A Step by Step Guide for Real Estate Closing

real estate closing

Buying your own home is one of the happiest and proudest moments of life. However, the tedious process can get the highest of spirits to dwindle. The closing process can sometimes take a long time and may seem never-ending.

You can make it easier on yourself by becoming familiar with it. Let us begin by explaining what real estate closing is.

Real Estate Closing

Real estate closing is the process of transferring ownership of the house from the seller to the buyer. It is also sometimes known as settlement. This process starts before the deal is done and you are ready to sign the official documents. You get the keys to your new house once the process has finished.

Steps for Real Estate Closing

There are several steps to this process of closing, and we will make things easier for you by explaining every detail, so let us begin.

real estate closing with keystone
Credit: Kzenon

1.     Get an Escrow Account

An Escrow account is an integral part of the process, and you need to open one for your financial safety. A third party is responsible for holding the account on behalf of the buyer and seller. It eliminates the chances of being cheated, and both parties benefit from this account. The third party is neutral, and they hold all the money and any official documents that are a part of the transaction. Once the deal has gone through, all the money and documents go to each party as required. This ensures a transparent transaction that is equally beneficial for all parties involved.

2.     You Need a Title Search and Homeowner Insurance

A title search means examining the public records of a house to check its legal ownership. A title agent can help you do a title search on the property you are buying. You can also find out whether any claims exist on the property and have them resolved before you finally buy the house. A title search protects you from surprising claims that you only find out after buying the house. 

Homeowner insurance is essential as it keeps you protected from any loss or damage to the property. Sometimes damage or loss happens because of a title defect which means the owner cannot legally transfer the property to anybody because someone else has claimed over it.

3.     Get an Attorney

Some states in the United States have made it mandatory to hire a lawyer when going through the closing process. However, even if you are in a state where this is not a requirement, it is always good to get legal guidance when going through a process like real estate closing. It can often get difficult for us to understand legal documents, and an attorney can help you understand them and check if all paperwork is done correctly.

4.     Negotiate the Junk Fee

Buying a house is expensive; adding the closing cost to it will get you a hefty bill. It can get worrisome to keep paying for one thing or another. If you borrow money to buy your home, you can save some of the amounts by reducing some extra fees. Lenders charge borrowers junk fees that most people are unaware of. This cost includes an appraisal review fee, processing fee, settlement fee, application review fee, administrative fee, etc.

You can get this cost eliminated or reduced to a manageable amount if you are willing to negotiate this extra fee. 

5.     Get a Physical Home Inspection Done

You should never buy real estate without having a look at the property. Sometimes, people like property so much that they don’t even stop to think or have it inspected before shaking hands. You can even hire a professional home inspector who can check every book and cranny of the house on your behalf. It is good to be present there when the inspection is happening so that you know about any problem that arises. Depending on the severity of the issue, you can either decide not to buy the house or get the seller to have it fixed or pay you to fix it.

6.     Get Pest Inspection Done on the House

You are required by law in some states to get a pest inspection done when buying a house. Pests can get pretty destructive and destroy your wooden items or furniture. It is best to know about it before you close the deal for the house. In some circumstances, you can have the seller fix this problem. Try to get a pest inspection done even if it is not a legal requirement in your state.

7.     Renegotiate the Offer on the House

If you have found any damages or defects in the house, you have the chance to renegotiate the offer that was made on the house initially. They can also compensate for the added cost of damages to cover the extra amount you will have to spend on the house. If the seller is rigid and not budging, you always have the option to back out of the deal if it no longer seems worth it.

8.     Go Over Your Mortgage Interest Rate

Interest rates fluctuate with the market and can cause you distress when making monthly payments. Even the slightest increase can significantly affect the amount you are to pay every month.

We suggest you lock in the interest rate if possible before the deal is closed. This will mean that your rate stays fixed and does not impact the amount of interest you pay.  

9.     Meet the Funding Requirement

Buyers are required to pay earnest money when they sign the purchase agreement. Earnest money is given to the seller in good faith to display your intentions of buying the real estate. If one party doesn’t wish to go further with the deal, the other party keeps the earnest money. This is a part of the down payment and not paid separately.

Before you sign the deal, you also have to deposit some extra funds into your escrow account. This is also a security deposit. You must complete all financial transactions included in the settlement process before closing. You will not be able to proceed with the purchase if you fail to make these payments.


The settlement might seem like a never-ending process, but it is crucial. All steps are a part of the process because they provide you with financial safety to purchase the property without any undisclosed damage or face loss.

Remember to get a final inspection of the house before signing the deal so that you are aware of any changes that the property may have gone through.

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