What to Expect on the Day of your Closing

Buying your first home can be stressful. You may have looked at several properties with your real estate agent until you found the perfect place. You’ve been working with your lender for weeks to secure the final loan approval. You’re worried that the seller hasn’t made the repairs to the kitchen that were promised. But while buying your first home can be stressful, the closing doesn’t have to be. I have prepared a summary of what to expect on the day of your closing. This primer will prepare you for what should be one of the most exciting days of your life!

WHAT YOU NEED TO BRING WITH YOU

Generally, in Illinois, residential real estate closings are held at the office of a title insurance company. The title company acts as the escrowee and will be responsible for holding the funds associated with the transaction, distributing the funds at the conclusion of the closing, and providing a title insurance policy protecting the buyer’s title to and the lender’s interest in the property being sold.

The most important thing you will bring with you to your closing is the amount of money you need to complete the purchase. Your attorney, and lender if you are securing a loan, will explain the final amount or bottom line, in the days leading up to closing. Due to federal regulations, if the amount is over $50,000, the buyer will need to have the funds wired to the title company. Any amount below $50,000 may come in the form of a cashier’s or certified check payable to the title company.

Because you will be signing several documents requiring notarization, you will also need to bring identification. Acceptable forms include, but are not limited to a driver’s license, state identification card, and a passport. Check with your lender if you are unsure about what they require.

Finally, if you have already purchased homeowner’s insurance, you should bring your homeowner’s insurance certificate or proof you have already paid for it.

UPDATES TO CLOSING PROCEDURES

Although some title insurance offices have been forced to temporarily close some locations, changes to the traditional closing services have been implemented by many title insurance companies. Closing offices will only allow purchasers and their attorneys to be present on closing day. Several companies are even offering “curbside closings” for financed transactions, allowing buyers to remain in their vehicle while signing the required documents. 

Closing documents are being sent to all parties well in advance of the closing date allowing attorneys to adequately prepare clients without ever having to physically meet. Lavelle Law, Ltd. has long been able to connect with clients via teleconference and will continue to offer this service throughout the current pandemic.

Cash transactions may be closed electronically via e-mail and electronic signature technology. These new procedures allow the seller’s attorney to submit all required documents to the title company prior to the closing and eliminate the need for anyone from the seller’s team to be present during the closing. The title insurance industry acted quickly in implementing these procedures to ensure a lower amount of unnecessary physical contact between all parties.

As always, a purchaser may assign power of attorney if the purchaser is unable able to attend the closing in any capacity. The power of attorney must be approved by both the title company and lender, if applicable, prior to closing.

The title companies may add additional requirements and exceptions to account for gap periods, unavailable transfer stamps, tax sales and other specific circumstances. It is important that attorneys submit requests and questions to the title company in a timely matter to prevent any delays.

THE DOCUMENTS YOU WILL SIGN

If you are securing a loan to purchase the property, the lender will send the company a package of loan documents that you will sign the day of closing. While the number of pages may seem daunting at first, your attorney will be there to explain what you are signing and what it means for you. A few of the most important documents include the note, the mortgage, and closing disclosure. After the loan package is signed, the title company will send the documents to the lender for review and approval.

NOTE:  This is the written promise of the buyer to repay the lender the amount of the loan, plus interest. The note will explain the expected timing of payments, the interest rate, and what will result from late or missed payments. It is worth noting that there is no “pre-payment penalty” in the State of Illinois. This means you are allowed to pay off the loan at any time without being charged additional fees from the lender.

MORTGAGE:  A mortgage is a legal instrument executed by the buyer that gives the lender a security interest in the property. This document is recorded with the county in which the property is located and it will detail any restrictions on the use or disposal of the property. The mortgage will also explain what will happen if the buyer defaults on the note to trigger foreclosure proceedings.

CLOSING DISCLOSURE:  Because of federal regulations, you will actually receive a preliminary version of this document 3 days before your closing. The closing disclosure reveals all of the fees associated with the transaction and will provide you with the final amount of money you will need to bring to closing.

DOCUMENTS FROM THE SELLER AND TITLE COMPANY

At every closing, the seller will give the buyer a deed, bill of sale, and an affidavit of title. If you are purchasing a single-family home or townhome, you will also receive a recent plat of survey. The title company will provide, among other documents, a title insurance commitment/policy, an ALTA Loan and Extended Coverage Statement, and a settlement statement.

DEED:  A deed is a legal document that asserts the ownership of real property has been transferred by the seller to the buyer and will also detail how the buyer(s) is taking title. This document is signed by the seller, notarized, and recorded with the county in which the property is located.

BILL OF SALE:  A bill of sale is another legal document showing transfer of ownership. The bill of sale is used for personal property, e.g. the refrigerator, washer, and dryer. The items transferred to the buyer are determined by the original real estate contract and may be modified during the attorney review period if the parties so choose.

AFFIDAVIT OF TITLE COVENANT AND WARRANTY: This affidavit is signed by the seller and affirms that the property is owned by the seller and there are no liens against the property.

TITLE INSURANCE COMMITMENT/POLICY:  Title insurance is needed by the buyer and if applicable, the lender. This insurance protects owners and lenders from any defects in the title. These may include another claimed owner of the property, improperly recorded documents, liens, encroachments, and easements. Title insurance can also protect you against fraud and forgery.

ALTA LOAN AND EXTENDED COVERAGE STATEMENT:  Extended coverage protects the buyer from not only matters that are listed by the public records, but may also cover certain matters that are not found in the public records. The document confirms the seller has not put any new liens on the property.

SETTLEMENT STATEMENT:  This document breaks down all of the costs associated with the transaction for both the buyer and seller. All lender fees, title fees, tax and closing credits, escrow payments, transfer taxes, and third-party fees are clearly disclosed.

HOW LONG WILL THIS TAKE?

The duration of a residential real estate closing may depend on several factors: whether the lender provides the loan package on time, how long it takes to sign the loan package, how much time the lender needs to review the signed package, the arrival of wired funds, and any unexpected hurdles arising at the closing table. This process can take anywhere from less than an hour to several hours. On average, where the buyer is taking out a loan, closings are 90 minutes to 2 hours.

WE'RE CLOSED! NOW WHAT?

After the lender approves all of the documents, the title company will disperse the funds to all parties owed money from the transaction. The seller’s team will hand over the keys to the buyer, and the title company will provide copies of all of the signed documents. Congratulations on becoming a homeowner!

Your first real estate purchase may seem overwhelming at times. Real estate attorneys should be prepared for unforeseen circumstances and it is extremely important that your attorney is capable of guiding you through the entire process. The real estate team at Lavelle Law, Ltd. handles hundreds of real estate transactions a year. We are always available to answer your questions and we look forward to providing you a comfortable home buying experience!

If you would like to speak to the author, Chance Badertscher can be reached at 847-241-1779 or cbadertscher@lavellelaw.com.