If you’ve been working in real estate, you may wonder when the key transfer should take place. When is key transfer in real estate, exactly? And how long is the closing process? In this article, we’ll talk about review the real estate closing process and go over what legal documents you need for closing on a home. For more information on how key transfer happens in real estate transactions, read on!
Review of the Real Estate Closing Process
According to Shobhit Seth on Investopedia, there are 12 steps that must be taken before a real estate deal can close. These steps should be taken between the time the offer is accepted and when the buyer gets the keys to their new home. (All of Shobhit Seth’s quotes below were found in the helpful article linked above.)
These 12 steps to closing include:
- Opening an escrow account. “The best way to prevent the seller or the buyer from being cheated is to bring in a neutral third party. This third party can hold all the money and documents related to the transaction until everything has been settled.”
- Conducting a title search and obtaining title insurance. “A title search and title insurance provide peace of mind and a legal safeguard. They ensure that when you buy a property, no one else can try to claim it later.”
- Hiring an attorney (optional). “It’s always better to get a professional legal opinion on your closing documents. The complicated jargon in them can be difficult to understand, even for well-educated individuals.”
- Negotiating closing costs. “From opening an escrow account to hiring a real estate attorney, involved services and entities cost money. These costs can snowball if you aren’t careful. Many services take advantage of consumers’ ignorance by charging high fees. Junk fees include administrative fees, application review fees, appraisal review fees, (etc). If you’re willing to speak up and stand your ground, you can usually get junk fees reduced or eliminated before closing.”
- Completing a home inspection. For more information on the home inspection process, see our article on home inspections.
- Getting a pest inspection. “A pest inspection involves a specialist making sure that your home doesn’t have any wood-destroying insects, such as termites or carpenter ants. Many mortgage companies mandate that even minor pest issues be fixed before you close the deal.”
- Renegotiating the offer. “You may want to renegotiate the price to reflect the cost of any necessary repairs revealed by inspections. You can also still back out without penalty if a major problem is found that the seller can’t or won’t fix.”
- Locking in the interest rate. “If possible, it’s advisable to lock in the interest rate for the loan in advance. That prevents you from being at the mercy of market fluctuations, which could cause rates to rise before you finalize your property purchase.”
- Removing contingencies. “Your real estate offer should be contingent. Such contingencies must be removed in writing by specific dates stated in your purchase offer, a process known as active approval. However, some purchase agreements are subject to passive approval (also known as constructive approval). This means they’re considered approved if you don’t protest them by their specified deadlines. Buyers must understand the approval process and take actions by the required dates.”
- Meeting funding requirements. “You most likely deposited earnest money when you signed the purchase agreement. To complete your purchase, you’ll have to deposit additional funds into escrow. As the original earnest money is applied to the down payment, arrange for other required payments before the deal is closed. Failure to do so can lead to the sale getting canceled, with the earnest money going to the seller. Furthermore, you could still be charged for the services you used before the deal fell apart.”
- Doing the final walkthrough. “Make sure no damage occurred since your last home inspection. You should also verify that the seller completed the required repairs and no new problems came up. Check to see that nothing included in the purchase agreement was removed.”
- Understanding the paperwork. More on that below.
When Does Key Transfer Happen?
Key transfer happens the day of closing, and not a moment before. Before it can happen, all of the legal documents must be signed, payments need to be made, and the deed must be recorded at the county recorder’s office.
“Fortunately, closing day usually only takes a few hours, and if everything is wrapped up before 3 PM (and not on a Friday), you will get your new keys at closing,” Evette Zalvino writes on the HomeLight blog.
How Long Does Closing Take?
An Ellie Mae report that was released in October 2019 showed that closing on a house can take between 40 and 49 days, depending on the type of loan. As a real estate agent, you can ensure that the buyer will understand the steps a bit better. You can explain to them that, despite the term “closing,” it will take a while longer for them to be given their keys. You can manage expectations of when they’ll be able to move in.
All Legal Documents Must Be Signed
“Despite there being a stack of papers filled with complex legal terms and jargon, you should read it yourself. If you don’t understand something, consult a real estate attorney,” Shobhit Seth says. As the buyer’s agent, you can explain the complex terms to them in order to expedite the process a bit for the buyer.
Mr. Seth continues by saying, “Make sure the interest rate is correct and all other agreed terms are clearly mentioned. More generally, compare closing costs to the good faith estimate you received at the beginning of the process. Vigorously dispute any fees you think are illegitimate.”
Evette Zalvino also expresses the importance of the purchase contract. “While the buyer must understand the purchase contract in full, it’s strongly advised to pay special attention to any addendums or contingencies added in. These can modify the contract in a few ways.” Other documents which must be reviewed and signed are the title review and mortgage or deed of trust. Be sure that your buyer understands all these as they sign.
Payments and Financing Arrangements Must Be Made
“On closing day, you’re expected to bring the rest of the money you owe to the table, or you won’t walk away with the keys. (It) needs to cover the down payment and closing costs, and can be in the form of a cashier check or wire transfer,” Evette Zalvino says.
“However, closing can be delayed if the bank didn’t wire the funds to the title company on time,” says Claudia San Roman, a top real estate agent in Miami.
Remind your buyer that the money they paid after the seller accepted their offer was not the entire down payment – it was an earnest money deposit. In addition to the down payment, your buyer will have to cover other closing costs, including:
- Home appraisal
- Flood certification
- Escrow fees
- Property taxes
- Lender fees
- Title and attorney fees
- And more
The Deed Must Be Recorded
According to Kevin Lisota on the Findwell blog, “Closing occurs when the deed is recorded at the county and recording numbers are available. Once the deed (and your mortgage) is recorded, you own the home. If the home is vacant, customarily your agent can pass you the keys at any time after recording. If the seller is in the midst of the final move-out, they may take until the possession time to pass you the keys.”
Close Concierge Can Handle Your Transactions
The closing process can be terribly time-consuming for busy real estate agents. If you’re an agent who closes more than two transactions each month, you would benefit from bringing in Close Concierge. With Close Concierge, you’ll get your own dedicated transaction coordinator who will treat your transactions with the utmost care. They will maintain compliance across all levels and get your transactions right the first time. By doing this, they can save you 15 hours per transaction. Curious? Contact Close Concierge!