When buying or selling real estate in Washington, the process culminates with closing and settlement. For many people, this can be a stressful time, as it often represents the culmination of months’ worth of planning, preparation, and waiting. While closing and settlement usually proceed without incident, there are several issues that can arise, and knowing what to do if and when there is an issue can be crucial to meeting your closing deadline and finalizing the sale.
In this article, we provide an overview of the general closing and settlement procedures for a typical residential real estate sale in Washington. Seller financing, buying a house listed for-sale-by-owner, and other less-common scenarios will involve different closing and settlement procedures.
What Are the Steps Involved in Closing and Settling a Residential Real Estate Sale in Washington?
So, you have negotiated the purchase price, all contingencies have been satisfied, and you are ready to close the transaction and move on to the next phase of your life. What is left to do?
As it turns out, quite a lot. Here is an overview of the 10 major steps involved in the residential real estate closing and settlement process in Washington:
1. Title Search
For buyers, the title search is a key early step in the closing and settlement process. The purpose of the title search is to confirm, to the extent possible, that the seller has clear title to the property being sold. There are various issues that can “cloud” title to real estate in Washington, and a comprehensive title search can identify most – but not all – of these issues.
Due to the inherent limitations of a title search (e.g., a title search will not uncover a recent divorce pursuant to which the spouses agreed that one would take sole ownership of their home), it is important for buyers to purchase title insurance as well. Lenders generally require title insurance coverage, and buyers can separately purchase coverage for themselves – with the one-time premium to be paid at closing.
2. Escrow Preparations
The escrow agent serves a number of important functions during the closing and settlement process. Once the buyer and seller have agreed to their transaction in principal, the escrow agent will begin its preliminary preparations. This includes taking steps such as verifying the parties’ identities, obtaining payoff statements, and getting ready to process the loan documents once they are received from the buyer’s lender.
3. Sending Loan Documents to Escrow
When you apply for a mortgage, your lender will review your application, and it will request numerous forms of documentation, which will be sent for underwriting in order to approve your loan. This is an entirely separate process that needs to be completed before closing and settlement can occur. Once the buyer’s lender sends the loan documents to escrow, the escrow agent will then review the documents and prepare the closing documents for signature.
4. Seller Signing
With residential real estate closings, the seller signs first. The main documents that the seller needs to sign include the deed to transfer ownership of the property, the excise tax affidavit, and the HUD-1 Settlement Statement. Depending on whether the property is currently mortgaged, the seller may need to sign additional documents prior to closing as well.
5. Buyer Signing
Once the seller signs, then it is the buyer’s turn. Since the buyer is taking out a mortgage, the buyer generally has significantly more signing to do than the seller. The buyer will typically sign at the escrow agent’s office with the buyer’s real estate agent present, and in some cases, the loan officer may attend to help resolve any last-minute issues as well.
6. Payment or Wire Transfer of Down Payment and Closing Funds
When the buyer signs, the buyer must also pay the down payment and closing costs via check or wire transfer. Depending on how close in time the buyer signs to the scheduled date of closing (or if the buyer signs on the closing date), a wire transfer may be required.
7. Lender Review
After everything has been signed, the closing documents go back to the lender for a final review. Some lenders will require delivery of the hard-copy closing documents, while others will accept scanned copies of the buyer’s and seller’s signatures. Assuming everything is as it should be, the lender will approve the transaction, and then the purchase loan will be funded.
8. Funding the Purchase Loan (Mortgage)
While loan funding occurs behind the scenes and happens in an instant, it is still a fundamental step in the closing and settlement process. When the loan is funded, the seller and/or the seller’s mortgage lender will receive payment, and from a transactional perspective, the sale will be final.
9. Recording of the Sale
But, while funding may finalize the parties’ financial transaction, at this point, the sale of the home is still not yet official. Making the sale official requires recording with the appropriate county records office. Once the purchase loan is funded, the title company or escrow agent will file the deed, mortgage, and excise tax records; and, when the records office provides a recording number, the transfer of the property is officially closed.
10. Exchange of Keys
Finally, the buyer gets the keys. This is the moment everyone has been waiting for, and it brings an end to the closing and settlement process. While there may still be some behind-the-scenes work to be done, at this point, the seller and buyer can both move on feeling confident that their transaction has been completed successfully.
Speak with an Experienced Estate Attorney in Tacoma, WA
Blado Kiger Bolan, P.S., is a real estate law firm in Tacoma, WA, that handles all aspects of residential real estate transactions. We provide escrow services, and our attorneys also represent buyers and sellers throughout the closing and settlement process. If you would like more information about our services, please call us directly or contact us online to arrange a confidential consultation.