The last step in a real estate purchase is called the closing. This process will see you finalize the transfer of title from seller to buyer by executing the appropriate documents and transferring the funds. Knowing what happens at a real estate closing can help the process go much smoother, as you’ll be prepared to avoid costly mistakes.
Real estate closings can be complicated and stressful but they don’t have to be, so it’s always advised that you work with a reputable Florida real estate attorney.
What Is Real Estate Closing?
Real estate closings are the final part of a commercial or residential purchase and sale. As the name suggests, it closes the transaction as the property title passes from the seller to the buyer, and the funds go the other way.
During a real estate closing process, participants review and sign various legally binding documents, such as signing a deed, authorizing the creation of an escrow account and completing the purchase.
The Five Steps of a Real Estate Closing
Once you arrive at the closing date, there will be five key steps:
- You and your real estate lawyer will review and sign all loan documents, such as mortgages, trust deeds and a Closing Disclosure.
- You provide proof of homeowners insurance and completed property inspections.
- You provide a certified or cashier’s check (or via wire transfer) to pay for the down payment and other expenses (read below for specific fees and expenses).
- Your lender sends the necessary funds to the closing agent’s escrow account.
- You receive the keys to the new property!
Read Related: The Key Steps to a Successful Real Estate Closing
What Documents Will Be Signed by Buyers?
During closing, you will be required to sign multiple documents. Get used to signing your name, as it will be required at least a dozen times. You should also review these documents before signing. The last thing you want is to sign a document with a grave error. The safest thing to do is to ask your real estate lawyer to review the documents on your behalf.
The Consumer Financial Protection Bureau states the key closing documents include:
- Closing Disclosure: This document is required by federal law and lists all the related closing costs, such as loan fees, expenses and real estate taxes.
- Promissory Note: This document details key information such as loan amount, term length, payment schedules and any mortgage payment failure penalties.
- Mortgages: You may have read to use a Deed of Trust, but in Florida, they are not statutory forms or recognized by the state. Buyers purchasing real estate property with a loan should use mortgages.
- Deed: A deed or document that transfers title ownership must be signed.
- Notice of Right to Cancel: This document allows each borrower in the transaction up to three business days to cancel their new mortgage loan. If the borrower is buying a property with a mortgage loan, then they do not have the right to cancel after all closing documents are signed.
What Fees and Expenses Are There in a Real Estate Closing?
Closing costs include fees and expenses related to the purchase of the property. These must be paid before you become the owner of the property. In most cases, the buyer will pay 2-5% of their mortgage loan. The key closing costs include:
Appraisal Fee: An appraisal is completed to confirm to the lender how much the property is worth. It ensures you’re paying a fair purchase price and that the lender is protected with their financial investment in you and the property. This fee usually costs between $300-400. It is paid to the lender during the loan application process once you have found a property and negotiated terms.
Credit Report Fee: Included in your loan ‘application fees’, this covers the cost of processing verifying your credit payment history and balances and monthly payments of any credit cards, loans, or other debts.
Origination Fee and Underwriting Fee: These fees are charged by the lender for evaluating and preparing your mortgage loan. Put simply, and that you’re not being lent more money than needed. Related fees may cover document preparation, notary services and attorney services.
Recording Fee: Paid to the local municipality, it makes the transaction official.
Title Search Fee: Title searches should be performed to ensure that there are no outstanding liens or claims against the property. This complicated task may cost around $200. Title Insurance is additional and generally required by the lender and recommended that the buyer obtain a policy to protect them as well.
Transfer Taxes: Transfer taxes and property taxes must be paid to the relevant government agencies.
Other Potential Closing Costs:
- Home Inspection – this is generally paid during a due diligence phase of the home purchase process but may be included at the time of closing, at times.
- Assumption Fees – If there are any loans the buyer is assuming responsibility for, there may be additional fees related to that.
- Attorney Fees
- Prepaid Interest-since interest is paid in arrears on a loan but since generally the first mortgage payment isn’t due until the first day of the first full month following closing, a prorated portion of interest is collected at closing to cover the remaining days in the month of closing.
- Discount Points-these are paid if the buyer wanted to “buy down” their interest rate.
- Mortgage Application Fees
- Upfront Mortgage Insurance Fees
- FHA, VA and/or USDA Fees where applicable to the type of loan
- Property Taxes-these will be prorated at closing so that the seller pays for the time they owned the property and the buyer will cover the taxes from the closing date forward.
- Upfront Annual Assessments
- Homeowners Insurance Premium & Flood Insurance Premium if applicable
- Prorated Homeowners Insurance and Property Taxes to set up Escrow Account
When Does Real Estate Closing Take Place?
The closing date will be determined by the agreed-upon date between you and the seller. This will be determined during the contract negotiations.
Closing day usually comes several weeks after your offer has been accepted. During this interim period, you will have completed your due diligence and everything related to loan processing.
Delays may happen if you hit any issues with pre-closing steps such as financing, title searches and home inspections.
Where Does Closing Take Place?
The local traditions of where you’re buying will affect the real estate closing’s location.
When using a real estate attorney, the closing will be held at their office.
How Long Does a Real Estate Closing Take?
The actual closing usually takes under an hour, often much less if it’s a cash sale. The type of financing the buyer is getting determines the amount of documents that need to be signed. Government guaranteed loans such as FHA, VA, or USDA require more paperwork and therefore more time.
How Long Does it Take to Get to the Real Estate Closing Date?
The closing process can take from between one week to 80 days, depending on the type of property, it’s current ownership and status and whether you’re taking out a mortgage or not.
The most common cause for a longer process is financing. If you buy a property with cash, however, you can expect to close the purchase within as little as a week. Only 23% of homes are purchased entirely with cash.
Who Attends a Real Estate Closing?
At a minimum, the seller, buyer and closing attorney or agent will be in attendance. There may be additional parties if they are involved and need to or want to be there.
- Their attorney
- A lender’s representative
- A real estate professional
- The closing agent or title company representative
- Their attorney (if they have one)
- The seller’s representative
- The seller’s real estate professional
- A notary public
Contact a Real Estate Closing Lawyer in Florida
If you’re buying a property in Florida and need assistance with the closing process, our Florida real estate attorneys can help.
We’ll guide you through the process, reviewing legal documents and protecting your rights and interests. We’ll coordinate, prepare and complete documents related to the title, deed, transfer, and loan acquisition.
If you’re purchasing property or land in St Petersburg, Florida or Riverview, Florida, contact us today.
Our St Petersburg & Riverview real estate attorneys have extensive experience that can help you through these tricky moments, reviewing your contract, advising you on the next steps to secure your transaction, and successfully finalizing the purchase of your new home or commercial property.
Contact us today to schedule a free consultation.