Navigating the Home Buying Closing Process

So, your offer got accepted! Or, you’re perusing pocket for fun (like the rest of us), but you want to imagine the actual feeling of going through the closing process. Either way—welcome. We’ll preface with this: the closing process is actually pretty simple. 

And, contrary to popular belief, you do not need a real estate agent. All of the things you think an agent does for you during closing are actually handled by the title company and your lender. So, yes, you can close without a real estate agent—while saving money and not juggling another party’s interests and busy schedule.

Pro tip: while traditionally, the seller pays the real estate fee (~6% commission, usually split between the buyer and seller agents), they often bake it into the price so that the buyer pays commission indirectly. So, buying without an agent means you could save 3-6%.  

Interest piqued? We thought it might be. Let’s dive in.

What You’ll Learn:

Alright, so What is The Closing Process?

To put it simply, the closing process is what happens between the acceptance of your offer and you doing a little happy dance with your new keys in hand.

The closing process typically takes 4-to-6 weeks and involves the transfer of property ownership via the exchange of money and documents between the buyer and the seller. 

Your closing date will be listed on the purchase agreement. And, the closing will involve a number of different players, steps, documents, and financial maneuvers. However, as complex as they might sound, we’re here to show you how easy closing can be.

Who’s Involved in the Closing Process?

If you’re buying without a real estate agent, the parties involved in closing will be:

1. You, The Buyer: determined, protective of your interests, and astoundingly good-looking.
2. The Seller: the current property owner, also self-interested, not as good-looking.
3. The Escrow (Closing) Agent: the neutral third-party who facilitates the exchange of and holds onto funds and assets until all parties have signed and fulfilled their contractual obligations. They represent the title company typically chosen by the buyer.

4. The Lender Representative: a rep of the lender who finances the loan (if you’re financing.)

Timeline of Buying a Home with Financing: 30-45 Days

Before You Make an Offer: Get a Pre-Approval or Proof of Funds Letter (to submit more competitive offers)

It’s a very good idea to get pre-approval before home hunting. You’ll find a lender (easily through your bank or a mortgage marketplace.) 

You’ll apply for pre-approval with a Loan Application; if you’re pre-approved, you’ll receive an official pre-approval from your lender. It’s “pre” because its finality depends on upcoming factors (i.e., appraisal results.) But, for the time being, it’ll lock in your interest rates.*If you’re a cash buyer, make sure to show the seller a proof-of-funds letter from your bank. Cash purchases have pros and cons—for instance, you won’t pay interest or the lender’s closing costs, and often sellers prefer them—especially during a “seller’s market.” But regardless, if you are a cash buyer, get a proof-of-funds letter in lieu of a pre-approval.

How to Navigate the Closing Process in Washington State (and in general)

1. (You will) Choose a Title Company and Open an Escrow (“Impound”) Account: 
   
   You’ll choose a title company (ideally one that offers escrow services) and open an escrow account with them. The title company is a neutral third-party that will assign you an escrow agent who will guide you through most of the closing process, from beginning to end. They’ll handle everything from the title search and insurance to the preparation and signing of final closing documents and funds transfer.
   
   Choosing your title company is as simple as Angie’s List or a friend’s recommendation. You’ll want an experienced company with an ethical and transparent reputation (no hidden fees) that is communicative from the get-go and relatively local.
   
   The escrow account you’ll open will hold the earnest money (the deposit that converts into your down payment,) homeowners’ insurance (three months of it, plus any other insurance), and property taxes*. As a rule of thumb, it’s s a good idea to have six months of reserves.
   
   *(which, by the way, in Washington State, taxes due at purchase depend on the month of sale.)
   
2. (Your title company will) Run a Title Search and Obtain Title Insurance:
   
   The title company you’ll choose will conduct the majority of the closing process, including the title search and title insurance. They’ll run the complete title search process for you, checking public records to ensure no one else has a claim to the property (except the seller.) Your title company will also help you secure Lender’s Title Insurance (“Loan Policy” – required by the lender) to protect the lender’s interests in the property.
   
3. (Your inspector will) Conduct an Inspection:
   
   You’ll hire a third-party inspector who’ll check for problems with plumbing, roofing, radon, gas, and mold. You can find one with Angie’s List or a friend’s recommendation. Generally, lenders don’t require an inspection, but it’s essential you know the property’s condition before buying. Also, consider a pest inspection if you’re not a fan of (surprise) cockroaches.
   
4. (Your lender will) Facilitate an Appraisal:
   
   If you’re financing, the lender you chose will select an appraiser who’ll assess the market value of the home. Lenders require the appraisal to ensure the home value is at or above its selling price—but it’s also important for you to know the value of what you’re buying. And, If the home passes your lender’s appraisal, you’ll be receiving your Loan Estimate (read on to learn all about it)
   
5. (You will) Obtain Financing (if you’re financing):
   
   As we mentioned, you should have received pre-approval for a loan prior to your house hunt—but if not, your financing contingency in the purchase agreement will give you time to obtain financing. After you are pre-approved and once your offer has been accepted, your lender will provide you with a loan estimate. The loan estimate will be a clear preview of your interest payments and closing costs (usually ranging between 3-5% of your loan).
   
6. (Your title company, you, and the seller will) Finalize the Purchase Agreement:
   
   Now that  financing has been obtained, the appraiser has confirmed the value of the home and the inspector has checked all the closets for skeletons (figuratively and otherwise), you’ll decide whether or not to continue with the purchase. If you do find issues but decide to go on with the sale, you can ask the seller for a discount, credit, or fix problems before closing. Once you and the seller come to an agreement, you’ll finalize the purchase agreement.
   
7. (You will) Sign the Disclosures:
   
   Within 5 days of the accepted offer, you’ll receive the Seller’s Disclosure (prepared by the seller.) With it, you’ll acknowledge that you’re aware of any problems with the property, previous repairs, or potential environmental hazards. 3 days before closing, you’ll sign a five-page “Closing Disclosure” from your lender (if applicable) that finalizes the loan terms.
   
8. (You will) Get Homeowners Insurance:
   
   You’ll then use a homeowners insurance marketplace to compare homeowners insurance rates and choose the one that fits you. Your lender and HOA (if applicable) will want to see definitive proof of insurance; don’t deny them that privilege.
   
9. (You will) Do a Final Walk-Through:
   
   Once everything else is ready, but before you sign the final papers, it’s crucial you take a last look at the property when it’s vacant. You’ll do this to check that no damage was done or discovered since the inspection and that you’re buying the home you saw before.
   
10. (Your title company and you will) Review Your Closing Disclosure (if you’re financing)
    
    At least one day before closing, your lender will give you a Closing Disclosure (formerly a HUD-1) document or final statement of your closing costs and loan terms. Mistakes happen—and so do hidden fees. So, make sure your Loan Estimate, and Closing Disclosure align closely.
    
11. (Your title company and lender will) Coordinate Closing Day:

• The escrow agent will receive the final loan documents from your lender, and you’ll sign all of the closing documents and final loan documents. Bring two forms of ID and patience. 
• The seller will sign their set of closing papers, usually separately and on a different day. 
• You’ll deposit the down payment (minus earnest money, which converts to the down payment) and closing costs to the escrow agent via advance wire transfer or cashier’s check.
• If you’re financing, the escrow agent will deliver all relevant and signed documents to the lender, who will review the closing documents and wire the loan to the escrow agent. If you’re buying with cash, you’ll deposit the payment to the escrow account. 
• The escrow agent will notify the relevant municipality of the sale and transfer the funds to the appropriate parties. The city will record the transaction—making you, my friend, a homeowner.
  
  

Some Tips About This Whole Closing Thing

1. Before closing starts, estimate your closing costs so there are no surprises.
2. During the closing process, do not change your financial standing (so, no new cars.) 
3. Quad-billion check your documents. 
4. Consider that money transfers take time, so plan ahead. 
5. Know your contingencies—especially your financing contingency if you’re financing (the clause that protects the buyer by giving them time to secure a loan.) Washington State differs here: the financing contingency is indefinite unless waived by the buyer

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Alrighty, so that’s our pocket Guide to navigating the home buying closing process in Washington State (and beyond). We promise you can do this beautifully—and without an agent. 

Why are we so sure? Well, first, because we have complete confidence in you (and we know the closing process is actually pretty simple.) Second, because you have this pocket Guide.

And third—because your title company will virtually guide you through and conduct the whole closing process, from the title search to the closing documents and funds transfer. So to be completely honest, a real estate agent is more of a middleman-messenger than a critical element in the process. Therefore, why pay that 3-6% when you could…not? 

And on that empowering note, we’ll let you go. But if you’re looking for a bit more guidance, we happen to be ~humble~ experts in this space. So, feel free to reach out to us at [email protected] and definitely sign up to receive our weekly newsletters. 

Thanks for staying with us; happy home hunting.