Closing is the actual settlement and transfer of the real estate title and the money. It can either be face-to-face, where all parties and their representatives meet in a room to exchange documents, or it can be done solely through an escrow agent, who, as a disinterested party, receives all of the documents and finalizes the settlement and transfer.
Most real estate closings must be reported to the Internal Revenue Service using Form 1099-S, Proceeds from Real Estate Transactions, listing the seller’s social security number, the sales price, and any reimbursements to the seller of prepaid property taxes. Typically, the closing agent or the lender reports to the IRS.
If a business entity, like an LLC, is going to take title of the property, the buyer should inform the escrow agent, so that the title can be properly prepared.
The escrow officer closes the transaction and records the deed when all the requirements of escrow and the purchase agreement are satisfied, including the transfer of money.
Although the actual process of closing escrow varies in different geographical areas, there are some common elements. Generally, the parties get together, all necessary documents are signed and notarized, then funds are transferred from the buyer to the seller. Both the seller and the buyer will receive an estimated closing date, so the parties should ensure that there are no mistakes; otherwise, corrections will have to be expedited or the closing of escrow will have to be delayed.
The escrow agent will tend to overestimate expenses that will need to be paid on the closing date, so that there is no shortage of funds. If the estimated amounts are too high, then it is easy enough to credit the amount to the appropriate party.
If you have any questions about your current or future real estate transaction, call our team of attorneys at the Kendrick Law Group and Champion Title & Closing to learn more or to obtain one of our customized closing guides.