What Can I Expect To Happen Leading Up To and On Closing Day?

"Closing" is the official transfer of ownership from the Seller to the Buyer (you). Once the Closing is over,  the keys to your new property are given to you.

Typically, your actual Closing will take about 2 - 3 hours at your Attorney's office (on a week-day).  But, plan to take the entire day off because you will have things to do before and after the Closing.

The following are the general items in your Closing Timeline.

 

 

The Closing Date in your sales contact is an "estimated Closing date".

While both sides aim for your Closing to take place on that date, there are often valid reasons why the Closing can not take place on that date.

Because of the possibility that your closing date might vary by a couple days,  DO NOT schedule yourself so closely that you put yourself in a difficult situation.  Allow flexibility in your planning around your "estimated Closing date".

For example, do not schedule your movers on the day of Closing.  Allow yourself a few days flexibility, at the least.

Also, be sure your actual Closing date is scheduled before your mortgage commitment letter expires and while your interest rate lock-in remains valid.

 


In The Weeks Before the Closing Day

Your Attorney will:

  • Have a title search conducted.
    The most accurate description of title is a bundle of rights in real property. Your title search is a means of determining that the person who is selling the property really has the right to sell it, and that the you are getting all the rights to the property (title) that you are paying for. To make sure you receive clear title to the property, your lender will require a title search which attempts to uncover any "encumbrances" on the title.  "Encumbrances" include any liens -- legal claims against a property filed by creditors as a means to collect unpaid bills.  Liens can also be filed by the Internal Revenue Service for nonpayment of taxes.  Any such claims must be paid by the Seller -- this occurs either before or at the Closing.
  • What exactly, is involved in a title search? 
    • There are two types of title insurance policies:
      • The lender's policy protects the lender should a flaw in the title be detected after the property has been purchased.
      • The owner's policy protects you should a flaw in the title be detected after the property has been purchased.
    • With regard to title insurance, some lenders only estimate in their Good Faith Estimate of Closing Costs the cost to provide title insurance coverage for the lender.  You should confirm with your attorney that he is including title insurance and their related costs at Closing which would provide title insurance coverage for you as the owner of the property (this is the standard thing that is done).  If you want to know more about your title insurance and cost, please contact your attorney. Your attorney will typically choose your title insurance company.
    • Chain of Title
      This is the history of the ownership of a property, telling who bought it and sold it, and when.
    • Tax Search
      This is a search to determine the present status of general real estate taxes against the property. The tax search reveals if taxes are current or whether any taxes are past due and unpaid from previous years.  In addition, the tax search indicates the existence of any special assessments against the land and, if so, whether or not these assessments are current or past due. A due and unpaid tax or special assessment is a prior lien or claim on the property above all others.  The tax search reveals the status of the taxes.
    • Judgment and Name Search
      One of the most important parts of the title search is to determine if there are any unsatisfied judgments against the Seller or previous owners which were in existence while they owned the title. A judgment is a general lien against the debtor's real estate and constitutes security for any money owed under the judgment. Real estate can be sold to satisfy the judgment. It is extremely important to be sure that the title is not subject to judgments against the Seller or previous owners. Rights established by judgment decrees, unpaid federal income taxes, and mechanic's liens also may be prior claims on the property, ahead of the buyer's or lender's rights. If a judgment is discovered that constitutes a defect in the title, it is pointed out, and the Seller must eliminate it before the title of the new buyer can be insured free and clear of that judgment.
    • Obtain your title insurance for you.  Your lender will require that you pay for title insurance to ensure that you are receiving a "marketable title."
    • Obtain a survey of the property for you (does not apply to condos).  NOTE: If this is a new construction, the Seller's Attorney is normally responsible for getting the property surveyed but the cost is typically borne by the Buyer.  A survey is a drawing or map showing the precise legal boundaries of your property, the location of improvements, easements, rights of way, encroachments, and other physical features. Your lender typically requires you to have a survey of the property performed. This process confirms that the property's boundaries are correctly described in the purchase and sale agreement. Also called a plot plan, the survey may show a neighbor's fence is located on the seller's property or more serious violations may be discovered. These violations must be addressed before the lender will proceed to the closing. If you want to know more about your survey options (for example, if you want survey markers placed or the lot be "staked") and costs, contact your attorney.


In The Two Weeks Before the Closing Day

You need to get "homeowners insurance" (hazard and liability insurance) to cover your property starting on the day of Closing.

  • If you are purchasing a house, your lender will require the property to be insured for at least the amount of their loan.  You will want to cover the entire purchase price.   You will need to arrange for the policy to be written at least a week before your Closing.  Your lender will require that you pay the first year’s premium for this insurance.  A receipt will be needed by your lender to verify that homeowner's insurance has been obtained for the property you are buying. You should also consider how much insurance you need to cover:
    • Your personal belongings; and
    • Personal Liability.
  • If you are purchasing a condo, your insurance needs are a little different than insuring a typical house because you don't own the entire building. If you are buying a condo or a townhouse, there are two basic things to remember when it comes to insurance.
    • Additions, alterations, wall fixtures, floor and ceiling of your unit;
    • Your personal belongings; and
    • Personal Liability.
    • In addition, you should also consider obtaining an Umbrella Policy for liability that covers you new home and your car(s). Umbrella liability insurance is so named because it acts like an umbrella, sitting on top of your auto and homeowners liability policies to provide extra protection. This protection is designed to “kick-in” when the liability on other current policies has been exhausted. Umbrella liability coverage of $2 to $3 million is relatively inexpensive and can be easily coordinated with your existing insurance policies.
    • Your condo association will  have a master insurance policy that covers the exterior of the building's structure (including the roof) and also all common areas such as pools, sidewalks, hallways, garage, landscaped areas, gym, elevators, common stairs, etc. The Condo association would also have a master flood insurance policy, if required.
    • The master policy does not insure the interior of your unit, what is inside your unit, or any of your personal belongings.
    • As a result, you should consider obtaining some sort of condo owner type insurance to cover:

Contact the local utility companies at least a week before the Closing to arrange starting service on the Closing day in your name.

  • Some services will need to be coordinated with the Seller since the utility will require a Move Out/Shutoff request by the Seller and a final utility reading must be taken before they can issue the Move In/Start date for you. 
  • Your Attorney will make sure all the appropriate prorations are made at Closing in term of who owes what amounts.

 To determine your local utility companies for water, electric, gas, sewer, garbage, cable (telephone, internet, etc.), you can contact the local municipal office for which utility providers service your new home. We also confirm with the Seller's Agent which utilities you will need to contact. For example:

Water

o    United Water - Selected communities in Bergen, Hudson counties including Goldcoast towns of Jersey City, Hoboken, Guttenberg, Secaucus, Weehawken, North Bergen, Union City, West New York, Edgewater and Fort Lee and also selected communities in Sussex and Passaic counties

o    Elizabethtown Water Company - Selected communities in Hunterdon, Mercer, Middlesex, Morris, and Union Counties.

o    New Jersey American Water - Selected communities in Atlantic, Burlington, Camden, Cape May, Essex, Gloucester, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Union, and Warren Counties

o    Southeast Morris County Municipal Utilities Authority (SMCMUA) - Selected customers in Morristown, Morris Township, Morris Plains and Hanover Township with some service in Mendham Township and Harding Township, all in Morris County.

o    Middlesex Water Company - Selected communities in Middlesex and Union counties

o    Consumers New Jersey - Selected communities in Warren, Hunterdon, Mercer, Burlington, Monmouth, Camden and Gloucester Counties

o    Bayonne Municipal Utilities Authority

 

Gas & Electric

o    PSE&G - Selected communities in Bergen, Burlington, Camden, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, and Union Counties

o    Jersey Central Power and Light (First Energy Corp) - Selected communities in Essex, Hunterdon, Mercer, Morris, Passaic, Middlesex, Monmouth, Ocean, Somerset, Sussex, Union, and Warren County

o    NUI/Elizabethtown Gas - Selected communities in Union, Middlesex, Sussex, Hunterdon, Morris, Warren and Mercer Counties. 

o    Orange and Rockland Electric - Selected Communities in Bergen, Passaic, and Sussex County - Electric Only/Not Gas

 


Cable TV, Intern access and/or Telephone:

o    Verizon FIOS  

o    COMCAST Infinity 

o    CABLEVISION / OPTIMIUM

 

Sewer and Garbage (these may or may not be a separate accounts and is dependent on the rules of each town and/or condo association).

 

Confirm the date and time of your closing appointment with your Attorney and ask for a final list of what you need to bring to the closing.

Get an estimate of cash required at closing. 

  • In the weeks before closing, you should ask your lender to give you an updated estimate of your Closing costs based on the home you are purchasing and when you are closing. One to two business days before closing (or, sometimes the morning of the closing), your Attorney will give you his final closing figures for your Closing.


IMPORTANT:

Make sure you allow yourself enough time so you can get a certified check from your bank or arrange to have the funds wired into your Attorney's escrow account or that of the Title Closing Company handling the Closing before Closing. It is best to check with your bank a few days before you need this done to ensure you know their procedures for getting these needed funds.

Don't be surprised if you find some costs which were not included  or were under-estimated in the original "Good Faith Estimate of Closing Costs" from your lender.  For example:

o    Condo fees - When buying a condo, there will be closing costs related to the condo association (condo working capital charges/contributions, pre-paid maintenance fees, move-in fees, condo membership fees, etc.) which can be 2-4 times your typical monthly maintenance fees.

o    Title insurance - Your lender will require that you purchase a Lender's Policy and include that cost in your good faith estimate of closing costs; but, lenders typically fail to include the cost of your Owner's Policy. (Ref: title insurance)

o    Property taxes - These depend on what day in the month you are actually closing so your good faith estimate can easily be incorrect.  These costs are also affected by when in the tax quarter (three months) you are closing since your lender may require you to pre-pay several months to fund your tax escrow beginning balances.

o    "Mansion Tax: - The Mansion Tax is a New Jersey Realty Transfer Tax which is paid by the Buyer. The "Mansion Tax" rate is 1% of the sales price when the price is more than $1,000,000.

Determine whether you want to get a home warranty.  A home warranty is a service contract, normally for one year, which helps protect homeowners against the cost of unexpected covered repairs or replacement on their major systems and appliances that break down due to normal wear and tear.  Typically, home warranties (basically insurance) are considered for older homes where there are more unknowns about the property you are buying.  New construction in NJ is covered under a State mandated 10 year warranty program. The primary issue with home warranties in NJ is whether the company issuing the warranty has a decent support system of good contractors available to do any of the warranty work. For the latest about home warranties and to see the experiences others have had with various companies, GOOGLE "Home Warranty Companies".

Confirm with your lender if there are any final items that need to be completed by you prior to Closing day. For example, what type of final verification of your finances and employment or pay stubs will they require prior to closing?


On Closing Day

Final Walkthrough Inspection - You and we, as your Exclusive Buyer's Agent, will complete a final walkthrough inspection to ensure the property at closing is in the same condition as it was when you last saw it and that any agreed repairs have been completed. Usually, this is scheduled one to two hours before your closing (depending on how far the property you are buying is from the location of your Closing).

While the final walkthrough can be held before the day of closing, we do not recommend this since there is no way to guarantee that something has not changed or been damaged before the closing day (a water pipe could break, vandals could break into the home knowing it was left empty by the Seller (or Builder), rain or wind damage could result from a storm, the Seller's movers may do some damage to the walls or floors during the final move-out, etc.). Typically any Seller responsibility will not "survive closing", in other words, after you leave the Closing table you are not holding the cards anymore.  Thus, it's best to make sure you are satisfied right before heading into the actual Closing.

Where is the Closing Held?

  • Typically, your closing will be held at your Attorney's office...the office of the Buyer's attorney.

Who attends the Closing:

  • Your Attorney, and the usually the Seller's Attorney.
  • You (the Buyer(s)).
  • Your Exclusive Buyer Agent from BUYER'S ADVISORS.
  • A representative of the Title Closing Company.
  • Rarely, but not always:
    • the Seller(s) may attend.
    • and/or the Seller's agent may attend.
  • Lender's rarely will be at the Closing.

What to bring to your closing:

  • Certified or Bank Cashier's Check or Wire Transfer.
    For things to go smoothly, you need to be prepared to pay your necessary closing costs (which includes the remainder of your down payment). Most closing costs are paid by a Wire Transfer.
  • Your Attorney will tell you to whom a check (or checks) should be made payable and for what amount. Typically, you will get this information the morning of your closing (sometimes the information may be available the day before the closing).  Make sure to allow time to get this check from your bank.
  • Personal checkbook.
    You can usually pay small but unexpected closing costs--such as last-minute adjustments -- with a personal check.
  • Your driver's license and/or passport. You need to prove who you are.
  • Copies of important papers.
    At a minimum, you should bring a copy of your purchase agreement, the Closing cost estimate your lender gave you, and the insurance binder you sent your lender from your insurance company that proves you have appropriate insurance coverage on the home.
  • Patience.  You will have a lot of paperwork sign; but, eventually it will be over.

What happens at the closing.

  • Receive Mortgage Check - A check/wire is sent by your lender to your Attorney or the Title Closing Company to cover your mortgage amount.
  • Review and execute the final Mortgage and Note Documents - Once your Attorney explains your lender's financing documentation, you'll sign the mortgage papers, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. Don't be afraid to ask questions. Once your signature is on the loan papers, you are committed to abiding by their terms for the life of your loan.  (Keep in mind these are standard documents required to be in conformance with Federal guidelines so you can not make any changes to the documents.)
  • Review your Closing Disclosure - which shows the money you owe the Seller (remainder of down payment, prepaid taxes, etc.) and the money the Seller owes you (unpaid taxes and prepaid rent, if applicable). You'll pay your lender's closing costs and, in turn, your attorney will provide you with a Closing Disclosure statement of all the items for which you have paid. Your attorney will review your Closing settlement statement with the you and the Seller's Attorney to verify that the agreed upon dollar amounts have been entered and, if so, have both you and the Seller sign the Closing paperwork. Compare this final statement to the estimate of closing costs you received earlier from your lender.   Ask your attorney to explain any large discrepancies. Note: When buying a condo, be aware that there will also be closing costs related to the condo association (capital charges, pre-paid maintenance fees, etc.)
  • Present Certified or Bank Cashier's Check for Closing Costs - Your Certified or Bank checks are given to your attorney to cover your closing costs.
  • Review All Other Documents - Your attorney will have you and/or the seller review and, if correct, sign all remaining documents that are part of the closing process.
  • Establish an Escrow Account - You will typically sign paperwork authorizing your lender to establish an escrow account for you to cover your property tax, homeowner's insurance, interim interest, and possibly private mortgage insurance monthly payments.
  • Receive Title to the Property - A warranty deed will be provided signed by the Seller. You will officially receive the deed once it is recorded - which in New Jersey takes from 2 to 3 months to be recorded at the local county courthouse.
  • Receive Keys to the Property - At the conclusion of the closing process, you will be presented the keys to your new home. The Seller may also provide you with other documents such as instructions and warranties for appliances and other major components that are part of the home, garage door open and combo, remote controls, etc.
  • Important:  Also, make sure you get any garage door openers (and codes) and also any security alarm codes you may need for your security system (if any).


After the Closing

  • Celebrate!  Move in, settle in, and start taking responsibility for your new home.
  • Record Legal Documents - The recording process is the final step in the Closing process. Your Attorney is responsible to ensure the recording process is taken care of. The process officially records certain documents such as the deed and the mortgage. You should receive the recorded documents in from 2 to 3 months after the closing.
  • At or after the Closing, you should receive the original or copies of the following:
    • Closing Disclosure Statement -- This document itemizes the funds the buyer and the seller will pay at closing.
    • Note -- Often called the promissory note, it represents your promise to pay the lender according to the agreed upon terms of the loan, including when and where to send your payment.
    • Affidavits -- Any written declarations made under oath before your attorney - you'll sign various affidavits at your closing verifying information such as your address, place of employment, checking account number, and more.
    • Deed -- This document transfers ownership from the seller to you.
    • After your closing is completed, keep any paperwork you received in a safe place. Remember to keep a copy of every document you signed.
  • Change Your Locks - It is common practice to replace all the external locks (or re-key all the locks) on your home to prevent anyone with duplicate keys from entering your new home.
  • Have your security alarm system activated including changing the alarm codes and your personal passwords.
  • Change the codes for your garage door opener.
  • Change your voter registration.
  • Make sure the Post Office has your Change Of Address.
  • Send change of address to:
    •  friends,
    • credit card companies,
    • bank,
    • insurance company, etc.
  • Also, checkout out our Moving Checklist.


IMPORTANT:

When you next file your Federal and State taxes, it will be useful to have a copy of the Closing Disclosure because it lists the items you paid at the closing -- some of which may be tax deductible.  Also, other of your Closing cost can be added to the basis of your property for tax purposes when you sell it which will impact any gain or loss you will report in a later tax year. See the IRS Publication 530: Tax Information for Home Owners.

 

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