12 Things to Know About a Real Estate Closing (Part 1)
There is a lot of work that goes into real estate closing long before money exchanges hands. From the purchaser's offer to the negotiation of the contract, to the due-diligence examinations on the condo or coop (or home inspection of a house), to the review of title, to the loan application there are many moving parts that must first take place.
What is a real estate closing? When we lawyers talk about handling “closings” for clients, we are not just talking about who is buying or selling the property, we are also talking about the final consummation of the deal, where the money is exchanged, and the ownership finally passes from seller to purchaser.
The closing date is not set in advance. The universal custom in New York real estate transactions is to state an "on or about" closing date in the contract. This is never intended as a firm date, and you should not write it in your calendar or expect that the deal will actually close on that day. It is a target date, and New York law allows for the deal to close within 30 days after the on-or-about date, with no legal implications.
The deal can close earlier if the parties are ready, and it can close later if they agree to do so. But the date will be set firmly only after the final approvals are received from the condo / coop and lender, and after that it usually takes at least a week or two to pull it together.
A lot of pieces have to come together. It takes time to arrange the closing because a lot of things have to fall into place, which takes a lot of work and communication among the parties and their counsel.
There may be ten or twenty expenses that have to be paid other than the purchase price going from purchaser to seller - things like city and state taxes, condo / coop fees, fees to the bank and their counsel, charges for title insurance, and the payoff of the seller's mortgage.
In addition, there may be ten or twenty different documents that may be needed - or, when the purchaser is taking a loan, more like thirty or forty - all of which have to be correctly prepared and approved among the parties’ counsel. It’s very much like a theater production – a lot has to happen behind the scenes in order for the show to go on.
Much of the information comes together just before the closing. Some of that information and some of those documents are known and prepared from the start of the deal; some are standard and require little or no discussion. But much of it comes together only in the last day or two. The operations of a bank, title company and condo/coop manager are focused on the closing and not on the earlier stages of the transaction, so their numbers and documents are always gathered at nearly the last minute.
Some materials, such as loan documents, are seen for the first time only at the closing itself. The numbers come in from different sources at different times, and they are often revised, even up to and at the closing. So, we prepare your closing statement iteratively, with updates, corrections, and revisions, as the details come together.
Funds may be delivered in a variety of ways. It is therefore only in the last day or so before a closing that we can confidently advise you what funds to deliver or expect at the closing. Funds are often delivered by check - bank checks are always required for large amounts, like the big payments to the seller or the mortgage payoff. The purchaser usually requests the bank checks the day before the closing and picks them up the morning of the closing. Personal checks can be used for smaller amounts, so it's always wise to bring your checkbook to the closing.
Funds may also be sent by wire transfer, e.g., when the recipient needs the funds immediately to close another deal, or when they need to deposit funds to a bank that has no local branch.
Also, it often makes sense for funds to be delivered into escrow accounts with one of the attorneys or the title company. This allows funds to be gathered from different sources and then relayed to the recipient and can guarantee that funds will be on hand to make all the payments, while the details of the numbers are still being determined. It's extremely common for escrow accounts to be used in this way, and lawyers and title companies are universally trusted to hold such funds, to account for them in complete detail, and to promptly refund balances to the parties (and are subject to very harsh penalties if they fail to do so).
Use your legal name. Your name may be Christina but for your whole life everyone has called you Tina; your name may be Dwayne Johnson and everyone calls you The Rock. That’s great, but it’s very important that all your transaction documents identify you by your actual legal name. This is the only way to ensure that all the documents will be consistent and legally valid. This is an issue for anyone who uses any kind of nickname, a middle name, a married or maiden name, or an Americanized version of a foreign name. You should proactively provide this information - and a copy of your official ID - to your attorneys, loan officers, and any other party who is processing your information or preparing your documents, and do so at the start of the deal, not at the last minute.
Ron Meyers graduated from Columbia University in 1992, from Harvard Law School in 1999, and has been practicing law in New York City since 2000. He worked for several years in major law firms on commercial real estate matters, such as the World Trade Center, the creation of the High Line and the redevelopment of Times Square. He turned to private-client work in 2007, opening his own practice in 2009, where has now served over 1,000 clients. He and his team handle estate planning, probate and residential real estate matters for individuals, couples, & families of all kinds.