Your clients have shopped for the perfect home, negotiated a price, obtained a loan, and survived the ups and downs of the period after signing the contract. Now that closing day is upon them, what do your real estate clients need to be ready?
Here are some important considerations that can help get buyers ready for closing – before, during, and after the big day.
How Is The Closing Arranged?
Closing typically takes place anywhere from two to four weeks after an offer is accepted, to allow for any common home sale or purchase contingencies, such as the inspection, financing, appraisal, inspection, or attorney review contingencies, to be fulfilled.
In Illinois, the buyer and seller must both engage real estate attorneys who will work with a title company to arrange for the date and time of the closing. For buyers and sellers in Wisconsin, the parties are free to engage attorneys, although the involvement of an attorney is not strictly required. If no attorney is involved in a Wisconsin real estate transaction, the real estate agents negotiating the sale will generally arrange for the closing to take place.
In many home transactions, the closing takes place at the office of the title company that conducts the title search on the home, or an attorney’s or real estate broker’s office. Closings can become crowded – at a particularly packed house, you might expect to see the buyer, real estate agents for the buyer and seller, attorneys for both the buyer and the seller, a representative of the buyer’s lender, and a title agent.
What Needs To Be Done Before Closing?
The period from contract to closing on a real estate transaction can be a busy one. Here are some of the important calculations and steps that should be addressed before the buyer and seller arrive for the closing:
Calculating Property Tax Credits
First, any credits for property taxes must be calculated. In Illinois, property taxes are paid “in arrears,” meaning that Illinois homeowners pay last calendar year’s taxes during the current year. When a buyer takes title to a property, they are taking the property subject to real estate taxes from the previous year through the date of closing. Put more simply, when someone closes on a home on July 31, 2021, there will be unpaid taxes from January 1, 2020 through July 31, 2021 which will be the responsibility of the new owner. As a result, the seller must give the buyer a credit for the accrued but unpaid property taxes at the time of closing.
In Wisconsin, taxes are calculated somewhat differently. The seller of the home is responsible for the taxes from January 1 through the day prior to closing, and the buyer bears responsibility for the taxes from the day of closing through the end of the year. At closing, the buyer receives the seller’s portion of the accrued but unpaid taxes in the form of a credit on the closing statement.
Preparing for Closing Costs
For buyers, other common closing costs to consider will include attorney’s fees, loan application and appraisal fees, a credit report, the closing or escrow fee, a survey fee, the lender’s policy of title insurance, homeowner’s insurance, an escrow deposit for property taxes and mortgage insurance, a loan processing fee, and the lender’s underwriting fee.
Sellers should expect to pay attorney’s fees, city and county transfer taxes, the cost of the owner’s title insurance policy, the cost of the property survey, recording fees, and any agent commissions.
The buyer should receive an estimated list of closing costs, with wire instructions, a few days before the closing takes place. It is common for agents to advise their buyers to wire the estimated closing cost amount, plus the down payment, and add an additional $1,000 to account for any unexpected adjustments.
In most sales, the seller’s portion of the closing costs will be taken out of the seller’s profits from the sale. However, if the outstanding amount owed on the seller’s loan and the seller’s closing costs exceeds the amount of the seller’s equity, the seller may also need to provide some cash at closing. To estimate your closing costs, please use our free seller net sheet.
Reviewing Loan Documents
The buyer will usually receive the final drafts of any loan documents a few days before closing. To avoid delays at the closing itself, it is a good idea for buyers to plan to spend a few hours reviewing these documents with the appropriate professionals, making sure all of the terms are laid out as agreed, and that the documents are complete in form and substance.
Taking the Final Walkthrough
The buyer’s final walkthrough of the property generally takes place the day before closing. During this walkthrough, the buyer should ensure that any projects have been completed and that the house is in the condition the parties agreed upon – usually “broom clean,” which typically translates to being free of old property or debris and having been swept and vacuumed. To facilitate the final walkthrough, the seller should plan to discontinue utility service on the day after the closing – if the buyers can’t turn on the lights or test the outlets, some confusion or delays might ensue.
At The Closing
At the closing itself, buyers should plan to bring two forms of identification – usually a driver’s license and passport. Buyers and their teams should also come ready with proof of homeowners insurance, a copy of the purchase contract, and a check to address any costs not already covered by a wire transfer.
All parties at a closing should expect a jam-packed day – but one that moves faster and more efficiently with Landtrust Title! There will be a substantial number of documents to review and sign, and buyers especially should be prepared to review each of the documents to ensure they match up with what has been negotiated. Patience is key; it’s always better to take the time to read a document carefully with your team than to be surprised later.
Other Closing Tips And Tricks
Once your closing is complete, all that’s left is to plan and organize your big move! As a buyer, you’ll want to ensure that all utilities will be transferred and turned on before you move in. Arranging for a babysitter or pet sitter on moving day can help streamline the process while ensuring that your little ones stay safe.
Stay organized and hydrated throughout the moving process – the less you have to think about on moving day, the better you’ll feel at the end of the process.
Make sure to pack essentials in one well-marked box. If everything that can go wrong does go wrong on your moving day, at least you’ll be able to access your toothbrush and any essential medication.
Learn More From Your Trusted Title Insurance Company
Understanding what goes into closing is just one important consideration for sellers and buyers. We know that navigating any real estate transaction can feel daunting. That’s why we’ve got your back! Landtrust Title Services understands the complexities of buying or selling a property, and we are here to support you every step of the way. We are equipped to fulfill all your title needs throughout the closing process to ensure a seamless transaction.
And when your attorney is partnered with Landtrust Title Services, you can rest assured that you’ll get a seasoned team of professionals who are there for you whenever you need them. Whether on the buyside or sellside, your attorney will work directly with our decision makers every step of the way. Plus we have on-staff attorneys that are here to help resolve more complex issues. With Landtrust, our attorneys can ensure on-time closings, quick searches, and more underwriting flexibility.
If you have any questions about choosing a title insurance provider, working with a real estate attorney, or closing on the sale of your home, you can contact Landtrust Title Services anytime at [email protected] or by calling 312.528.9210.