Closing Time: Six Steps Your Buyers Should Expect

Owner’s title insurance gives buyers confidence

Your client’s long home-buying journey is almost over. You’ve helped them find a home they love, the seller agreed to the offer and now it’s time for closing. The last thing you want is for something to go wrong, so make sure your buyer works with an experienced closing agent—like the Long & Foster Settlement Services Prestige Partners—to help ensure everything runs smoothly.

Here are six steps to a successful closing:

1. Select a Closing Agent: Your client may grant you permission to place an order with one of our settlement companies’ closing agents as soon as the contract is accepted. Most homebuyers rely on their real estate agent to select a closing agent—someone they work with regularly and know to be professional, reliable and efficient. Buyers, however, may select their own closing agent.

2. Draw up an Escrow Agreement: First, a contract or escrow agreement is drafted, which the closing agent reviews for completeness and accuracy. The buyer’s deposit goes into an escrow account, where the funds will remain until closing.

3. Title Search is Conducted: Once the title order is placed, the title company conducts a search of the public records. This should identify any issues with the title such as liens against the property, utility easements and so on. If a problem is discovered, most often the title professional will take care of it. After the title search is complete, the title company can provide a title insurance policy.

4. Shop for Title Insurance: There are two kinds of title insurance coverage: a Lender’s policy, which covers the lender for the amount of the mortgage loan; and an Owner’s policy, which covers the homebuyer for the amount of the purchase price. The bank or lender will typically require that the mortgage borrower purchase a Lender’s policy. However, it only protects the lender. It’s recommended that buyers obtain an Owner’s policy to protect their investment.

5. Obtain a Closing Disclosure: The lender must provide a Closing Disclosure to the borrower at least three days prior to closing. The lender may also have a closing agent provide the Closing Disclosure to the homebuyer three days before the transaction closes.If the lender makes certain significant changes between the time the Closing Disclosure form is given and the time of closing, the borrower must be provided a new form and an additional three-business-day waiting period after receipt of the new form. This applies if the creditor:

  • Makes changes to the APR above ⅛ of a percent for most loans (and ¼ of a percent for loans with irregular payments or periods)
  • Changes the loan product
  • Adds a prepayment penalty to the loan

If the changes are less significant, they can be disclosed on a revised Closing Disclosure form provided to the borrower at or before closing, without delaying the closing.

6. Prepare for Closing: As closing day approaches, the closing agent orders any updated information that may be required. Once the closing agent confirms with the lender and the seller, he or she will set a final date, time and location of the closing.On closing day, all of the behind-the-scenes work is complete. The closing agent has been managing the closing process, so all of the parties to the transaction can be confident the property will successfully change hands.

Laws vary by location, so for exact terms, conditions, exclusions, and limitations of the products mentioned, please contact a title insurance company authorized to do business in your location.

Content has been provided by the American Land Title Association