Real Estate Agents, especially new ones, are on a steep learning curve through their first few transactions. Training tends to focus on getting clients and getting a signed agreement, and much less on everything it takes to get to and through the settlement table. Understanding the basics of the closing process ahead of time can eliminate a lot of stress for you and your clients.
I still remember my first closing. The whole process had been contentious, with my clients (the buyers) and the sellers butting heads every step of the way. There were plenty of moments after the offer and acceptance where it was anyone’s guess if the transaction would actually close.
But we got there. The buyers and sellers never sat down together, but the settlement agent was there, documents got signed, funds were exchanged, and title to the property was officially transferred.
I didn’t know what I didn’t know. Looking back, I’m sure I could have understood the process better and given my clients more hands-on help in preparing to get to and through the closing.
Getting your pre-settlement ducks in a row
The first step to a successful closing is understanding who is actually is involved. Believe it or not, this can be wildly different depending on which state you’re in so it’s important you get local expertise.
At a high level, you have:
- Sellers and Buyers: The parties selling and buying the property.
- Real Estate Agents: Generally, it will be you and the agent serving the other party (buyer or seller).
- Lawyers (depends on state): In some states, or in some circumstances, lawyers for each party will be directly involved.
- Mortgage Lender: The mortgage lender, who provides financing to the buyer, may or may not attend closing.
- Title Company: The title company fills several roles. First, they will manage the title search. Escrow is a separate function, where all of the crucial documents and money related to closing are managed. And last but not least, the settlement agent who is in charge of managing all of the paperwork and personalities around the settlement table.
Working with trusted partners
Choosing a title company is at the discretion of the client. As a new agent, RESPA laws have been explained in exam preparation and in training from your broker. These, just to refresh your memory, ensure that you have no financial incentive to have your client hire one title company over another. A good rule of thumb is to share a number of recommendations, especially companies who can be recommended by previous clients. Typically, I see that the most recommended title companies have excellent communication, attention to detail, and have adopted a modern, streamlined workflow. You are a resource for clients who are likely new to this whole process, or who at the very least have no ongoing relationship with a particular title company.
The inspection process
After an agreement is reached, and a settlement date is agreed upon, the inspection process is the next big hurdle. Buyers will normally hire an inspector who will write a detailed report. Out of that, renegotiation of the sale price and/or repairs needed will take place.
Securing financing and title
If you are on the buyer side, a big piece of getting to closing is staying on top of the mortgage process. The contract will stipulate when mortgage commitment is due, and you will want to make sure the lender and your clients are processing the financial data needed to make this happen. If you are on the seller side, you’ll want to make sure the other side is sticking to the contract timeline, and that financing is indeed being secured.
Around the same time as the mortgage commitment, the title company will be working on title commitment, also known as the contract to insure the title. This is when you will be receiving “marked up title” to go over with your clients. With the title commitment, the closer has confirmed that all requirements have been met and will usually reference any endorsements provided. They have sent out a settlement date announcement to all parties, and buyer/seller names, purchase price, and mortgage amount/s have been confirmed.
When your title company uses Qualia, you get live closing updates and can easily send secure messages to all parties in the transaction.
The final countdown
By law, three days prior to closing, the title company will send the Closing Disclosure to your clients. The Closing Disclosure is a plain-language document outlining financial obligations of the buyer. It includes actual closing costs, ongoing tax and insurance obligations, and a breakdown of your mortgage loan. It follows the same format as the original loan estimate, but provides more details and is no longer just an estimate — these should be the final numbers to be disbursed at closing, barring major revelations at the final walk-through.
At the table and disbursement
A real estate agent’s role at closing is often minimal. You are there to answer any questions or concerns your clients may have, but hopefully most have been answered prior. The settlement agent will be in charge, walking everyone through the closing documents.
The final step is disbursement. This is where all the funds spelled out in the Closing Disclosure are disbursed to buyer, seller and brokers on both sides of the transaction.
Taking control of the closing process
As new as you are, your manager probably has used these exact words with you: “Nothing is certain, the sale is not a sale until the keys are handed over at the closing.” With an agreement in place, getting to and through closing is usually what everybody wants. But there will likely be hurdles along the way. Understanding the process from the beginning and staying informed every step of the way will make getting to that end goal more attainable. It will make the actual closing as stress-free as possible.