As noted in the previous section (see Under Contract), if there is only a week or two between the date you contract on a property and the closing, the activities we describe in the Under Contract phase and the phase involving preparations to close will be carried out simultaneously. That is, you’ll be arranging your move at the same time you’re doing your inspections on the new house. In most cases, however, issues regarding inspections, title work, surveys, and the loan should be largely resolved before you begin final preparations for closing. There are several items listed below that are vital to a successful closing.
We typically begin to prepare for closing about 10 days prior to the closing date by sending a pre-closing message to our clients outlining what needs to be done prior to closing. At this point, the buyer and their agent or attorney should review everything that has been done in connection with inspections, title work and surveys to make sure that there are no loose ends. If the seller agreed to have repairs carried out, you should confirm that the work has been completed and get copies of the contractors’ receipts for review. If the title company agreed to issue additional coverage over a title defect, you need to make sure that they have actually issued the appropriate documents. You should also make sure that the lender has been notified of the time and date of closing, that they and the title company have copies of any amendments that have been made to the original contract, and that they have all the documents and information that they have requested from the buyer.
If you haven’t already done so, you need to get home owner’s insurance in place prior to closing. If you are buying a single family home, the lender will not allow you to close otherwise. If you are buying a condominium or townhome, your association probably provides insurance coverage for the building, but you should also have insurance that insures the interior of the unit, your personal property, and provides you with liability coverage. This is critical! While the lender probably won’t require this insurance, a fire in your unit the day after closing could cause $100,000 in damage that you’re not insured for. Your house warming party will be long delayed.
You need to make calls in the week prior to closing to transfer utilities from the seller’s name to your own. Typically, you will be calling the phone company, the company providing electricity and natural gas to the home, the cable company, and a trash company. In our area, the transfer of sewer and water utilities will generally be handled by the title company. If you are building a new home and installing phone service for the first time, you should probably call at least a month in advance. At closing, you need to verify that the seller has called to cancel their service with the utility companies. If they fail to cancel, some utility companies (particularly cable companies for some reason) may refuse to connect your service.
The closing is typically held at the title company during normal business hours and will take about an hour. The walk through is generally scheduled either the evening before closing or on the day of closing. If the seller agreed to complete substantial repairs, it is probably a good idea to do the walk through at least a day or two earlier so that there will be time to rectify problems you find with the work that has been done. However, since it is so easy to do damage to the property while moving out, you typically want to do the walk through as close to closing as possible. The purpose of the walk through is to confirm that the the property is in the condition that the seller agreed to leave it in.
You need to make sure that the money that you will need at closing is available. You should either transfer adequate funds to a local bank on which you can draw a cashiers check or you should have the funds wired directly to the title company’s bank. If you are transferring money to your bank, make sure that you do this early enough that the bank will be willing to write a cashiers check on that account. Some banks won’t issue a cashiers check until 5-10 days after the date the check has been deposited. If you transfer the money directly to the title company, do it at least two days prior to closing.
Assuming the work on the loan is complete, the lender will send the title company information on all your loan costs 3-7 days prior to closing. The title company then prepares final closing statements for both the buyer and seller. These statements include a balance sheet indicating all charges (e.g., the price of the home and the loan costs to the buyer) and all credits (e.g., the loan and earnest money to the buyer). These statements will be sent to the buyer and their agent or attorney for review. In the ideal world, this should happen several days prior to closing. In the real world, you will generally be lucky to get figures more than a day or two before closing. Let the title company know immediately if the figures are wrong.
In any transaction where a loan is involved, the buyer will have to sign a deep stack of papers at the closing table. Most of these documents are disclosures to the buyer, but many have significant legal implications. If you are concerned about the documents you will be signing, you should get copies prior to the closing and review them, or have them reviewed by your attorney. We generally recommend that our clients get a copy of the Note and the Deed of Trust prior to closing (see Key Documents). These documents record the terms of the loan agreement and are simply too long to read at the closing table. You should understand that you will generally have little or no leeway to negotiate changes in key closing documents. If the lender were to customize any of the important loan documents in response to your concerns, they wouldn’t be able to sell the loan on the open market. Generally, if you won’t sign the standard documents, they won’t make the loan.
If you want to have an attorney assist you with the closing, you need to arrange this with your attorney at least a week or two in advance. Attorneys are not common at the closing table in residential sales in Colorado, but if you want an attorney they will need time to review the contract, the title commitment and other documents prior to closing. They will also generally want to review some of the important loan documents before they get to the closing table.