What Happens at Settlement? A Step-by-Step Guide
The settlement process is a crucial part of buying or selling a home. It’s the moment when ownership officially transfers from the seller to the buyer. Understanding what happens at settlement is key to a smooth transaction. Here’s a step-by-step guide to help you navigate this important phase.
Getting Started
A sales contract (aka Agreement Of Sale) is signed by the buyer and seller and delivered to the closing agent, typically with a deposit check. The escrow deposit is accepted by the settlement agent, often by written notation on the contract. The escrow agent starts the process by opening a title order. The file can then begin to be processed.
Tax information, loan payoffs, survey (if necessary), homeowner/maintenance fees, inspections/reports, and hazard and other insurances, legal papers, and a title search are ordered.
Pre-Settlement Preparation
Before settlement, several tasks need to be completed, including:
- Title Search and Insurance: At this stage, we search all public records. Records searched include deeds, mortgages, paving assessments, liens, wills, divorce settlements and other documents affecting title to the property. We then examine the documents. Title examination is the examination of the documents found during the title search that affect the title to the property. This is when verification of the legal owner is made and the debts owed against the property are determined. Upon completion of the search and examination, a title commitment/ preliminary report is prepared, reviewed and sent out to interested parties.
- Final Walkthrough: Buyers typically inspect the property one last time to confirm it’s in the agreed-upon condition.
- Document Preparation: The closing agent reviews the new lender’s instructions and requirements, reviews instructions from other parties to the transaction, reviews legal and loan documents, assembles charges, prepares closing statements, and schedules the closing.
Arriving at Settlement
Settlement usually takes place at a title company, lawyer’s office, or closing agent’s office. All parties involved will be present, and here’s what happens:
- Document Review: The settlement statement is reviewed by all parties, outlining the financial details of the transaction.
- Signing Documents: Both the buyer and seller sign various documents. The buyer signs the loan documents, while the seller signs the deed of transfer.
Funds Exchange
Once the documents are signed, the buyer provides the necessary funds, typically via wire transfer or certified check. These funds cover the down payment, closing costs, and prepaid items such as insurance and taxes. The funds are then disbursed by the title company.
Disbursement of Funds
The title company distributes the funds to the appropriate parties, such as the seller and real estate agents. This final step ensures everyone gets paid as agreed.
Finalizing the Transaction
Once everything is complete, the buyer receives the keys, and the transaction is finalized. Any remaining post-closing items will be addressed shortly after settlement.
Post-Settlement Activities
After settlement, there are still a few tasks:
- Recording the Deed: The deed is officially recorded with local authorities, confirming the buyer’s ownership.
- Receiving Documents: The buyer gets copies of the signed documents, including the deed and title insurance policy.
- Property Tax and Insurance Updates: The buyer may need to update tax information and homeowners insurance.
Why Title Insurance Matters at Settlement
Title insurance protects the buyer and lender from any future title issues or claims. At H&H Settlement Services, we ensure the property has a clear title and provide coverage in case problems arise. Without title insurance, you could face financial loss due to undiscovered issues with the property’s title.
Conclusion
Settlement is a crucial step in the home-buying process, but understanding what happens can make it less daunting. At H&H, we guide you through each step and ensure your settlement is smooth and secure. If you have questions or need assistance with title insurance, contact our team today!
