One of the thorniest and most gnarled bundles of stress in the transaction is the final stretch. Offer accepted, inspections done, appraisal is in, and the buyer’s final loan approval is out of underwriting. Now it is time to bring it all together for the big finale.
A lot happens in the last few days of the transaction….some of it you’re involved with, some of it involves the other side, and some of it is just behind the scenes with the escrow officer, Realtors and lenders.
Let’s a take a look at what is going on during the final days of escrow.
Loan documents—The buyer’s lender will prepare the loan documents and send them over to escrow. Depending on the queue, this could take 24-48 hours. Once the escrow officer has them, she will review them and put together the closing statement.
Closing Statement—This will outline all of the line item debits and credits. After the loan documents are in, a good escrow office should be able to prepare this in a few hours. The closing statement will tell the buyer how much money they will need to complete the transaction (the balance of the down payment, closing costs, etc), and it will tell the seller how much money they can expect at closing. Depending on the type of transaction, you may hear this referred to as the HUD Statement. Read your closing statement very closely. Buyers should compare it to the contract and the good faith estimate that the lender provided.
DETOUR! Short Sale Approval—If this is a short sale, the closing statement will need to be reviewed by the seller’s lender that is authorizing the short sale. This can take another 24-48 hours. As I often say on a short sale, it ain’t over ‘til it’s over. The short sale lender may question line items, request changes, reject credits, etc. Anything! Do not take this step for granted. And, if it isn’t approved or adhered to on time, it can delay the closing for another week or so.
Final Walkthrough—I advise my clients to do a final walkthrough of the property in the last few days of the transaction to make sure it is in the expected condition. Usually, this last step is fine, but it is important to do. Though, on short sales, if there are any issues, it is sometimes difficult to get the seller to help out.
Signing—Once loan documents are prepared and the closing statements are approved, it is time to sign. Sellers should anticipate about 30 minutes of time for this, unless the sale is tied to a more complicated string of transactions. Buyers should anticipate up to an hour, especially if it is an FHA loan. These are typically very statutory, non-negotiable forms based on everything that has occurred so far in the transaction. If you want to review them in detail before signing, you can speed things up a bit by requesting the escrow officer to send you the signing packet for review. Also, you will need to schedule the signing with little notice, sometimes just a few hours. Make sure to notify any bosses or clients that this may came up and you will need to drop everything and go. Finally, make sure to bring two forms of ID, with at least one form being a photo ID. A driver’s license is good, as is a passport or social security card.
Closing Funds—Buyers will likely need to bring funds for closing. This will need to be a cashier's check or wire transfer. Wire transfers are usually better, as the escrow company will probably need to sit on the cashier's check overnight before it can be used. This needs to be delivered at least 24 hours prior to the scheduled closing for the process to move smoothly.
Loan Funds—After everything is signed, the escrow officer will coordinate with the buyer’s lender to get the funds for the purchase. There could be some hiccups here if a form is missing or incomplete.
Closing Day—Once the escrow company has all the funds in and everything is signed and approved, they will release the transaction to the county to "go on record." That usually happens toward the end of the day. And, with that, the transaction is done! Time for a key exchange!
Hopefully knowing a bit more about what is going on behind the scenes with all the various parties will reduce stress as the transaction comes to a close. I think it is important to address this, especially at the frantic end stage, because I would hate for the stress to take away from the excitement of buying or selling a home.