Closing Process / Settlement
Definition
The closing process, also called settlement, is the final step in a real estate transaction where documents are signed, funds are disbursed, and title is officially transferred from the seller to the buyer.
Example
At closing, the buyer reviews and signs the closing disclosure showing a purchase price of $350,000, loan amount of $280,000, and various prorated expenses. The seller signs the general warranty deed. The closing agent collects the buyer's down payment, disburses funds to the seller, and records the new deed and mortgage.
Exam Tip
RESPA governs the closing process for federally related mortgage loans. The Closing Disclosure must be provided to the buyer at least 3 business days before closing. Remember that prorations are calculated using either a 360-day (banker's year) or 365-day calendar year.
Related Title Transfer Terms
Deed
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
General Warranty Deed
A general warranty deed provides the greatest protection to the grantee by guaranteeing that the grantor holds clear title and has the right to sell the property. It includes covenants that protect against all defects in title, even those arising before the grantor owned the property.
Special Warranty Deed
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
Quitclaim Deed
A quitclaim deed transfers whatever interest the grantor may have in a property without making any warranties or guarantees about the quality of title. It offers the least protection to the grantee.
Bargain and Sale Deed
A bargain and sale deed implies that the grantor holds title and possession of the property but does not include warranties against encumbrances or title defects.
Deed Requirements (Essential Elements)
For a deed to be valid, it must contain several essential elements including a competent grantor, identifiable grantee, consideration, legal description, granting clause, signature of the grantor, and delivery and acceptance.
Frequently Asked Questions
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