Closing The Sale
Closing the Sale
Closing the sale is when the house buyer and seller fulfill all of the agreements made in the sales contract. In more literal terms, it is about the transfer of money and documents so that you, the seller, can transfer ownership and possession of the property free and clear to the buyer. Also, you will pay off all loans that you are still carrying on the house and pay all of the parties who contributed documents or services to facilitate the sale and closing the sale.
If you agreed to make any repairs to the property or take any other action to improve it, or to take action to clear title to the property (such as removing a shed encroaching onto a neighbor’s property), all of these agreed-upon endeavors should be completed by closing the sale as well. The exception would be if you and the buyer made a separate contract for the work to be completed at a later date.
Closing the sale is often called “settlement” because the seller, together with the buyer, the buyer’s lender, the sales agents, and the seller’s lender, are “settling up” among yourselves and all of the other parties who have provided services or documents to the transaction. To make this process secure and enable all of the parties involved to treat all of the closing tasks as having taken place simultaneously, you will be working with an escrow company. The escrow company will take in all of the documents, money, and other items needed to close from the parties assigned to furnish them, pay out the money necessary to clear title, pay off all of the old lenders and lien holders, and pay the sales agents and other service providers.
Closing the sale will take place in the office of the escrow company. The escrow company is typically the title insurance company that insures the buyer’s title to the property. The escrow company can take full responsibility for closing the sale, taking in and disbursing funds, explaining which documents are what.
Unlike the buyer, who may have to attend the closing to sign original loan documents delivered by the lender to the closing, you, as the seller, may or may not need to attend. For either a conventional escrow closing, you may be able to pre-sign the deed and other transfer documents. You may even give your attorney a power of attorney to sign any incidental documents for the escrow company.
Your sales proceeds can be wired directly to your bank or your new home purchase escrow if you are purchasing on the same day as, or shortly after, your sale.
Closing the sale is complete when the escrow company pays off your lender and other lien holders and service providers, pays your sale proceeds to you, places the deed (and the buyer’s mortgage if any) for recording with the county recorder of deeds, and gives all other transfer documents to the buyer.
After completing closing the sale, you are no longer the owner of the property. Unless the contract or another side agreement states otherwise, you must relinquish possession of the home by giving the buyer all keys, garage door openers, and all other devices that control the home’s systems and appliances.
You are expected to have completely moved your household and your possessions out by this time as well, and left the place broom-clean, at a minimum. Absent an agreement with the buyer that allows you to stay longer, you can be evicted, or the buyer may sue you for damages caused by your breach of the sales contract.
If you believe you may not be able to move out on or before the closing date, you should negotiate a post-closing the sale possession agreement with the buyer, sometimes called a “rent-back.” Ask the buyer for this as soon as possible, either at the time you negotiate the sales contract or well before the closing. The agreement should allow you to stay in the home for a specific amount of time in exchange for daily or monthly rent, depending on the length of time you will remain in the home. (In a hot market, however, an eager buyer may allow you to live in the house for a month or more rent-free.) The rent should cover your possession (you are now like a tenant in what was once your own home), hazard insurance, and real property taxes for the time you remain there. You will be responsible for any damage to the home that occurs during this time.
Shortly after receiving full payment of your outstanding mortgage loan, your lender should prepare and deliver a release of mortgage to you. Sometimes, the lender will send the original release to the escrow company or directly to the county recorder of deeds for recording, but it is important that you make sure the release is recorded and returned to you. Keep this release and copies of all of the other closing documents. Your tax preparer may want to see one or more of these closing the sale documents when preparing your taxes for the year of the sale.