing day refers to the date mutually agreed to by the seller and buyer for the transfer of funds, title and the keys (usually). This can be a stressful time for both parties considering that this may be the largest sale or purchase of a lifetime. A few essential preparations can make the transaction flow smoothly.
The buyer must review the closing statement carefully and double-check the calculations. Review the lender, title and escrow fees to ensure that what was discussed is accurately reflected in the documentation.
You should also review the exact legal description of the property and any liens, encumbrances or other items which may have been discovered in regard to the property. Also ensure that the title or escrow agent has the correct title on the deed. Correcting a vesting on a deed later can be time consuming.
Buyers should also arrange to re-inspect the property just prior to closing. This can avoid any nasty surprises on moving day. On or after closing day, buyers have less leverage to demand that repairs or other promised changes actually be completed. If the seller promised to paint a fence or empty the pool you have a right to insist that these be done.
Before signing your name to any closing document be sure that the interest rates, miscellaneous fees and the condition of the property are all what you agreed to. Honest mistakes have been known to happen but these mistakes can be costly.
Whenever possible avoid closing on a Friday, at the end of the month, or before long weekends. If anything goes wrong the banks will be closed. For example, if you are retiring your mortgage you may face addition interest adjustments if the funds reach the lender too late on a Friday afternoon. The seller may be faced with three extra days of interest (four days over a long weekend!).
Don’t forget your utilities. Depending on your jurisdiction, the buyer’s lawyer or notary will contact the local water, electricity and gas companies to have the meters read as of closing day. However, it may be your responsibility so check with your real estate agent or lawyer beforehand. This avoids any gaps in service for the buyer and extra expense for the seller.
Most other services into the home are the responsibility of the seller. At least a week before the closing date, contact your cable television, telephone and Internet service provider if you have one. Terminating service on or just before closing day can save you additional charges. Adjustments There are also several adjustments to consider. These are designed to settle any expense incurred (or income earned on rental properties) by either you or the buyer as of the day of closing-which is what both parties want. Municipal property taxes, school taxes, monthly condominium fees, utilities, and fire insurance (plus sales taxes) are all common expenses that need to be adjusted at closing.
Any expenses you have prepaid before closing day are pro-rated, with the buyer reimbursing you for the period during which you no longer own the property. Expenses that have not yet been paid, but which apply to the time during which you owned the home are similarly pro-rated and reimbursed to the seller.
If the buyer assumes your mortgage, the outstanding principal plus accrued interest and any funds held in your tax account are also adjusted for, as are first and last month’s rent on rental properties.
Closing day need not be worrisome if both parties plan ahead and review all paperwork carefully. In fact, with enough preparation, closing day should be the beginning of a new chapter for buyer and seller in their new homes.