HomeBuyingWhy the Right Closing Date Can Make a Difference

Who controls the closing date for escrow – the Buyer or the Seller?

When you make an offer to purchase a property, you will sign a Purchase or Purchase and Sales Agreement with the Seller. This document will be the binding contract and agreement between you and the Seller and the provisions in that document will spell out certain events which must take place before your escrow can close. Within the Purchase Agreement will be a provision for the scheduled “Date of Closing.” A date is normally filled in when the offer to purchase is made by the buyer. Once your offer is presented to the seller, the seller may choose to change this date before accepting your offer.

Both you and the Seller will come up with a closing date which seems reasonable. The closing date should allow you enough time to apply for and obtain a mortgage, if you will be getting a loan to help finance your purchase, and the seller will choose a closing date which allows ample time to move out and find a new home or property. The closing date which is agreed upon should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances, such as one or more parties being out of town or out of the country, an estate or probate situation, or other complications which may involve legal assistance.

To set a reasonable closing date, both parties need to understand what their individual responsibilities are before closing can occur. You and the Seller should list the tasks you each must perform and then try to calculate a time limit for each of these tasks. The Seller, for example, may find that there are liens or other encumbrances on the title of which he was not aware, and these “clouds” on the title will need to be cleared up before the title can be transferred. The property inspection might show up minor defects which the Seller may be required to repair, or major defects might become evident, in which case you and the Seller may need to come to an agreement as to who will pay for these repairs. These types of events are not unexpected in a property purchase and should cause no delay in the closing, as long as they have been provided for ahead of time. Before setting the closing date, try to think of any situations which must take place before you go to closing.

The Seller may request that the closing date be contingent upon the sale of his present home. This date may be rather arbitrary, but a tentative 30, 60 or 90 day closing date could be set and when the actual closing date can be set, then an addendum to your purchase contract can be drawn and signed by both you and the seller. In this case, you would want to be sure to notify your escrow or closing officer of any changes in the date for closing.

Keeping the escrow officer informed of exact dates is very important, as she will be prorating and calculating certain expenses and credits, such as interest, taxes, and insurance and these will be calculated right up until the day of closing.

The lender may have an important role in setting the closing date. Your loan may take longer than traditionally expected, perhaps you have additional items the lender needs to verify, or perhaps you are self-employed and the lender will require Profit and Loss Statements and other documentation to document your financial profile. Perhaps the lender will require that certain repairs on the property take place before they will agree to fund the loan. To avoid any unnecessary delay in closing by a lender, you might want to consider getting “pre-qualified” by a lender and asking them if they see anything unusual in your credit which could hold up your loan. If property repairs are required, you could ask that money be held in escrow for these repairs, rather than hold up the agreed upon closing date.

The closing agent may have a role in controlling the closing day. Check with the escrow officer to get an idea of how long it will take to issue the title reports and how long it will take to prepare the closing documents.

Schedule your closing as soon as possible in the transaction, as escrow officers often are busier on some days than others and you would want to be sure to reserve your time and day. When scheduling your closing with the title or escrow company, let them know that you want ample time to go over and review all the paperwork. Oftentimes, Buyers and Sellers are rushed through this critical process, as the closing agent may have a busy schedule that day and these documents are all standard and commonplace to her. Closing agents may forget that each provision and each commitment listed in a document may be new to the party and will need to be explained carefully.

When an attorney is involved in the transaction, whether representing the Buyer or the Seller, normally the attorney will explain each provision in detail. Keep in mind that the escrow officer or closing agent is a neutral third party only. The title company cannot give legal advice or interpret documents for you. The closing officer can explain each item and review how the numbers were calculated, but for any legal opinions, you will want to consult with your attorney.

On an FHA loan, whether you sell or refinance your loan, you will be charged 30 days of interest by the lender that is servicing your loan, regardless of the day of the month you close. If you close before the end of the month, you will be charged a “per-diem” amount of interest on your new loan by the new lender in addition to the 30 days interest being charged by the FHA lender.

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