Buying Real Estate in the United States, Part II: Closings
Part II: Closings on residential properties
Once a potential buyer located a property in the US which he/she wishes to buy, the next step is to enter into a contract. If the purchase is for example to take place in the state of Florida, the Florida Bar and Florida Board of Realtors have prepared a standard form contract for residential property which is widely used and which contains clauses which are generally considered more balanced than other sample forms of contracts. Other states in the US have similar sample form contracts. Of course, depending on what is entered into the form, a contract may favor one side over the other.
Contracts for the purchase of commercial properties are usually substantially more complex. The discussion of the particulars of the purchase of commercial real estate in the US would exceed the scope of this article.
The contract will include the names of the buyer and seller, the purchase price, the closing date, the method and time of payment, and the amount of time for the inspection period. As every situation is unique, we strongly recommend that you have a lawyer review any contract before you sign. In the alternative, if you choose to sign a contract before having it reviewed by a lawyer, you should include a provision that the contract is contingent upon review and approval of your lawyer.
In a short sale scenario (see also Part I, specifically addressing short sales), the contract will have additional provisions, the most important is that the contract is contingent upon approval by the seller’s lender. In some situations, the seller may have a second mortgage, homeowner association lien or other liens that will have to be released so that the buyer can obtain clear title (title without liens or encumbrances that attach to the property). In such a situation, the first lender will approve how much each junior lien will be paid from the short sale. The seller will then have to negotiate with the junior lien holders to accept the amount that the first lien holder allows.
The acceptance of the contract by the first lender usually triggers the inspection period, closing date and other obligations.
Once the first lien holder and the junior lien holder approve the short sale, the closing agent will prepare and forward the closing documents to the buyer and seller. The buyer and seller will sign, notarize and return the closing documents to the closing agent. Additionally, the buyer will supply funds for closing (either in cash or by obtaining a loan).
There are certain original documents the closing agent must have in order to close. Primarily, the closing agent must have an original executed, notarized and witnessed deed and if applicable a power of attorney from the seller. Additionally, if the buyer obtains a loan, the closing agent must have original executed loan documents provided by the lender and signed by the buyer.
Once the closing agent has the necessary original documents and funds to close, and with approval of both the seller and buyer, the closing agent will record the deed and mortgage and disburse the closing funds paid by or on behalf of buyer.
Once the deed, mortgage and any other documents that need to be recorded are recorded, the recorded documents are usually returned to the closing agent. The closing agent will then issue a title policy ensuring the buyer’s ownership of the property and return the title policy with recorded deed to buyer. It usually takes 30 days for the closing agent to receive the return of the recorded documents and issue title.
Suzanne Paulus and Carl-Christian Thier
Real Estate Law