What the Closing Process Looks Like in Real Estate Transactions
Closing on a home is both an exciting and nerve-wracking process. Knowing what to expect out of it can help the process run much more smoothly for everyone involved.
Key points
- A lot happens before closing: the purchase agreement, earnest money and the seller's disclosure statement.
- In Iowa, the abstract is updated and an attorney examines it and issues a title opinion.
- Inspections and surveys can find problems the abstract won't show.
- Closing documents like the deed, groundwater hazard statement and declaration of value have to be right before closing.
Before the Closing: Offer, Acceptance, and Disclosures
Once the buyer has made an offer and the seller has accepted, you should have an attorney review the sales contract to ensure that it is everything you, as either the buyer or the seller, should include. Once the sales agreement is finalized, and earnest money has been exchanged, the buyer should have already received the Residential Property Seller Disclosure Statement from the seller.
Although all of these steps are necessary portions of the sales process, they are not technically part of the closing process. They are merely preliminary steps to get the closing process started.
The Closing Process
- Updating the Abstract
Once the terms of the sale have been finalized, the closing process can begin. One of the first things that happens in Iowa is that the seller locates the abstract to the property and hands it off to an abstract company. The abstract company will then update and extend the abstract to include the new sales information. Updating the abstract takes time, so it's ordered early. It is an essential part of the closing process in Iowa.
- Investigation
Next, buyers should investigate matters that are not be apparent from the abstract, such as condition of the property. A physical inspection of the property will reveal problems like diseased trees, buildings that may be adjacent to the property, and a property survey can show whether all improvements are contained within the boundaries of the property, including driveways or fences. A certified home inspector will conduct a visual inspection of the property looking for both safety issues and structural deficiencies in the home. The inspector will prepare a written report for the buyer to review, at which point the buyer may provide repair requests in writing to the seller. It is important to understand that there are no REQUIRED repairs and this is to be a good faith negotiation between buyer and seller.
- Title Opinion
Once the abstract has been updated, the next step is to get a title opinion. The buyer’s financial institution will often take on this task, but it is also a good idea to get your own independent attorney to review the abstract. The financial institution’s attorney only works for the bank, which means that their attorney is solely responsible to the bank—not to you. If the title turns out to be defective, you may not have any recourse against their attorney if you rely on the bank’s assessment.
When the title opinion is complete, it will set out any problems with the title that need to be addressed. Many issues that crop up can and should be dealt with before the closing process is complete.
- Preparing Closing Documents
Finally, the seller is responsible to prepare the property transfer documents necessary to complete the closing process. These include the Deed, the Groundwater Hazard Statement, a Declaration of Value, and property tax proration. The seller’s attorney will review the settlement statement (drafted by buyer’s/lender’s attorney) to ensure its accuracy before either party signs. The seller’s attorney will need a copy of the title opinion to prepare the deed.
The closing process in Iowa is complicated and can take a long time. It is a good idea to involve an attorney, whether you are a buyer or a seller. Learn more by contacting Danilson Law today!
What do people ask about closing in Iowa?
Iowa uses abstracts instead of private title insurance. The abstract is updated for the sale, and an attorney examines it to issue a title opinion. That opinion points out problems that need to be fixed before closing. If the abstract can't be found, it can slow things down, so it helps to locate it early.
Repairs after an inspection are usually a matter of negotiation between buyer and seller, based on the terms of your purchase agreement. What you can ask for, and what happens if you can't agree, depends on that agreement and its deadlines. An attorney can explain your rights under your contract before a deadline passes.
The lender's attorney represents the lender. Their job is to protect the bank's interests, not yours. Having your own attorney means someone reviews the contract, the title opinion and the closing documents with your interests in mind.
Sellers typically need a deed, and depending on the property, a groundwater hazard statement (Iowa Code 558.69) and a declaration of value. The settlement statement also needs to be reviewed for accuracy. Danilson Law prepares and reviews these for sellers so problems don't surface on closing day.
Have questions about your own property? Book a Discovery Call with Danilson Law, see our Iowa deed services, or call 515-512-5500. We work with clients in all 99 Iowa counties.
