You’ve found a home for your buyer, negotiated, and closed the deal, but your job isn’t over yet. Closing transactions can be riddled with confusion, drama, and potential fraud pain points if you do not educate and prepare your clients.
Whether it’s your first closing or your 50th, here are 10 things to make sure your buyers know before closing.
1. They can choose to have an attorney present
In addition to a closing company that guides the final process of paperwork gathering and signing and funds disbursement, your client can choose to have their real estate attorney present. For some buyers, this can help them feel more comfortable about the whole transaction.
Realtors are present at closing to offer moral support and to answer any lingering questions, but a real estate attorney provides legal advice and makes sure the documents are correct and as expected.
2. How their money should be disbursed
Although money doesn’t change hands until a closing date that could be months away, prepare home buyers by giving them the details on how their home loan should be disbursed. Some closing companies prefer a cashier’s check, while others only accept wire transfers. Because it can take a few business days for a wire transfer to hit a closing attorney’s account, help them plan by giving them the dates they need to transfer funds.
3. The status of the home’s title
Mortgage lenders require a title search to establish legal ownership. This is a critical step that protects buyers from distant relatives or ex-spouses who may own the property. Clearing the title ensures that buyers are protected and that there are no unexpected claims of ownership. As a realtor, you’ll provide buyers with recommendations from reputable title companies.
4. If they need to purchase homeowners and title insurance separately
Some buyers opt to have homeowner’s insurance rolled into their monthly mortgage payment, but they still need to find an insurance company and pass that information along to the closing attorney.
Title insurance is another layer of protection against claims of ownership or other legal challenges to a title. Although it is not required in all 50 states, it’s a small expense to protect the largest purchase most people will make.
5. What contingencies are (and the timeline for meeting them)
Contingencies are standard practice and can include everything from getting final mortgage approval to making repairs before closing. Give home buyers an idea of what they can ask for and what they can expect when it comes to getting contingencies handled before closing.
6. The final cost of their home
Home buyers must understand the fees and various closing costs they will see on their final closing documents. From title insurance to appraisal fees and prorated property tax, the total sale price can be six to 10% higher than the cost of the home itself.
7. Documents and documentation required at closing
Most states share some common closing documents or documentation that the buyer needs to bring with them when they close. These include:
- Either proof of an electronic transfer of funds or the exact amount of the closing costs in a cashier’s check
- Loan co-signers, if applicable
- Checkbook for last-minute changes to closing costs
- Government-issued ID (i.e., driver’s license or passport)
8. What paperwork they will see and sign at closing
Want to prevent a big shock when your buyer sits down at closing? Put together a packet of paperwork that includes all of the documents they might see and sign. This allows them to carefully review all the terms and conditions of the loan as well as their rights and responsibilities in the process.
These documents might include:
- Closing disclosure: The terms of the loan, a.k.a the HUD-1 settlement statement
- Completed loan application
- Loan estimate: This includes interest rates, estimated closing costs, and other costs associated with the mortgage.
- Promissory note: This is the legal agreement that binds the buyer to pay the mortgage.
- Deed of trust: This uses the house as collateral if the buyer fails to pay the mortgage.
- Escrow statement: It outlines any property tax or insurance payments that come from an escrow account (where earnest money was held).
- Title documents: A title search may have revealed previous loans or liens that the buyer is responsible for at closing.
- Deed: The formal document that registers the new owner.
- Right to cancel: This gives the mortgage holder the right to cancel the loan if it is refinanced.
Additionally, new construction comes with a certificate of occupancy. There may be other documents that are specialized in your area — make sure they are in the preview packet, too.
9. Whether or not they need to be physically present
New technologies (and the demands of COVID) mean that many home sales have taken place virtually. Closing with safe and protected e-signatures is also a good option for buyers and sellers who are out of town or cannot make a closing due to poor health.
If your client needs to close on their home virtually, make sure they have the tools they need to sign.
10. That they are entitled to a final walk-through
Buyers can schedule a final walk-through 24 hours before closing. This allows them to make sure the previous owners have vacated and to check on required repairs. Not all home buyers take this opportunity, especially out-of-state buyers.
You can offer to walk through for your buyer. Because buyers appreciate this personalized type of service, it can help you gain positive reviews and more referrals down the road. Buyers may be more inclined to reach out to you when they are ready to buy or sell their next home.
Informed buyers = happy clients
A closer look at the real estate market in 2022 has shown that people looking to buy and sell their homes are relying on the skills and expertise of realtors now more than ever. Especially in high-demand areas where the market is competitive and tight — a skilled realtor can make a difference.
Informed buyers are happy clients who remember the good service you’ve provided and are more likely to return to you for their next sale or purchase. Letting them know what to know before closing is a great strategy for growing your business.
Luke Babich is the CSO of Clever Real Estate in St. Louis. Connect with him on Facebook or Twitter.
