Your First Real Estate Closing

by William Jorden on May 3, 2011

by Harry Faber White, II, Esquire

The purchase of a first home or other property should be a joyous occasion. Instead, it often can be overshadowed by anxiety and the fear of the unknown. The primary unknown factor is how much money will a buyer need and what else must be brought to the closing.

Closings come in many sizes and forms, but there are certain basic themes.

After a real estate contract is signed, the following general procedure occurs.

Your attorney or title agent will “search the title”, which is a review of recorded documents in your county.

The documents reviewed include deeds, easements, oil and gas agreements, mortgages, estates, tax sale deeds, judgments and secured transactions.

The title search is done both to ensure that you are securing marketable title which is not burdened by unsatisfied mortgages, liens, judgments, unpaid taxes or other circumstances, and to also alert the buyer as to easements, oil and gas leases or other contracts, which affect your title.

After the search, if the title is appropriate or can be remedied quickly, and if any tests required by the lender or the buyer are satisfactory including those of water, sewer, building or structure, a closing is set.

HOW MUCH MONEY DO I NEED FOR THE CLOSING . . .

The largest cost at the closing is the cost of your house minus your down payment, which is generally held in escrow until the date of closing.

A buyer is generally charged what are referred to as “title charges” which consist of a closing fee, a title search and guarantee fee, a title insurance policy fee if required by the bank or the buyer, and may be charged a document preparation fee for the bank or other lender documents.

On the other hand, the seller is generally charged significantly less but pays a fee for his or her attorney to attend the closing and bring a completed deed.

The buyer then is charged recording fees for the deed and mortgage, if applicable, and pays a 1% transfer tax and, in Crawford County, the seller pays the other 1% transfer tax. In Erie County, the seller traditionally pays both of the 1% transfer taxes, for a total of 2% transfer tax, paid when the deed is recorded.

If a buyer borrows money for a closing, he or she generally pay fees in connection with the loan. Fees are payable to the bank, and most are collected at closing. These fees frequently include amounts for loan origination, loan discount, credit reports, appraisals, flood certifications, and if the house is being built, a lenders inspection fee.

The seller generally pays the real estate commission and may possibly pay a portion of inspection costs and/or repairs necessitated by the inspection. The buyer pays the rest of the inspection costs.

Finally, real estate taxes are prorated to the date of possession, as levied and assessed.

Your attorney should be able to give you a “hard” number several days before closing representing the exact amount of money you need. Generally, there are some surprisingly significant difference in fees charged by different attorneys, and it would be wise to call your attorney before the closing to find out what the proposed costs are. Then you can double check that price with several other attorneys or closing agents.

In any event, prepare for your big day by having your money ready, your homeowners insurance policy, and any other documents necessary for the closing. If everything is lined-up, the closing can go very smoothly. If it is not lined-up, the closing can be a nightmare for all parties involved.

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: