What is Real Estate Closing: A Comprehensive Guide for Homebuyers Part 1
What is real estate closing? If you’re new to buying real estate, you may have heard of closing but don’t know much about it.
In this 2-part series, we’ll discuss everything you need to know about real estate closing.
What is Real Estate Closing: Pre-Closing Preparation, Key Players, Common Documents, and Closing Costs
Definition of Real Estate Closing
Real estate closing, also known as settlement, is the final step in buying or selling a property. It involves the transfer of ownership from the seller to the buyer. Real estate closing also includes the disbursement of funds and the signing of documents.
Pre-Closing Preparation
The homebuyer should take measures to ensure they are ready before the closing date. Here are some key points you should consider before the closing date:
- You should try to understand the timeline of a closing. Work closely with your real estate agent and lender to avoid delays or issues.
- Carefully review the disclosure document, which outlines all financial details of the transaction. You want to ensure that all the information is accurate and complete.
- Buyers will also need to secure homeowner’s insurance. Lenders typically require insurance before closing to protect their investment.
- Take the time to complete a final walkthrough. Ensure that the property is in the same condition as when you made the offer. Address any issues or discrepancies before closing.
- Prepare the funds required for closing. You’ll need the down payment, closing costs, and any other fees or expenses associated with the transaction.
Key Players in a Real Estate Closing
Several people should be present during a real estate closing. These key players may vary depending on the specific transaction and location but generally include the following:
- Buyers and sellers
- Real estate agents
- Lender
- Title company representative
- Attorney (in some states)
- Escrow agent
Common Closing Documents
Several documents are involved in a real estate closing, each with its specific purpose. These include:
- The Closing Disclosure
- The deed
- The bill of sale
- The affidavit of title
- The transfer tax declaration
Closing Costs
Closing costs are the fees associated with the transaction, including appraisal fees, title insurance, loan origination fees, and attorney fees.
The average closing costs in the United States vary depending on the state, lender, and type of loan. The national average for closing costs on a single-family home in 2021 was $6,905, including taxes, according to ClosingCorp. In Tennessee, the average closing costs for a home purchase (including taxes) were $3,911 in 2021.
As a homebuyer, you can negotiate some of these costs and should review the closing disclosure carefully. You need to understand and account for all the fees included in the process.
The Bottom Line
Real estate closing can be complex. However, a little time, effort, and preparation can go a long way toward ensuring a smooth transaction.
In part two of this comprehensive guide, we will explore additional topics related to real estate closing. It will cover what to expect on closing day and post-closing tasks.
Tennessee Title Services
Do you need help with title services in Tennessee? Click here to contact the Title Group of Tennessee. Our team offers a complete range of title searches for buyers and sellers in Tennessee.
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