The final step in buying a house is the closing, also called settlement.

"It's when everything that was agreed upon in the contract is actually executed," says Julian Bryant, a real estate agent with Crye-Leike's Bellevue office.

Many buyers have the misconception that after an offer is accepted, an agent's job is done. But, he says, "Our job's just beginning at that point."

Denise Allis, president of Commonwealth Title Agency of Nashville, urges "constant communication" with your agent, lender and title company until the closing.

Bryant notes, "There's always some hiccup" getting to closing. Understanding potential hurdles can smooth the process.

Loan documents: Get everything to the lender when they ask for it, suggests Allis. And plan to close a few days before the purchase contract or loan expires, recommends Mary Frances Rudy, an attorney and owner of Rudy Title & Escrow. "Don't wait until the last day — if there's a snag with the loan, the buyer may lose the house," she says.

Appraisal: If the house appraises for less than the sales price, the lender won't make the loan, says Bryant. The buyer can pay the difference, notes Allis, or possibly get out of the contract if an appraisal contingency was included.

Insurance: Get homeowner's insurance at least a week before closing and provide proof of insurance to the closing company, Allis says. And don't forget separate flood insurance if the home sits in a flood plain, says Bryant.

Closing costs: A lender usually sends the settlement statement, called a HUD-1, to buyers 24 to 48 hours before closing, Bryant says. Without this form, which details all costs and how much money to bring to closing, buyers may not have enough money — or time to get the required cashier's check — to settle.

Final walkthrough: Buyers have the right to tour the property (usually the day before closing) to ensure that it's "in same general condition" as when the offer was made, says Bryant.

If there's damage or something doesn't work, "agents would negotiate any repairs and set up an escrow account," says Rudy, often for 1½ times the estimated repair cost. "It puts pressure on the seller to get work done," she says.

The closing: After proving identity (bring ID), buyers should "expect to sign quite a few documents," says Allis, noting that most buyer closings take an hour. She says closing agents, who are not necessarily lawyers in Tennessee, should explain each of the documents. Rudy says five are particularly important.

• The HUD-1 details all the loan and closing costs.

• The note details interest rate, number of payments, minimum payment and any pre-payment penalty.

• The payment letter shows the monthly principal and interest and any escrow payments for insurance and taxes.

• The truth-in-lending statement shows the total cost of the life of the loan. "It's the first time people actually understand what they're paying for the house."

• Warranty deed is what puts the property in the buyers' names. "You are not an owner unless you're on the warranty deed," says Rudy, adding that some people mistakenly believe that signing the deed of trust grants ownership.

If all goes according to plan, buyers will leave the closing with keys to their house, says Allis. "Ultimately that's what they want — they bought a piece of property and they want to move in as soon as they possibly can."
posted by Rick at 5/02/2006 12:24:00 AM

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