Closing is next week, what should I expect?

 Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 10

This is the tenth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – Closing is next week, what should I expect?

First of all, congratulations for making it to the point where the closing is finally scheduled. You should expect that you’ll be given the closing documents to review and a copy of the Sellers’ Disclosure Statement (aka the HUD) at least three days ahead of the closing date. You should examine those documents carefully for any mistakes. The most common mistake is the misspelling of someone’s name on the documents; however, I’ve also seen documents prepared with the wrong property address or wrong legal description on them.

How can mistakes like that happen? Well, the people who work in the title companies are human and do make errors and their error rate is exacerbated by the fact that there are usually too few of them for

the end of month crunch as everyone tries to close on the last day of the month. There are good financial reasons for trying to close on that last day of the month. Ask your mortgage person about that. Another contributing factor is the slow pace that most mortgage companies work at, which means that the underwriters don’t get their part done until a few days before the closing deadline, so they often get their paperwork to the title company late. Add to all of that any last minute changes that the Buyers and Sellers may agree to and you have the makings of a chaotic and error prone document preparation process; so check the closing docs and the Sellers’ Disclosure Statement thoroughly. If the errors are egregious, especially in the Closing Statements, they will have to be redone and the three –day clock reset, so closing may be delayed.

You should also expect that the Buyers will want to do a final walk-through of the property to make sure that it is in substantially the same condition as when the offer was accepted. That’s a nice way of saying that you didn’t do anything stupid and strip out stuff that was supposed to stay with the house or cause any damage to the house, if you’ve already moved out. If you have arranged for some post-closing occupancy they may delay this walk-through or do another one when you vacate the premises. The final walk-through is sometimes done the morning of closing while the Buyers are on

their way to the closing office. The Buyers’ agent may offer to pick up the real estate sign and take the lock box off the door at that time.

The actual day of closing you should remember to bring your drivers’ licenses to the closing, so that your identities can be verified. If possession is to be turned over at closing, you should bring all of the keys and garage door openers that you have to turn over to the new owner. If you are going to stay in possession for some amount of time after closing you won’t have to turn over any keys or openers at closing.

The closing process itself is a marathon signature signing exercise. The good news for you is that the Sellers have fewer documents to sign than the Buyers. A closer from the title company, perhaps two closers if the closing is “split” between the Sellers title company and the Buyers title company, will walk you through the documents, explaining each as they go and showing you were to sign. Since you were given the documents at least three days ahead of the closing, it is assumed that you read through them already. It’s OK to ask questions about the documents if you have questions, but it is not time to read the documents for the first time at the closing table.

In Michigan we have a concept called Homesteading which allows owner-occupants to save on their primary residence by claiming a Principal Residence Exemption (PRE) on it. To understand what the PRE is I have taken a definition from the Michigan Government Web site –

Section 211.7cc and 211.7dd of the General Property Tax Act, Public Act 206 of 1893, as amended, addresses PRE claims (formerly known as the Homestead Exemption). A PRE exempts a principal residence from the tax levied by a local school district for school operating purposes up to 18 mills. To qualify for a PRE on a parcel of land, a person must be a Michigan resident who owns and occupies the property as a principal residence. The PRE is a separate program from the Homestead Property Tax Credit, which is filed annually with your Michigan Individual Income Tax Return.

To claim a PRE, the property owner must submit a Principal Residence Exemption (PRE) Affidavit, Form 2368, to the assessor for the city or township in which the property is located. The deadline for a property owner to file Form 2368 for taxes levied after December 31, 2011, has changed from May 1 to June 1, and a second deadline of November 1 was added. The exemption information is then posted to the local property tax roll. Normally, when you purchase a home, Form 2368 and other relevant principal residence exemption forms are provided by the closing agents. There are many variables in determining eligibility for the exemption. The Principal Residence Exemption (PRE) Guidelines book provides answers to a number of frequently asked questions.

Since you are selling and this will no longer be your principal residence you must file a rescission of the PRE that you had on the property, so the closer will give you a form to take to the local Township Treasurers office to remove your PRE. The new owners will be given a form to take in to that same office to claim a PRE for the property. You have 45 days to get that done or you will be fined and you cannot claim a PRE on another property (maybe the new home that you are buying) until you rescind the old PRE.

Once the flurry of paperwork signing is done there will be a period of time in which the title company

closers are off making copies for everyone and that is great time to have a conversation about the house with the new owners. They may have questions like, “what day is trash day?” or “where does the school bus stop?” If they didn’t do a septic test they may ask about where the septic tank is located. You can also pass on to them any names of neighbors or other information that you feel might help them get settled in.

Sometimes, even though all of the paperwork was signed, the deal isn’t done yet because the mortgage company may want to see the signed HUD before they will wire the funds into the Buyers’ title company. So the title company closer will fax or scan and email that document to the lender for review. No funds can be disbursed to anyone until such time and the Buyers title company can confirm that they have received the wire transfer at their bank. That can take minutes to hours. There is even a risk that the mortgage company or bank will close for business and not get the wire transfer done before that. In that case everyone may have to wait until the next business day to get paid and to take possession.

I have been in a worst-case scenario closing where the closing could not be completed because the funds could not be transferred before the banks close AND it was Friday afternoon; so the whole closing was delayed until Monday. In that case the Buyers stuff was in a moving van that was sitting outside the house awaiting the Buyers to return with the key to let the movers unpack. The Seller’s graciously allowed the Buyers to unpack their stuff into the garage for the weekend. The Seller’s even had to camp out over the weekend because their stuff was all packed on trailers that they were driving to their new home. What a mess. Make sure you plan the closing early enough in the day so that this does not happen to you.

Once the money is received by the Buyers title company they will disburse the checks that they have had with them all along. You’ll get your check (unless you arranged to have it wired into your bank account) and all of the other parties that get a check will get theirs. If you wanted your proceeds wired to your bank account you will have to supply the wiring information – your bank account number, the bank’s routing number and anything else that the title company need to do the wire transfer – at the closing table. The title companies do it that way to avoid fraud by scammers who might have emailed in a bogus set of wiring instructions.

If everything goes smoothly and you have your check in hand, congratulations; you sold your house. Any money that you might still have coming from insurance rebates or other things should be forwarded to your new location, so hopefully you have provided a forwarding address to anyone who might need it to send you those checks.  It’s time to move on with life. If you have post-closing occupancy there is one more post for you. If not, maybe you’ll become a Buyer now. If so, read my next series of posts for buyers.