Closing on a Home

WHAT IS A TITLE COMPANY?

A title company hosts the buyer, seller, and financier of a real estate closing in one location to complete the sale and transfer of a real estate transaction. The title company usually provides title insurance which protects the property owner against loss if it is discovered that the title to the property contains a defect, usually found in the title search process.

WHAT IS A PURCHASE AGREEMENT?

A purchase agreement clearly defines the terms of the real estate sale and what must happen before the property changes hands.  It defines contingencies, such as what happens if a requirement is not met and the agreement must be cancelled, or who pays for property inspection and any defects uncovered during the inspection.

WHAT IS A REAL ESTATE CLOSING?

Also known as a settlement, a real estate closing takes place when a third party such as a real estate attorney or Title Company provides oversight in the transfer of property from the seller to the buyer, assuring that the terms of the purchase agreement are met. This “closing agent” also acts as the repository for documents and monies, disbursing them to the appropriate parties at the end of the real estate closing.

WHAT IS TITLE INSURANCE?

Title insurance is issued by a title company in order to protect the property owner against loss if it is discovered that the title to the property contains a defect. In the event the insured owner suffers a monetary loss due to a lien or other title defect, the title insurer defends the insured against a lawsuit, or provides reimbursement up to the amount of the title insurance policy.  Title Insurance Premiums are a one-time fee usually paid at the time of closing.

WHAT IS A TITLE SEARCH?

A title search is a review of all public documents pertaining to a specific piece of property in order to determine the present state of the title.  This involves the examination of documents filed in the mortgage and conveyance records of the clerk of court and the assessor’s office.  Depending on the number of documents and their complexity, a title search could take days or weeks to complete.  It is best to have a knowledgeable real estate attorney review the results for potential problems.

WHAT ARE CLOSING COSTS?

Closing costs are the total cost of completing the transfer of ownership of a house. These costs do not include the purchase price of the home. Rather, they are the fees and expenses aside from the purchase price (See what are items are typically included in closing costs below).

WHAT ARE ITEMS INCLUDED IN CLOSING COSTS?

Closing costs vary depending on your mortgage lender, lender fees, curative title work, if any, and escrow items required by your lender. Below is a listing of common closing cost items.

    • Loan origination

 

    • Application Fee

 

    • Appraisal Fee

 

    • Lender’s Document preparation fee

 

    • Realtor Commission

 

    • Real Estate Attorney’s services

 

    • Pest inspection fees

 

    • Credit Report Fee

 

    • Flood Determination Fee

 

    • Prepaid items which may include first year of hazard insurance, 13 months of taxes, 3 months of additional hazard insurance, and mortgage insurance premiums if applicable

 

    • Wire Fees

 

    • Fees associated with recording mortgage and cash sale

 

    • Title Insurance (Lenders and/or Owners Policy)

 

  • Overnight courier fees depending on lender’s requirements

GETTING AN ESTIMATE OF CLOSING COSTS?

The Real Estate Settlement Procedures Act, or RESPA, requires that mortgage lenders give you a good faith estimate or Loan Estimate of all the loan-related fees you’re likely to pay at closing. They must give you this estimate at the time of loan application. Keep in mind, however, that these are just estimates. Actual closing costs may be more than the good faith estimate closing costs.