What Every Agent and Investor Should Know About Real Estate Closings
It is essential for all agents and investors to understand the basics of real estate closings.. Closings are a ceremonial process in the realm of real estate. Closings occur at an attorney’s office by appointment, not as a spontaneous act. While in other industries, the sales close may happen at the cash register or in a back office on an immediate buying decision, real estate closings require a minimum of 48 hours to setup and often can take up to four weeks. You should begin planning a close several days to weeks in advance of the actual date for closing. Each party should be notified at the proper point in order to have all of the required pieces come together at the appropriate time. Think of a closing as cooking a meal. You must know how much time in advance to start preparing each dish or all of the food will not be complete when it is time to eat.
Without a doubt, lenders will cause more delays to closing than any other source. The paperwork prepare does not usually take more than a few hours to put together, but they often demand documents from the attorney, buyer, and insurance agent. The time spent going back and forth connecting the lender and the other parties is what can shove a back a closing date. The best way to ensure that a lender will be on time is for you to know in advance what they will need and make sure that it is easily available to them. As we discuss the other parties to a closing there will be particular references to what you will need to do in advance so that the lender is not waiting.
When the attorney goes to the courthouse to review the historical documentation of ownership it is called “title work”. The attorney looks to see who is the legal owner and what liens (mortgages, construction liens, unpaid tax liens, etc) are held against the property. He then brings this information back to his office and writes up a Title Report listing everything that he has found. Often attorneys will refer to a title as “clean” if there are no surprises. If something comes up the report is referred to as clouded and the setbacks must be addressed in order to continue with the closing.
Do not wait to order title work. Title work can take two to five days to get back and if the title is clouded it can take several more days to tidy up the problems. You should order title work the day that you sign a contract. This gives you the most time possible to fix any problems that may arise and guarantees that the lender will have the title work as soon as they request it. We have seen numerous agents miss their closing dates because they forgot to order title work until a day or two before closing. The attorney could not get everything together on such abrupt notice and the lender needed a few extra days because they did not have the title work to examine. One agent set up a closing with an out of town seller that had to purchase airline tickets to come to the closing. Two days before closing, when the agent remembered to order title work, they found out that the closing date needed to be pushed back a week. The seller’s tickets were nonrefundable, and needless to say, they were not very excited.
Because title work often comes back clean in a couple of days, agents commonly make the mistake of waiting to order it until the last minute. Do not make this mistake. Order title work as soon as possible.
Edwin D Brown trains real estate investors on how to cash out their Lease Option buyers and Subject-to buyers as well as normal tenants using Credit Repair. His site offers free information for investors on how to grow their business along with case studies from his clients around the country.