"I'm Closing on my new home!!" (Wait, what does that mean!?)
If there is one part of any transaction that causes people the most stress and anxiety, I think it is the closing process. I want to break it down here a little bit and hopefully alleviate some of the anxiety before you even get there!
Naturally, I need to disclaim a few things first.
1. Every transaction is different and every market is different, so, while this description is largely true for MOST transactions in Spokane, WA, your experience (especially if you are in a different market) may vary greatly.
2. I am not a closer, attorney, financial adviser, land surveyor, pest/mold/dog expert/etc,etc,etc - please, talk to your Realtor/Lender/Closer or relevant professional for your specific circumstances. If you need a good referral to any of those, give me a shout and I'll help you out! The below description is for general information purposes and is not meant to guide you through your transaction!
So I had a question (I actually get this one a lot) that stood out to me and I think is representative of how many people feel.
I was talking to one of my amazing clients about final details (keys, signing, etc) and she said, "So I sign tomorrow, but I don't get the keys until Tuesday?"
This was a Sunday, so she was signing on Monday and getting keys on Tuesday.
The biggest confusion with closing is that people associate signing with closing. These are two separate things.
Do you remember when your teachers taught you about squares and rectangles? A square is a rectangle and a rectangle can be a square but is not necessarily a square (and all that)?
This is a bit like that. Signing documents is a part of the closing process, but it is not (in and of itself) the closing.
Here in Spokane, our default contract language says that the Buyer will take Possession of the property at 9 pm on the date specified. The two default options for this date are "On Closing" and "Other _______________". (For convenience we will use "On Closing" for this illustration.)
So you get your keys (or Possession) at 9 pm of the "Closing Date". The closing date is a date that the Buyer and Seller agree to at the very beginning of the transaction. In most typical scenarios (with lending involved) that is usually 30 - 45 days from Mutual Acceptance. (Mutual Acceptance is the day that the Buyer and Seller have both agreed to all of the terms in a contract.)
So for 30 - 45 days, you have tried your very hardest to NOT think about this huge, massively exciting (and stressful) purchase that you are making! You know that the bank and your Realtor and the Title Company are all working on something, and, hopefully, you have been kept up to date on the things that are happening, but, largely, it seems that these things don't really involve you!
Now, all of a sudden, there is a whirlwind of activity and you have to show up for "the closing"!
The first step in this process is that you will receive a CD. No, this is not that now obsolete technology that we used to listen to music on, CD stands for Closing Disclosure and it is what the bank is required to present to you for review 3 days before you sign documents for your home purchase. You are REQUIRED to review this CD for 3 days. You must indicate that you have received it to start this clock and you can NOT sign anything until 3 days have passed! So.... when that CD shows up (email/portal/mail/in person) make sure that you acknowledge that you got it ASAP so that your 3 days can start. ALSO MAKE SURE YOU REVIEW IT!!!! Ask your lender about it, have an attorney review it, show it to your dog - just make sure that YOU understand it as this is a relatively new consumer protection put in place to protect you! It is often seen as an inconvenience (because of the 3 day waiting period) but since you have those three days use them!
After the 3 days have elapsed, you are ready to sign. But your Closer (Closing Agent) may not be ready.
The Closing Agent is the miracle worker in almost all transactions. The Closing Agent is the one that figures out where all the money goes AND distributes it to the relevant parties at the relevant times!
I like to tell people that they are the ones that make the planets align (often several times a day)! If you consider all of the places that the money in a transaction has to go and how tedious it is to calculate some of it, their ability to make the whole thing work is really quite impressive! For instance, the Seller pays taxes and utilities right up until the day that the Buyer takes possession of the property and the Buyer pays for the remainder of the month. If the Seller has a mortgage, they have to pay interest right up until the day that their bank receives the payoff. All of these things are dependent on the exact date that the transaction will close. And we like to change closing dates! (Actually I don't think anyone likes to, but it happens and they have to recalculate all of that on the fly!)
The Closing Agent is the one that you will sit down with to sign all of your loan documents (and other associated documents with your purchase)... it's a really big stack!
However, the Closing Agent can't (and at least in Spokane, won't) schedule you to sign until they have the loan documents from your lender. Your lender (who may be waiting on final underwriting approval or any number of things) can't send the loan docs until their process allows them to.
A good many Buyers have lost nights of sleep over the phrase (from the Closer), "I haven't received docs yet, I can't schedule the signing"!
Once the Closer receives docs from the lender, they will schedule the Buyer to come in to sign. (The Seller will come in to sign as well, but their timing is a lot easier to accommodate (for several reasons that I'll get into in another article)
When you (the Buyer) sign the documents, you are (among other things) authorizing the bank to send the money (usually by wire transfer) to the Closing Agent who is responsible for distributing the funds to the relevant parties.
Once the Closer has all of these documents signed (and the Sellers documents) they send all this to the lender so that the lender can send the money.
However, as you can probably appreciate, this isn't a text message saying, hey, go ahead and send that $300k over, we're all good here! They have to send it to the lender through secure channels (portals or whatever the bank has set up) and the lender has to review everything AGAIN to make sure that everything is "on the up and up". Once the lender is satisfied that everything is in order, they can wire the funds to the closer.
Here is where we start to run into issues with closings all happening on the same day - and why a lot of times you will sign on Monday and get your keys on Tuesday!
Being that we are on the West Coast and a lot of banks set their wire transfer cutoff time to EST, our wire deadline(s) are usually 1 pm (ish). If you sign at 11 am and the process of getting all those documents to the bank and the bank reviewing them, there is a good chance that you will miss the wire cutoff time. In which case the lender will wire the money the next morning.
It is possible to do what is called a "Same day closing" (Same day fund/record, same day sign/close... lots of different ways for it to be expressed) where you sign early in the morning, the lender is waiting for your signatures from the closer, reviews quickly and gets the wire transfer off before the cutoff.
Regardless of whether it happens the day that you sign or the next day, once the Closer gets the money from the bank, they verify everything and give everyone the "clear to record" which means that they have sent the relevant documents to the court house to be recorded. Recording is the "Aaaahhhhhhhhhh" moment when the house transfers from the Seller to the Buyer and you become a home owner!
This is Closing! The DATE that this happens is the Closing Date. According to the contract (if you chose "on closing") you now take Possession at 9 pm. So even though the sale has been recorded and you are now the owner of the house, you do not get to possess the house until 9 pm.
This time difference between closing and possession, I believe, is to allow the Seller time to clear out. I have found, in my experience, that Sellers who have already cleared out and don't have anything left in the house have been willing to allow the Buyers to get the keys once the recording is completed. Again, talk you your agent about when you will get keys! I am not saying that YOU will be able to get the keys any earlier than 9 pm, just that I have seen it happen ;-)
For all the detail I just went into, there are still a lot of details left out! If this felt like a firehose and you have more questions now than when you started reading, give me a shout and I'll walk you through any part of it in a bit more detail!
Also, if you are getting ready to buy or sell a house in Spokane - or know someone that is - I would love the opportunity to help you walk through ALL the steps! It is a journey - and one that I love helping people get through!
Please share this with anyone you think would benefit - and if it was helpful to you, I'd love to hear it! Thanks!!
Naturally, I need to disclaim a few things first.
1. Every transaction is different and every market is different, so, while this description is largely true for MOST transactions in Spokane, WA, your experience (especially if you are in a different market) may vary greatly.
2. I am not a closer, attorney, financial adviser, land surveyor, pest/mold/dog expert/etc,etc,etc - please, talk to your Realtor/Lender/Closer or relevant professional for your specific circumstances. If you need a good referral to any of those, give me a shout and I'll help you out! The below description is for general information purposes and is not meant to guide you through your transaction!
So I had a question (I actually get this one a lot) that stood out to me and I think is representative of how many people feel.
I was talking to one of my amazing clients about final details (keys, signing, etc) and she said, "So I sign tomorrow, but I don't get the keys until Tuesday?"
This was a Sunday, so she was signing on Monday and getting keys on Tuesday.
The biggest confusion with closing is that people associate signing with closing. These are two separate things.
Do you remember when your teachers taught you about squares and rectangles? A square is a rectangle and a rectangle can be a square but is not necessarily a square (and all that)?
This is a bit like that. Signing documents is a part of the closing process, but it is not (in and of itself) the closing.
Here in Spokane, our default contract language says that the Buyer will take Possession of the property at 9 pm on the date specified. The two default options for this date are "On Closing" and "Other _______________". (For convenience we will use "On Closing" for this illustration.)
So you get your keys (or Possession) at 9 pm of the "Closing Date". The closing date is a date that the Buyer and Seller agree to at the very beginning of the transaction. In most typical scenarios (with lending involved) that is usually 30 - 45 days from Mutual Acceptance. (Mutual Acceptance is the day that the Buyer and Seller have both agreed to all of the terms in a contract.)
So for 30 - 45 days, you have tried your very hardest to NOT think about this huge, massively exciting (and stressful) purchase that you are making! You know that the bank and your Realtor and the Title Company are all working on something, and, hopefully, you have been kept up to date on the things that are happening, but, largely, it seems that these things don't really involve you!
Now, all of a sudden, there is a whirlwind of activity and you have to show up for "the closing"!
The first step in this process is that you will receive a CD. No, this is not that now obsolete technology that we used to listen to music on, CD stands for Closing Disclosure and it is what the bank is required to present to you for review 3 days before you sign documents for your home purchase. You are REQUIRED to review this CD for 3 days. You must indicate that you have received it to start this clock and you can NOT sign anything until 3 days have passed! So.... when that CD shows up (email/portal/mail/in person) make sure that you acknowledge that you got it ASAP so that your 3 days can start. ALSO MAKE SURE YOU REVIEW IT!!!! Ask your lender about it, have an attorney review it, show it to your dog - just make sure that YOU understand it as this is a relatively new consumer protection put in place to protect you! It is often seen as an inconvenience (because of the 3 day waiting period) but since you have those three days use them!
After the 3 days have elapsed, you are ready to sign. But your Closer (Closing Agent) may not be ready.
The Closing Agent is the miracle worker in almost all transactions. The Closing Agent is the one that figures out where all the money goes AND distributes it to the relevant parties at the relevant times!
I like to tell people that they are the ones that make the planets align (often several times a day)! If you consider all of the places that the money in a transaction has to go and how tedious it is to calculate some of it, their ability to make the whole thing work is really quite impressive! For instance, the Seller pays taxes and utilities right up until the day that the Buyer takes possession of the property and the Buyer pays for the remainder of the month. If the Seller has a mortgage, they have to pay interest right up until the day that their bank receives the payoff. All of these things are dependent on the exact date that the transaction will close. And we like to change closing dates! (Actually I don't think anyone likes to, but it happens and they have to recalculate all of that on the fly!)
The Closing Agent is the one that you will sit down with to sign all of your loan documents (and other associated documents with your purchase)... it's a really big stack!
However, the Closing Agent can't (and at least in Spokane, won't) schedule you to sign until they have the loan documents from your lender. Your lender (who may be waiting on final underwriting approval or any number of things) can't send the loan docs until their process allows them to.
A good many Buyers have lost nights of sleep over the phrase (from the Closer), "I haven't received docs yet, I can't schedule the signing"!
Once the Closer receives docs from the lender, they will schedule the Buyer to come in to sign. (The Seller will come in to sign as well, but their timing is a lot easier to accommodate (for several reasons that I'll get into in another article)
When you (the Buyer) sign the documents, you are (among other things) authorizing the bank to send the money (usually by wire transfer) to the Closing Agent who is responsible for distributing the funds to the relevant parties.
Once the Closer has all of these documents signed (and the Sellers documents) they send all this to the lender so that the lender can send the money.
However, as you can probably appreciate, this isn't a text message saying, hey, go ahead and send that $300k over, we're all good here! They have to send it to the lender through secure channels (portals or whatever the bank has set up) and the lender has to review everything AGAIN to make sure that everything is "on the up and up". Once the lender is satisfied that everything is in order, they can wire the funds to the closer.
Here is where we start to run into issues with closings all happening on the same day - and why a lot of times you will sign on Monday and get your keys on Tuesday!
Being that we are on the West Coast and a lot of banks set their wire transfer cutoff time to EST, our wire deadline(s) are usually 1 pm (ish). If you sign at 11 am and the process of getting all those documents to the bank and the bank reviewing them, there is a good chance that you will miss the wire cutoff time. In which case the lender will wire the money the next morning.
It is possible to do what is called a "Same day closing" (Same day fund/record, same day sign/close... lots of different ways for it to be expressed) where you sign early in the morning, the lender is waiting for your signatures from the closer, reviews quickly and gets the wire transfer off before the cutoff.
Regardless of whether it happens the day that you sign or the next day, once the Closer gets the money from the bank, they verify everything and give everyone the "clear to record" which means that they have sent the relevant documents to the court house to be recorded. Recording is the "Aaaahhhhhhhhhh" moment when the house transfers from the Seller to the Buyer and you become a home owner!
This is Closing! The DATE that this happens is the Closing Date. According to the contract (if you chose "on closing") you now take Possession at 9 pm. So even though the sale has been recorded and you are now the owner of the house, you do not get to possess the house until 9 pm.
This time difference between closing and possession, I believe, is to allow the Seller time to clear out. I have found, in my experience, that Sellers who have already cleared out and don't have anything left in the house have been willing to allow the Buyers to get the keys once the recording is completed. Again, talk you your agent about when you will get keys! I am not saying that YOU will be able to get the keys any earlier than 9 pm, just that I have seen it happen ;-)
For all the detail I just went into, there are still a lot of details left out! If this felt like a firehose and you have more questions now than when you started reading, give me a shout and I'll walk you through any part of it in a bit more detail!
Also, if you are getting ready to buy or sell a house in Spokane - or know someone that is - I would love the opportunity to help you walk through ALL the steps! It is a journey - and one that I love helping people get through!
Please share this with anyone you think would benefit - and if it was helpful to you, I'd love to hear it! Thanks!!
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