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What Happens at a Closing?

You found the perfect home and, after a few negotiations, the seller accepted your offer. You’ve been to the bank and have your mortgage approval in hand. In fact, the only thing standing between you and your new home is the closing.

So just what is a real estate closing? And what exactly happens at closing?

Sometimes referred to as a settlement, your closing is the final step of your real estate transaction. The closing is handled by a neutral third party closing agent such as a title company or a real estate attorney. At a closing, major events include:

  • A home’s title (and the keys) are transferred from seller to buyer.
  • The proceeds of the sale are distributed to the seller.
  • If the home is financed, the buyers sign the mortgage note.
  • The buyer and/or seller pay other fees such as real estate commissions, title insurance, and pro-rated property taxes.

Understanding Your Closing

Closings involve loads of paperwork, including the deed, which grants legal rights and is signed by the seller and given to the buyer. The deed will then be registered with the city or county in order to protect the ownership rights of the new owner. Keys are also given from the seller to the buyer. Finally, the seller will get a check for the net proceeds of the transaction; the sales price minus closing costs and what they owe on their original loan, if anything.

The details of the financial transactions that occur at closing are summarized in a document known as the HUD-1 Settlement Statement.

As a buyer or seller, it’s important to review the HUD-1 document before closing. You should get this document a minimum of one day prior to closing, but hopefully several days before. The HUD-1 shows line by line each and every expense as well as who is to pay what amount. Therefore, it’s helpful to review the HUD-1 so you know what you should be expected to pay at closing.

As a buyer, you will typically have to pay your share of closing costs and escrow fees at closing, so you will need to bring a cashier’s check with you for the balance of what you owe for closing costs, as stated in the HUD-1.

As a seller, you may have to pay for a portion of closing costs and escrow fees as well in addition to paying for items such as:

  • Real estate commissions
  • In some states, a year of a home warranty for the buyer
  • In some cases, a title insurance policy for the buyer

Some items are pro-rated, or split between the buyer and seller according to length of use, at closing. Taxes, insurance and homeowner’s association fees are the most commonly pro-rated items.

It’s important to pay attention at closing despite being anxious to finalize the transactions. There are a few things that could potentially go wrong and you can play a role in preventing them. For example, the HUD-1 statement, being essentially several pages of items and their expenses, could have errors. As a seller, if you remember hearing that you were going to have to pay $400 for a home warranty and you see $4,000 listed, point it out! Carefully examining the settlement statement can save you money.

What Buyers Should Bring to a Closing

As a home buyer, your real estate agent and loan officer should provide plenty of coaching on what to bring to your closing. In most cases, you’ll need:

  • The big check. A cashier’s check (not a personal check) for the total amount due on the HUD-1 Settlement statement. This includes your down payment and closing costs.
  • Your checkbook. You’ll want to be able to cover any last minute changes (although hopefully there won’t be any). You may also need to cut the seller a check for items that aren’t included in the settlement, such as any heating oil left in the tank.
  • Your full attention. There are a lot of intimidating legal documents to sign at a closing, and it’s important not to glaze over. Do take the time to read before you sign. Don’t be afraid to ask for clarification if there’s anything you don’t understand.

A Final Caution

One problem I’ve seen arise for homebuyers is if either their loan commitment or interest rate lock expires prior to closing. (If the interest rate that you’ve locked in expires prior to closing, you may be stuck paying a higher interest rate or scrambling to qualify again).

Your closing agent is there to make sure everything goes as planned prior to closing and that the loan commitment doesn’t expire prior to close of escrow. Still, it behooves you to do your own double-checking and to sure you don’t pay for anyone else’s mistakes.

Although buyers, sellers, and even real estate professionals may get nervous about real estate closings, they’re just part of the process of transferring real estate. Knowledge and preparation are all you need to make your next closing go as smoothly as possible!

Published or updated on November 3, 2010

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website


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  1. This some great information. Especially for first time home buyers. But it is also good if a current homeowner is looking to buy or sell. It isn’t everyday that people go through the closing process. This would definitely be a good refresher for what to expect and what to look out for.

  2. Sarah Davis says:

    That’s horrible. I’m sorry you had such a bad experience. Thank you for sharing because your experience may encourage other people to read all of the paperwork even if some unethical “professional” is telling them otherwise. The fact that your lawyer even brought up suing means she knew she was doing something wrong. I would at least recommend filing complaints with her company and the BBB if possible. I hope everything has worked out okay for you and your family.

  3. Joseph says:

    Someone should learn from my experience. It’s important to make sure the independent 3rd party is competent. My wife and I enlisted a real estate attorney at the recommendation of our real estate agent, mortgage broker, and co-workers without any verification of our own. The first time we met her was at the closing.

    She discoraged us from reading over documents. Even though she explained everything, I would at the very least look for what she was talking about on the page she was refering to, as well as anything more I could interpret. She wasn’t able to answer any specific questions, claiming that all of the papers were “boiler plate documents.”

    She said that if we wanted to read every page that we would be there all night, and that we had to sign them anyway so we may as well just sign them.

    She also said that we could sue her if anything went wrong since she had malpractice insurance.

    Maybe we just had a bad experience (because she came so highly recommended). Maybe not. Either way we should have researched her first.

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