You’ve found the house that feels like home, your offer was accepted and now you have a fully executed real estate contract. Congratulations! What happens now? These are the 12 real estate closing steps.
STEP 1 – Hire a Real Estate Closing Attorney
Some real estate contracts include a period for attorney review. If this period is included in your contract, it likely provides you with 5 days or less to have your attorney review the contract, to make sure it is written in a way that does not harm you or cause you unreasonable obligations.
Even if the contract does not allow for attorney review, it is recommended to hire an attorney early on in the process to assist with amendments to the contract and to ensure that the attorney of your choice is available.
An attorney can only represent one of the parties to a real estate contract, so if you delay, the other party could hire the attorney that you want to hire.
Related Post: Real Estate Contract Terms You Should Know!
STEP 2 – Schedule Inspectors/Repairs
If you are the buyer, the next important deadline is the inspections, If the offer you signed included the right to do inspections of the property. Commonly the offer states that the buyer will perform the inspections within 10-14 days, so it is important to call and schedule the inspectors right away to ensure they can fit you into their schedule in that time frame.
Your offer could include inspections of various elements, including the structure, the septic, the water, and the radon. In that case, there may be multiple companies that you will have to coordinate with because most inspection companies do not handle all of those matters.
If the seller agreed to do any repairs in response to the buyer’s inspection results, then the seller needs to arrange to have those repairs done and paid for, with a paid receipt detailing the work provided to their realtor and attorney.
If the seller finds that they are unable to fulfill their obligation prior to the closing and the parties agree not to hold up the closing, then an arrangement can sometimes be organized with the attorneys that include holding funds in escrow to ensure the work is completed.
Related Post: Your Real Estate Closing Team – Who’s On It?
STEP 3 – Apply for a Mortgage
If you are the buyer and you need to obtain a mortgage to close, then hopefully you already reviewed what you can afford with a lender and obtained a pre-approval letter. Now that you have a fully-executed contract, it is time to apply for the mortgage.
You can do this with the company that provided the pre-approval letter or with another lender; it is your choice, but it is your responsibility to apply for the mortgage right away. Unless you are an all-cash buyer, this is one of the most important real estate closing steps.
STEP 4 – Title work
Part of the closing attorney’s job is to ensure that the seller is conveying a clean title and the buyer is receiving a clean title.
In Connecticut, it is generally the buyer’s attorney’s responsibility to obtain and review the title search. If the buyer is obtaining a mortgage, the lender will submit a request for title commitment from the buyer’s attorney.
This requires a title search, which is an expense that we try to wait to expend until the inspection issues are resolved. Sometimes the timing of the transaction means we have to work on the title search before the inspection issues are resolved.
We discuss that with the buyer client to make sure the buyer is on board with expending that money, which will have to be paid even if the deal falls apart because of the inspection issues.
On the seller’s side, it is important to work with the attorney to provide them with all of the information about the current mortgage(s) and home equity lines of credit on the property.
It is the seller’s attorney’s responsibility to obtain payoff statements for the liens that encumber the property so they can be fully paid off with the closing proceeds.
STEP 5 – Contact Oil and Propane Providers
The seller is entitled to be compensated for the value of oil and/or propane left at the property because these are commodities in addition to the property being sold.
It is the seller’s obligation to obtain a written statement from the company that provided the commodities that remain on the property that includes the amount left and the total value. This determination should be obtained 3-7 days prior to the closing and sent to the closing attorneys.
Related Post: Joint Tenancy Vs Tenants-In-Common
STEP 6 – Set up Utilities
The company that delivers electricity to the property depends on the location of the property. Eversource and United Illuminating are the two largest providers in the state. It is important for the buyer to contact the electric company that provides electricity to the property prior to the closing to set up an account.
The seller will also need to contact the electric company to notify them of the closing date so the company can switch the account from the seller to the buyer.
If the buyer does not establish an account and the seller calls to cancel their account, the electricity could be turned off, which could cause damage in colder months and is also more costly to re-establish.
Cable and telephone providers can also be contacted to schedule a time AFTER the closing for the buyer to allow them onto the property and establish service. The buyer should not attempt to establish service prior to the closing even if the seller is no longer occupying the property.
STEP 7 – Schedule Movers
As discussed in previous articles of ours, the closing date is not set in stone and many factors can affect it, so we recommend contacting movers but not solidifying the exact date until you hear from your closing attorney that the closing is scheduled.
STEP 8 – Secure Closing Funds
A few days prior to the closing, the buyer’s attorney should have an exact amount due from the buyer. The buyer should be prepared to wire the funds to their attorney’s office on the day of the closing or the day before.
If they do not want to wire, then they will need to obtain a certified bank check and bring that to their attorney’s office at least one day prior to the closing. The seller should discuss with their attorney where they want their net proceeds to be paid since (as discussed below) they will likely not be at the closing.
STEP 9 – Do a Final Walk-Through
The buyer is entitled to do a final walkthrough of the property just prior to the closing. This generally occurs on the day of the closing, once the seller is fully moved out. It could happen a day or two prior to the closing if the seller moves out early.
The buyer should arrange this with their realtor, who will then schedule it with the seller’s realtor, to make sure they arrive after the sellers are out of the property.
Related Post: The Truth About The Closing Date
STEP 10 – Sign Closing Documents
The last of the official real estate closing steps. If you are the seller, your attorney will likely arrange a time 1-3 days prior to the closing for you to go to their office to sign the closing documents. Since the pandemic, this has become the norm.
It allowed the parties to separate and not all be in the same room together, which was important during the pandemic. But it also allows the sellers to concentrate on moving on the day of the closing and not have to take time out of the day to go to the attorney’s office to sign documents.
This is not true for a buyer who is obtaining a mortgage. The mortgage documents are usually voluminous and must be signed on the day of the closing.
It is important for buyers to be aware that they will need to take time out of their day on the closing to get to the attorney’s office and sign the mortgage documents.
STEP 11 – Change Locks
Even though the seller hands over all of the keys they have, it is never certain that someone else might have a key to the property, so it is best practice for a buyer to change the locks on the property.
STEP 12 – CELEBRATE!
If you’re a buyer, order some pizza and beer and have a picnic on the floor of your new home surrounded by boxes. If you’re a seller, go out to dinner at a fancy restaurant and order some champagne with your fattened bank account. As far as real estate closing steps go, this one is the best!
Joan Reed Wilson Esq. – Managing Partner
Practices in the areas of estate planning, elder law, Medicaid planning, conservatorships, probate and trust administration, and real estate. Admitted to practice in the States of Connecticut and California, she is the President-elect of the CT Chapter of the National Academy of Elder Law Attorneys (NAELA), an active member of the Elder Law Section of the Connecticut Bar Association, accredited with the PLAN of CT for Pooled Trusts, with the Veteran’s Administration to assist clients with obtaining Aid & Attendance benefits for long-term care needs and with the Agency on Aging’s CareLink Network.