What to Expect When Closing Your First Deal in Real Estate

Finally, you have chosen your dream real estate property, and now it’s time to close! Closing real estate is a lengthy and confusing one. It’s the most exciting thing investors generally experience throughout their careers. Closing involves loads of paperwork, financial transactions, mortgage settlement of the property and much more. But with the right system in place, closing your first deal in real estate isn’t a burden. So, let’s take a look at what to expect when closing your first deal in real estate. To make your closing less stressful and more rewarding…

What is a real estate closing?

Closing is often called as “settlement” – is a final step of your real estate transaction. The closing is handled by neutral third party closing agents such as a real estate attorney or a title company. In short, closing is the final and fulfilled agreement in the sales contract between the seller and the buyer. 

Important steps to closing a real estate deal

Open Escrow

Yes, opening an escrow account is an important step in closing a real estate deal that can’t be overlooked. It is a trusted, unbiased account held by a third party on behalf of everyone represented in a transaction. Escrow collects all the documents and money involved in a deal and holds them until instructed. Once everything gets placed, the documents and money are transferred to the new owner, eliminating the chance of malicious acts. In short, Escrow is one of the safest methods to exchange valuable capital and documents. 

Conduct a title search and get insurance

Well, conducting a title search and securing title insurance represents a safety measure when closing a real estate deal. This step is crucial to protect your assets from anyone else claiming ownership. The title officer will perform extensive research to determine and confirm a property’s legal ownership. 

Hire an attorney

Quite optional! Still, hiring an attorney specializing in real estate transactions will provide you with a peace of mind that can’t be underestimated. Besides, an experienced real estate attorney can offer you multiple benefits – including suggestions on any potential problems in the paperwork. So, it’s best to hire a trained professional to represent your side of the deal. 

Negotiate Junk Fees

There are many companies in the real estate industries that are perfectly fine charging – ‘junk fees’. Those include application review fees, administrative fees, appraisal review fees, email fees, ancillary fees, and processing and settlement fees. It’s worth noting. So, those willing to remove these fees should take a chance and remove them. 

Lock the interest rate

It is advised to lock the interest rate for the loan you take in advance. Instead of being at the generosity of the market fluctuations, which can be a big risk if the rates rise before you finalize your asset purchase. A pre-approved mortgage provides you the facility of rate lock. Through which you can secure a favorable interest rate for the loan. 

Conduct a home inspection

You may argue a home inspection isn’t required. But I beg to differ here… as conducting a thorough home inspection is mandatory at closing a deal. Hiring an inspection inspector is cheap! Secondly, it can save you from a heap of troubles down the road. It will allow you to back out of the deal or ask the seller to rectify the problems.

Consider subsequent negotiations

At this point, you have to evaluate everything you have done up to this stage and determine whether your original offer price needs to be tweaked. 

Remove Contingencies

Yeah, every good real estate investor knows that a great offer isn’t complete without contingencies. So, if your real estate broker helped you draw up a good purchase deal, it should be contingent on several factors, including:

• The home inspection not disclosing any major problems with the home
• Securing financing at an interest rate (not to exceed a certain percent) that you can afford
• The seller fully communicating any known problems with the home
• The seller completing any agreed-upon repairs

As a part of active approval, you must remove the contingencies in writing by a certain date, which should also have been stated in your purchase offer. 

Final Walkthrough

Remember no deal should be brought to the closing table without conducting a final walkthrough (of the property). Make sure no damage has occurred to your property, required fixes have been applied by the seller or no new problems are found. 

Sign the papers

Paperwork forms a major step in closing a property deal. So, once everything is in place, feel free to start signing away the documents. There will be a lot of paperwork! Much more than people anticipate… Thus, I highly recommend you read each page carefully and abstain from signing until you clarify what you are agreeing to. In case, you don’t understand certain terms or sections – one can look them up for explanations on the internet or feel free to consult a real estate attorney. 

Conclusion

Well, closing real estate deals may seem a lengthy process. Buyers, sellers, and even real estate professionals may get skittish about real estate closings. But, I can assure you all of these steps are there for your protection. So, follow these steps to make your first closing smooth, as far as possible.