What to Expect at Closing: From Big Problems to Smooth Sailing

At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.

“What to Expect at Closing” is part five of our six part “How to Sell a Single Family Home” series. Check out Part 1, Part 2, Part 3, and Part 4. 

According to Forbes, failed home sales doubled Nationally from 2.1% in 2015 to 3.9% in 2016.

There are a ton of reasons your pending sale could fall through: the buyer’s loan could be rejected, the sale is contingent and the buyer’s home doesn’t sell, you and the buyer can’t settle on a fair price, the home could appraise for less than the offer–the list goes on.

In Melissa P.’s case, she and her family faced a huge issue with the title of the house during closing that almost ended in a failed home sale.

In her real estate agent Jeff Galindo’s words, “Once we’re getting closer to closing, we realize we’ve got a huge title problem. Apparently Dad, who is now deceased, had done some things with financing with some personal family members and some other people that created a bit of a challenge with the title.

We couldn’t clear the title.

We went back and forth on that for a while until we really discovered that we were going to need a lot more time to get this thing fixed. We’re in contract, we find the buyer, we do all these things, and now we have to go to the buyer and say, ‘There’s a problem, how can we resolve it?’

Long story short we put that buyer into a lease, she leased the house that she was going to buy, and it literally took us four months to fix all the problems with the title.”

According to Desare Kohn-Laski, top 1% single family home expert in South Florida, if a pending sale falls through the options are limited. The real estate agent can reach out to other buyers who put in an offer (if there are any), but in most cases she just has to re-list the house. If your pending sale fails during closing, you’ll have to start the entire process over again.

You don’t want to get close to that situation. Even though a lot of the factors that can tank the closing are out of your control, if you better educate yourself on what needs to happen at closing day on a house, you can take preventative measures to ensure that everything goes through.

how to sell a singe-family home
Source: (Shopify Partners / Burst)

Here’s What You Need to Worry About When You Close Your Single Family Home

1. Get the Papers Ready for Escrow

Escrow is when the money for the single family home sale gets transferred to the escrow officer, who acts as a third party to keep everyone’s money safe until the transaction closes. The escrow officer also orders the title transfer. As you’ll recall, this is the point in the sale process where Melissa P. and her family got tripped up.

Make sure that you know whose name is on the title of the house and that you will be able to transfer it without hassle. The escrow officer will also prepare closing statements.

At this point, you need to make sure that everything is all set with your title, you’ve paid off any outstanding loans secured by the house, and you’ve sent in any personal information to the escrow officer.

You’ll most likely need to send your escrow officer documents related to your property. These may include:

  • HOA paperwork
  • Mortgage statements
  • Smoke detector certificate
  • Property tax bills

Specialized documents should be listed in your purchase agreement, as they will be different for every sale.

When you open escrow, your escrow officer will send you documents. The most common documents include:

  • Escrow Holder Agreement
  • State specific forms
  • Grant Deed
  • 1099-S Input Form
  • Property Information Statement
  • Statement of Information
  • Affidavit of Nonforeign Status

Then, when you meet to sign documents at the closing table, you need to bring:

  • Photo Identification (your Passport or Driver’s License)
  • All house keys
  • Records of home ownership
  • Most recent paid utility bills
  • Deed to the house

Be Aware that You’ll Probably Have to Pay…

  • Fees associated with escrow, title, and any legal costs (Use this Seller’s Net Sheet Calculator to figure out what these costs may be for your area)
  • The real estate agent commission (6%)
  • Any outstanding mortgage loans
  • Property tax, homeowners insurance, HOA fees
get ready for the home appraisal with cleaning
Source: (The Creative Exchange / Unsplash)

2. Get Set Up for The Home Appraisal

The home appraisal happens after both you and the buyer have settled on the buyer’s offer and sign the purchase agreement for your single family house. You won’t have to pay for the home appraisal, but you will have to get the house ready.

The appraiser ignores your personal belongings and focuses on the bones of your property. While they won’t assign a value based on the gray suede leather couch in your living room, you should still make sure the space is as clean as it was when you staged the homes for showings–it just leaves a better impression.

If you have not already done so when you prepped the house for sale, make sure you handle these 3 things before the home appraisal happens:

1.Tidy Up
Clean and declutter enough so the appraiser can see small, unique details like a bay window, crown molding, beadboard, or original or new hardwood floors

2. Tackle the Smell
Make sure you air out the home and deodorize it with the DIY simmer pot you made in Chapter 3 or the reed diffusers you set out

3. Touch Up Your Landscaping
Re-mow the lawn and pull any weeds that popped up

You need the house to appraise for at least the number the buyers said they’re willing to pay for it. If your single family home appraises for less, you or your buyer will have to make up the difference in cash because the bank will not issue a loan for more than the home is worth.

This is the ultimate determination of your house’s actual fair market value.

landscape fair market value curb appeal landscape
Source: (Daniel Watson / Unsplash)

3. Get Ready for The Home Inspection

The buyer also pays for the home inspection, but again–you need this to go well because the buyer could ask you to make repairs or could walk away after the results. We identified several problem areas you can look to to try and minimize any issues that could come up during the home inspection.

This isn’t an all-inclusive list, as unknown and rare problems could occur, but it should help prepare you.

  1. All wiring should be functional, properly installed, and up to code
  2. Make sure that water properly drains around your house as to not seep into the foundation, basement or interior of the house
  3. The roof needs to be sealed and free of leaking or cracked tiles
  4. Check in on your foundation to make sure you don’t have any large or small scale foundation problems
  5. There should be no peeling paint on the exterior
  6. Watch out for signs of disrepair (cracked appliances, floor tiles, or any other unsightly cosmetic issues)
  7. Watch out for mold. Mold can be hazardous, and it can aldo signal leaky pipes or circulation issues. Get mold analyzed ASAP and figure out the cause
  8. Leaky pipes. These cause so many issues–mold, foundation problems, and dry rot, to name a few. Get these fixed
  9. You need a functional HVAC system

Put Your Closing Documents in Order

When it’s time to sign all of the closing paperwork, this is what you need to bring to the meeting:

  • A check (if you aren’t going to make money on the sale)
  • Your driver’s license or passport for identification
  • House Keys
  • Mortgage information
  • A list of home inspection repairs (if any)
  • Property tax information
  • The deed to the house (if you own the home)

You’ll then have to sign the closing documents. After this meeting you no longer own the house, so you should be fully moved out at this point.

Closing day on a house gets really tricky when you're working with contingency sales.
Source: (Bro. Jeffrey Pioquinto, SJ / flickr, via Creative Commons)

Be Extra Careful with Contingency Sales

Get everything in place during closing if the purchase of your new house depends, or is contingent upon, selling your single family house. Chris Bessette had one buyer/seller situation where all three parties involved had to get to closing, or else none of the three transactions would have gone through.

“There were a lot of moving parts. If buyer A from the third party agent didn’t close on buyer B’s house and they couldn’t close on seller A’s house, then they couldn’t close on their transaction. It was a big domino effect.”

You should take precautions in the listing contract so that you’re protected if your sale becomes contingent on the sale of the buyer’s home. Make sure there is a clause in the contract that says you can accept other offers while waiting for the buyer’s sale to close.

You should also be able to give the buyer the opportunity to remove the contingency up to 48 hours after getting another offer so that they either purchase your house then and there or let you sell it to the other buyer.

What to Expect at Closing: Communication With Your Agent is Key

The stakes are high at the closing table. Stay informed about everything that needs to happen during closing (your real estate agent should keep you up to speed), and make sure you prepare and protect yourself from potential risks.

Do some research about how often pending home sales fall through in your area and you’ll see just how delicate these real estate deals can be.. Some cities, like Las Vegas, have a higher closing fail rate (7.6% compared to the national 3.9%), so if you live in an area like this you need to stay extra aware.

The more you communicate with your real estate agent and the more fixes you make to your property, the better chance you have for a smooth closing.