When buying or selling a home, when should you sign closing documents?

Every state has different closing practices and even within a state, regional differences can occur.  In Northern California, a title company many times will double as a title and escrow company for the participants in a real estate exchange.   The title company’s job is to research and supply clean title to the buyer.  This normally includes providing a title insurance policy protecting the seller, buyer, buyer’s lender or all against any “clouds” on the title.  Clouds on the title can be related to transfer of ownership unclear, boundaries, and liens against the property that are unresolved.

The title normally includes research related to the chain of title that demonstrates all the transfers of ownership from the originating owner to the current owner.  A title search is normally displayed in a preliminary title report which provides all parties involved a summary of the ownership and any liens against the property.  Realize the preliminary title report is only assumed accurate for the day it was dated.  Obviously, the next day, a new lien or issue can occur on the title.  This is particular importance for short sales and foreclosure properties.  It is not uncommon to see a garbage lien or HOA (home owners’ association) lien come up at the last minute.  That is why it is important the real estate agent and/or loan officer update the preliminary title report at the time of signing off closing documents.

Closing documents are normally prepared one to two weeks in advance of the closing date.  If the buyer is obtaining a loan for the purchase, once final loan approval is received from the underwriter most lenders can prepare documents for signing within a week.  Ideally, loan approval is no less than two weeks prior to the close of escrow date.  The escrow company as a part of the title company acts as a “clearing house” for money and title.  When the buyer or buyer’s lender wires the money to escrow, the escrow company then transfers title to the new owner and lender (collateral owner) via a deed of trust.  The escrow officer is considered a neutral third party making sure that the transfer of money and title occurs as it was agreed to in the purchase contract.

Once the final loan documents are received by the escrow officer, they will set up an appointment with the buyer to sign.  Again, this could be any time prior to close of escrow and ideally should be at least one week prior to the closing date.  The loan documents will include a HUD-1 closing statement that should reflect the same numbers as the buyer received on the GFE (Good Faith Estimate), the actual note related to the loan, and miscellaneous disclosures related to the transaction.  It is assumed that the manner in which the title will be held by the new buyer(s) has been determined and this should be communicated to the escrow officer.  How you hold title can have significant tax and legal implications.  To understand the various benefits/risk, consult with your tax professional, attorney, and or financial planner.

The seller can sign documents fairly early in the process.  I normally set up the sign off as soon as contingencies are released.  With FHA loans, signing may occur later simply because there are forms related to an FHA loan the that both the buyer and seller have to sign and are not available until loan documents are prepared.   The seller’s documents are fairly straight forward and most of the signatures are related to the transfer of title, tax implications, and where to send the money.  Whenever you come to closing (buyer or seller) have your photo ID and your check book.  For the seller, you may want the funds wired to your checking account so you will need a check that has been voided.  For the buyer, you most likely will need your down payment balance either in a certified check or account information from which the money will be transferred.

Signing documents ahead of time provides time for all involved to double check that all “i’s” are dotted and “t’s” crossed.   Any missed signatures will be caught in advance and reduce the chance of delaying closing.  Normally money is received from the buyer’s lender one day before closing.  The following day the title is transferred to the buyer.  Sometimes, this can happen on the same day under a “special recording”.  For Santa Clara County, new purchase titles are recorded first thing at 8am.  Special recordings are limited and occur in the afternoon.   Once recording in the county has occurred the real estate agent can provide keys to the home.

Signing ahead of the closing date provides more security that all will go smoothly.   If you  have other questions about the real estate transaction or closing process,  contact me or comment below.

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  1. Reg Harris says:

    We never received GFE regarding our second loan. The day of closing we found out second loan had balloon payment disclosure. On the balloon disclosure it require our signature and the loan officer. The loan officer never sign that form. The promissory note, truth-in-lending, deed of trust, had May 7,2007, However the HUD statment had the closing date which was May 15,2007.

  2. CJ Brasiel says:

    Reg – This is not my specialty but in talking with loan colleagues, GFEs were not required on second loan until after 2007. You might want to consult with a real estate attorney if you feel loan fraud was involved. Contact me on email if you would a referral to a local real estate attorney in San Jose.

    Thank you for reading the blog!
    CJ

  3. Gr8huskers says:

    i put in a claim to have a new roof put on after a storm.  my insurance co. sent me a check.  i was unable to put the monies toward the roof due to unexpected circumstances.  my husband and i have buyers for our house and after dropping the price 1400.00 dollars and agreeing to pay closing costs they now want a new roof.  i am more than happy to accomadate them however i feel if i had gotten the new one 5 yrs. ago as planned they would still have 25 yrs. of life on it.  i want to increase the price of the house to reflect this since we priced the house low as we knew they would need one within a couple of years.  i’ve signed no closing papers altho the inspectors have been here.  can i ammend the price of the house?

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