It’s The Closing Day!
Regardless if you are an investor, a landlord, rehabber, or simply a purchaser of your own residence; the process of closing your home is the same. If you are new to the process, it can be a little intimidating!
Although this is written in the perspective of the newer Investing Realtor® or Wholesaling Investor, the ideas that I am going to propose to you today will apply no matter what situation you find yourself in.
As A Wholesaler…Your First Steps.
Boom shaka laka! Now you have found an end use buyer and have negotiated out all the terms for your flip. You’ve decided if you are going to use transactional funding, or double close. You’ve got the property under contract, and the earnest money. Now it’s time to go to closing, however, if you are a new wholesaler, you may ask yourself, how does THAT get done?
It’s easier than you think! First, understand that most states operate off a Title Company with Escrow officers who handle the closings. However, in some states, the use of an attorney is required, so be sure to check with your local laws and regulations to determine if you are in an “attorney state.”
The first thing you will need is a title company. They check the deed for any problems that may exist. (The deed is what gives you ownership of the property should you choose to take title). Typically, they will check for any known ownership claims on the property by others on the public record (“Chain of Title”).
This is essential to ensure that there are no other claims on the property, or incomplete documents from the past. Additionally, they check for liens, easements, and any other issues that affect the title.
Once this is complete, both buyer and seller typically will receive a copy of the proposed title insurance which will be issued to the parties to guarantee against any losses that may result in a transaction from title claims or disputes. It is incredibly important to check the title insurance for any exceptions that they may not cover. This typically is found on the “Schedule B”.
Should you be in a state that requires an attorney, or if you choose to have one to represent you, be sure to get an attorney who specializes in real estate. Hopefully, you have already done this by this point, or at the minimum have contacted a real estate agent who can help ensure the elements of the contract are completed.
If you are wholesaling (aka “Assignment of Contract”) then by this time, hopefully you have structured your contract to ensure that all parties inspection periods have concluded. If so, then there is little to do other than wait for the title company and/or attorneys to complete their title search, prepare documents, and arrange a time for the closing.
The Final Moments
It’s generally a good idea to perform a “final walkthrough” of the home prior to closing to make sure that your new property is in substantially the same condition it was at the time of sale. Even though our business many times is the “as-is” variety, there can be a wide disparity between what we think we get, and what actually happens!
Simply arrange with the Seller a time to take a final look at the home prior to the close of escrow. Remember, this is not an opportunity to re-inspect for another chance to reduce the price! This is simply to ensure that the Seller has not caused further damage, and has removed their items from the home.
Do not skip this important step. It is critically important to the new wholesaler or Investing Realtor® to ensure your “product” is in good condition or as good as it can be. Take personal responsibility to ensure your business runs smoothly!
A few days prior to the close of escrow, you should receive a preliminary HUD-1 Statement from your escrow officer. This is to show you “where the money goes.” It is always a good idea prior to the actual closing to review this with your Escrow Officer for any questions you may have or corrections that need to be made.
A word of caution… do not, repeat, do NOT freak out when you see the HUD 1 for the first time. It can be a bit intimidating, and oftentimes, because of its size, mistakes are made. Typically they are caught long before the actual closing table if you have competent people. However, do not be surprised if you see a mistake on your documents. Simply call them into question, and they will be easily fixed.
At the closing, it largely depends on the state you are in. In some areas, it is entirely customary for the parties to meet at an office with an attorney or two and sign together. In others, the parties never meet. Closings are merely a formality by that point. In many cases documents can be overnight expressed from anywhere in the world requiring no presence at all.
In summary, closing is the part where all your hard work has come to fruition! Don’t let it intimidate or scare you. If you have properly set up your contract from the beginning, you will have very little problems in the end!