Real Estate Closing ChecklistEverything You Need Before Closing Day

A real estate closing — also called a settlement in many states — is the final step in a property purchase transaction. It is the event at which legal title to the property transfers from the seller to the buyer, the purchase price is paid, and all the paperwork accumulated during the transaction is executed and recorded. Understanding exactly what happens at closing, who is present, and what each party is required to do is the starting point for effective closing preparation.

**Parties typically present at closing.** The buyer and any co-buyers are required to attend and sign. The seller and any co-sellers may attend or may have signed documents in advance. In most transactions, a title company representative, settlement agent, or closing attorney manages the closing table — collecting and distributing documents, verifying signatures, and disbursing funds. If either party is using a real estate agent, the agents may attend. If the buyer is obtaining financing, the lender is typically not present but has transmitted closing instructions and the closing package to the settlement agent in advance.

In attorney states (New York, New Jersey, Illinois, Massachusetts, Connecticut, South Carolina, and others), both the buyer's and seller's attorneys typically attend closing and play an active role in reviewing documents, resolving last-minute issues, and ensuring their clients' interests are protected. In non-attorney states, the closing may be conducted by a title company or escrow officer without attorneys present unless a party has chosen to retain one independently.

**Typical transaction timeline.** Most residential real estate transactions take 30 to 60 days from executed purchase agreement to closing. The timeline is driven by three tracks running simultaneously: (1) the buyer's mortgage underwriting process, which begins immediately after contract execution and typically requires 30-45 days to reach a clear-to-close status; (2) the title company's title search and title commitment process, which typically takes 1-3 weeks; and (3) the inspection, due diligence, and negotiation process, which happens in the first 7-21 days. All-cash transactions can close in as few as 7-14 days because there is no mortgage underwriting to wait for. Commercial transactions often take 60-90 days or longer due to more extensive due diligence.

**What actually happens at the closing table.** The settlement agent walks the parties through the closing package — typically 50 to 100 pages of documents for a financed purchase. The buyer signs the promissory note, deed of trust or mortgage, closing disclosure, truth-in-lending disclosures, and numerous lender and title company forms. The seller signs the deed, bill of sale, seller's closing statement, payoff authorization, and any other documents required to transfer title and discharge encumbrances. The buyer delivers the final cash-to-close amount, typically via wire transfer that arrives before closing or cashier's check brought to the table. The settlement agent disburses funds to the seller, payoff amounts to the seller's lender and lienholders, agent commissions to the real estate brokers, and fees to the title company and other service providers. The deed and mortgage are then recorded with the county recorder's office, either same-day or within a day or two of closing.

**Wet vs. dry closings.** In a wet closing (standard in most Eastern states), all documents are signed, funds are disbursed, and the transaction is considered complete at the closing table on the closing day. The keys are handed over the same day. In a dry closing (common in California, Oregon, and some other Western states), the parties sign documents but funds are not disbursed until the lender funds the loan, which may happen 1-3 days after signing. The buyer typically does not receive keys until the transaction "funds and records." Understanding whether your state uses wet or dry closings affects when you can take possession and when you should schedule your move.

The 30-day period between contract execution and closing involves a substantial volume of document review. Buyers who do not organize and review these documents systematically often arrive at the closing table having accepted terms and conditions they do not fully understand. The following documents should be reviewed during the pre-closing period, not for the first time at the closing table.

**The purchase agreement final review.** Before closing, review the executed purchase agreement and all addenda one final time. Verify that any repair requests or price adjustments negotiated after the inspection are captured in written, signed amendments. Confirm that all contingencies have been properly satisfied or waived in writing. Confirm the closing date, possession date, and any seller-retained possession arrangements (such as a post-closing leaseback). If a repair credit or seller concession was agreed upon, verify it appears on the closing disclosure.

**Title commitment.** The title commitment (or preliminary title report in Western states) is the title company's written commitment to issue title insurance, subject to the listed requirements and exceptions. It should have been issued within the first two weeks of the transaction and reviewed during the inspection period. Before closing, review the title commitment one final time: confirm that all Schedule B-I requirements (conditions that must be satisfied before the policy is issued) have been met or will be satisfied at closing. Review Schedule B-II exceptions (items the policy will not cover) for any new exceptions added since the initial issuance.

**Survey.** A survey prepared by a licensed surveyor identifies the exact boundaries of the property, the location of all improvements (house, garage, fences, driveways), easements of record, and any encroachments. Many lenders require an updated survey at closing. Review the survey to identify: (1) whether any structures on the property encroach on the property line or on a neighbor's property; (2) whether any neighbor's structures encroach on the subject property; (3) the location of recorded easements (utility easements, drainage easements, access easements) and whether they affect the usable area of the property; and (4) any setback violations — structures that are closer to the property line than the applicable zoning setback requires.

**HOA documents.** If the property is in a homeowners association, the seller is typically required to provide governing documents (declaration of covenants, conditions, and restrictions; bylaws; rules and regulations), current budget, recent meeting minutes, reserve study, and a disclosure of any pending special assessments or litigation. These documents should be reviewed to confirm: the monthly dues amount, any upcoming special assessments, any restrictions on use (pet restrictions, rental restrictions, architectural review requirements), and the financial health of the association. An HOA with a severely underfunded reserve account is a financial risk to the buyer — when reserves are depleted, special assessments follow.

**Seller disclosure statements.** Review all seller-provided property disclosure statements for disclosed defects. Most states have mandatory disclosure forms requiring sellers to disclose known material defects in the structure, systems, environmental conditions, and legal status of the property. Disclosed items should have been investigated during the inspection period. Before closing, confirm that any disclosed defects were either: (a) addressed through repair, price reduction, or credit; or (b) expressly accepted by the buyer in a written addendum. Do not assume that disclosed items that were not formally addressed during the inspection period will be addressed at or after closing.

**Lead paint disclosure.** Federal law (42 U.S.C. § 4852d) requires sellers of residential property built before 1978 to disclose known lead-based paint hazards and provide buyers with the EPA pamphlet "Protect Your Family from Lead in Your Home." Buyers must receive this disclosure before the purchase contract is executed. Confirm the disclosure form is in your file and was properly executed.

A title search is the systematic examination of the chain of title in the public land records to confirm that the seller has clear, marketable title to convey. A thorough title search traces ownership of the property from the current owner back through the chain of ownership for a specified period — typically 40-60 years in most states, though some states require examination to the root of title. The examiner reviews deeds, mortgages, tax liens, judgment liens, mechanic's liens, easements, and other recorded documents that may affect title.

**What a title search reveals.** A thorough title search will identify: the current record owner and how title is vested; all recorded mortgages and deeds of trust that must be discharged at closing; judgment liens against the seller that have attached to the real property; federal and state tax liens (IRS tax liens, state income tax liens); mechanic's liens filed by unpaid contractors; HOA assessment liens; municipal utility liens; easements, rights-of-way, and covenants of record; deed restrictions; mineral rights reservations; and encumbrances such as life estates and restrictions on alienation.

**What a title search may not reveal.** Title searches are limited to the recorded public record. They may not reveal: forged signatures in the chain of title; deeds executed by persons who lacked legal capacity (minors, persons under guardianship); errors in prior deeds; claims of heirs who were omitted from estate proceedings; rights of persons in possession of the property who have not recorded any interest; survey issues and boundary disputes; easements acquired by prescription (adverse use); and mechanic's liens that have not yet been recorded (in many states, contractors have a window after completion to record a lien).

**Owner's vs. lender's title insurance.** There are two distinct title insurance policies:

A **lender's policy** (also called a loan policy) is required by virtually all mortgage lenders. It protects the lender's security interest in the property up to the loan amount. The lender's policy protects only the lender — it does not protect the buyer's equity. As the loan is paid down, the lender's policy coverage decreases accordingly. If a title defect arises that destroys the value of the property, the lender's policy ensures the lender is paid off; the buyer's equity interest (down payment) may be lost entirely unless the buyer has separately purchased an owner's policy.

An **owner's policy** protects the buyer's interest in the property up to the purchase price, for as long as the buyer or their heirs hold an interest in the property. It is a one-time premium paid at closing. In the event of a covered title claim — a previously unknown lien, a forged deed in the chain of title, an undisclosed heir claiming ownership — the title company defends the insured buyer's title and pays covered losses up to the policy amount. The cost of an owner's policy is typically 0.5-1% of the purchase price (rates are set by the state in Texas and Florida; elsewhere they are filed by each company).

**Schedule B-I requirements.** Schedule B-I of the title commitment lists conditions that must be satisfied before the title company will issue the final policy. Common requirements include: payoff and discharge of the seller's existing mortgage; payoff of all judgment liens and tax liens against the seller; satisfaction of any mechanic's liens on the property; execution and delivery of the deed; delivery of an owner's affidavit (the seller's sworn statement that there are no unrecorded liens, rights of parties in possession, or other claims not shown in the records); and payment of the title insurance premium.

**Schedule B-II exceptions.** Schedule B-II lists matters that the title policy will not cover. Every owner's policy has standard exceptions and property-specific exceptions. Common standard exceptions (which can sometimes be removed by endorsement) include: rights of parties in possession; encroachments, overlaps, and boundary disputes; liens for services, labor, or materials not shown in the records; and taxes or special assessments not shown as existing liens. Property-specific exceptions include specific easements, CC&Rs, restrictions of record, and mineral rights reservations. Review each Schedule B-II exception and confirm you understand what it means for your use and enjoyment of the property.

**Resolving title defects.** If the title search reveals defects — an unreleased mortgage from a prior owner, a judgment lien against the seller, a disputed easement — they must be resolved before closing. Resolution options include: the seller paying off and discharging the lien; a quiet title action (a court proceeding to determine competing claims to title, which takes months to years); title insurance over the exception (the title company agrees to insure over the defect, accepting the risk); an indemnity agreement from a prior owner; or, in extreme cases, renegotiation of the purchase price or termination of the transaction.

For buyers obtaining mortgage financing, the closing package will include a substantial stack of lender documents. Understanding what each document is — and what you are agreeing to — is critical, because these documents create the most significant long-term financial obligations of the transaction.

**The promissory note.** The promissory note is your personal promise to repay the loan. It specifies: the loan amount (principal), the interest rate (fixed or variable), the loan term (15-year, 30-year), the monthly payment amount, the due date for payments, any prepayment penalty provisions, the conditions under which the lender may accelerate the loan (demand immediate full repayment), and the default provisions. Carefully review the note for any prepayment penalty — a fee for paying off the loan early, which is prohibited for most qualified mortgage loans but may appear in non-conforming loans, investor loans, and hard money loans. Also verify the maturity date — the note should fully amortize (the balance should be zero at the end of the term) unless you have a balloon loan.

**The deed of trust or mortgage.** The deed of trust (used in most Western states) or mortgage (used in most Eastern states) is the security instrument that gives the lender a lien on the property as collateral for the loan. If you default on the note, the lender can enforce the lien through foreclosure. The key differences between these instruments affect foreclosure procedures: deed of trust states typically permit non-judicial foreclosure (a faster, less expensive process using a trustee); mortgage states typically require judicial foreclosure (a court proceeding that takes significantly longer). The security instrument contains important provisions: the due-on-sale clause (requiring you to pay the loan in full if you transfer the property, which prevents most buyers from assuming your mortgage), the hazard insurance requirements, the tax escrow requirements, the conditions for acceleration, and the procedures for default and cure.

**Truth-in-Lending disclosure (TILA).** The federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) requires lenders to disclose the annual percentage rate (APR), finance charge, amount financed, and total of payments in a standard format. The APR is broader than the interest rate — it includes the interest rate plus certain lender fees, giving you a fuller picture of the true cost of the loan. Compare the APR in the final TILA disclosure with the APR in your Loan Estimate and Closing Disclosure.

**Right of rescission.** For refinances and home equity loans (but not purchase loans), federal law (15 U.S.C. § 1635) gives borrowers three business days after signing to rescind (cancel) the transaction without penalty. If you are closing a refinance, you will sign a Notice of Right to Cancel form at closing. Do not schedule the disbursement of funds until the three-day rescission period has expired. If you change your mind within three days, you can cancel the refinance — a right that cannot be waived in advance.

**Adjustable-rate mortgage (ARM) disclosures.** If you are obtaining an adjustable-rate mortgage, the closing package will include ARM disclosures explaining: the initial interest rate; the index to which the rate is tied (SOFR, Treasury, or another benchmark); the margin added to the index; the frequency of rate adjustments (annual, semi-annual); the periodic adjustment cap (maximum change per adjustment period); and the lifetime cap (maximum change over the life of the loan). Understand your worst-case monthly payment under the lifetime cap before signing.

**Escrow setup documents.** If your lender requires escrow for property taxes and homeowners insurance (which most conventional loans do), the closing documents will include an Initial Escrow Account Disclosure Statement. This form shows how the escrow account is calculated: the amount deposited at closing for taxes and insurance, the ongoing monthly escrow contribution, the maximum escrow balance permitted, and the timing of disbursements. Review this carefully — your actual monthly payment is the sum of principal, interest, and the escrow contribution.

The Closing Disclosure (CD) is a five-page federal form required by TRID (the TILA-RESPA Integrated Disclosure rule, 12 C.F.R. Part 1026) for most residential mortgage transactions. It is the definitive statement of your loan terms, monthly payment, and all closing costs. Federal law requires lenders to deliver the Closing Disclosure at least three business days before consummation (closing) of the transaction. This three-day waiting period is mandatory — you cannot waive it or close early unless you fall within a narrow exception for bona fide personal financial emergencies.

**The TRID 3-day rule.** The three business days are counted from the day you receive the Closing Disclosure (or the next business day if received after 6 p.m., or on a non-business day). If the lender delivers the CD on Monday, you can close on Thursday at the earliest. If any of the following changes occur after you receive the CD, a new three-day waiting period is triggered: the APR increases by more than 0.125% (more than 0.25% for adjustable-rate loans); the loan product changes (from fixed-rate to ARM, for example); or a prepayment penalty is added. Other changes — such as corrections to fees within tolerance thresholds — do not reset the clock.

**Tolerance thresholds.** TRID classifies closing costs into three tolerance categories that determine how much fees can increase between the Loan Estimate and the Closing Disclosure:

Zero tolerance fees cannot increase at all from the Loan Estimate. These include: lender origination charges, points, transfer taxes, and services provided by an affiliated company where the borrower was required to use that company. If any zero-tolerance fee increases, the lender must issue a cure (a credit at closing or a refund within 60 days).

Ten percent aggregate tolerance fees can increase, but the total of all such fees cannot increase by more than 10% from the Loan Estimate. These include: recording fees, title services for companies you chose from the lender's Written List of Service Providers, and certain transfer taxes.

No tolerance fees can change without limitation. These include: prepaid items (homeowners insurance, prepaid mortgage interest), initial escrow setup, and services you chose on your own (not from the lender's list).

**Line-by-line walkthrough of the Closing Disclosure.** The CD is organized as follows: Page 1 shows the transaction summary — loan terms, projected monthly payment, and a cash-to-close summary. Page 2 shows the closing cost details in three columns: Borrower-Paid at closing, Borrower-Paid before closing, and Seller-Paid. The columns are organized by service category (origination, services you did not shop for, services you could shop for, taxes and government fees, prepaids, initial escrow, and other costs). Page 3 shows the formal cash-to-close calculation, comparing the Loan Estimate to the Closing Disclosure. Page 4 contains required additional disclosures including the escrow account terms, adjustable payment table (for ARMs), and adjustable interest rate table. Page 5 contains the loan calculations (total interest percentage, APR, TIP) and other required disclosures.

**Comparing CD to Loan Estimate.** The most important pre-closing exercise is comparing the Closing Disclosure to your original Loan Estimate line-by-line. Focus on: origination charges (zero tolerance — should match exactly); third-party service fees (10% aggregate — flag any significant increases); total closing costs; the cash-to-close amount; and the monthly payment. If any zero-tolerance item increased, ask your lender why and whether a cure credit will appear on the CD. If the cash-to-close increased materially, trace the increase to specific line items — it may indicate an error or an undisclosed fee.

**Seller credits and concessions.** If the seller agreed to pay a portion of your closing costs as a negotiated concession, confirm the seller credit appears on your Closing Disclosure. Seller credits are typically shown on Page 2 of the CD under "Seller Credits." The total seller credit should match the amount agreed upon in the purchase contract. If it is missing or incorrect, contact your lender and the settlement agent to correct it before closing.

Closing costs are the collection of fees, taxes, and prorations paid at the closing table. For buyers, total closing costs in a financed transaction typically range from 2% to 5% of the purchase price. Sellers typically pay 6% to 10% of the purchase price, with real estate commissions historically representing the largest portion — though commission structures are evolving following the 2024 NAR settlement changes, which now require buyer's agent compensation to be separately negotiated rather than automatically paid from the seller's commission.

**Buyer closing costs — lender charges.** Loan origination fee (typically 0.5-1% of the loan amount, though some lenders charge $0 and build their profit into the rate); discount points (optional prepaid interest to buy down the rate; 1 point = 1% of the loan amount); appraisal fee ($500-$900 for a standard residential appraisal, more for complex or jumbo properties); credit report fee ($50-$75); flood determination fee ($20-$30); lender's title insurance premium (required by all mortgage lenders); and underwriting or processing fees charged by the lender.

**Buyer closing costs — settlement charges.** Settlement agent fee (paid to the title company, attorney, or escrow company for managing the closing; $500-$1,500 depending on state and transaction complexity); title search fee ($150-$400); owner's title insurance premium (one-time premium protecting the buyer's equity; 0.5-1% of the purchase price); survey fee ($400-$900 for a residential survey); recording fees for the deed and mortgage ($100-$400, charged by the county recorder's office); and notary fees.

**Buyer closing costs — prepaid items and escrow.** Prepaid items are costs that must be paid at closing to cover periods in advance: homeowners insurance (typically the first full year's premium is due at closing); prepaid mortgage interest (interest that accrues from the closing date to the end of the month; the earlier in the month you close, the more prepaid interest you owe); and property taxes, if the county collects taxes at closing. Initial escrow account setup requires depositing 2-3 months of property taxes and insurance into the escrow account at closing as a cushion, in addition to the first monthly escrow contribution.

**Seller closing costs.** Real estate agent commissions (traditionally 5-6% total, now separately negotiated following NAR settlement changes; paid from sale proceeds); seller's attorney or settlement agent fee ($500-$1,500); transfer taxes and documentary stamps (varies dramatically by state — see Section 09 below); recording fees for documents clearing title (mortgage payoff confirmation, lien releases); payoff of existing mortgage (the outstanding principal balance plus any accrued interest and prepayment penalty, if applicable); HOA transfer fee and disclosure fee ($200-$500 charged by some HOAs); and any repair credits or seller concessions negotiated in the contract.

**Negotiable closing costs.** Several closing costs are negotiable:

Lender fees — origination fees, underwriting fees, and points are negotiable. Competing lender bids frequently reveal significant differences. Using an independent mortgage broker rather than a captive bank lender often produces better pricing.

Owner's title insurance — in states where title insurance is not state-regulated, premiums vary by company. Comparing quotes can save hundreds of dollars.

Settlement agent fee — particularly in states where the buyer selects the settlement agent, shopping multiple title companies or closing attorneys is appropriate.

Transfer tax allocation — while transfer taxes are set by law, which party pays them is a matter of contract. In states where custom is for the seller to pay, asking the seller to pay is reasonable. In states where it is split or paid by the buyer, negotiating seller credit to offset transfer taxes is also reasonable.

**Prorations.** Property taxes are almost universally prorated at closing. In states where taxes are paid in arrears (the 2025 tax year is paid in 2026), the seller owes the buyer a credit for the portion of the current year's taxes attributable to the seller's period of ownership. The proration is calculated as: (annual estimated tax ÷ 365) × number of days in the year the seller owned the property. HOA dues are similarly prorated on a per-diem basis. Rental income on investment properties is prorated if there is a tenant occupying the property at closing.

The final walk-through is the buyer's last opportunity to inspect the property before closing. It is not intended to be a new home inspection — it is a verification exercise. The walk-through confirms that the property is in the condition you expect to receive it, repairs that were negotiated have been properly completed, agreed-upon inclusions are present, and the property has not been damaged since you last saw it.

**Timing.** Most purchase contracts provide for the final walk-through within 24 to 48 hours before closing — close enough to closing that any new damage will be recent, but early enough to allow time to address issues before the closing appointment. If the seller has a post-closing occupancy agreement (a leaseback arrangement where the seller remains in the property for a period after closing), the final walk-through should occur at or near the end of the occupancy period, not before closing.

**Checklist for the final walk-through:**

Verify agreed-upon repairs are complete. Bring the repair request amendment and any repair receipts provided by the seller. Test repaired items if possible — if the seller agreed to fix the HVAC system, run the system for at least 10 minutes. Review contractor invoices to confirm the work was done by a licensed contractor if that was a condition. Cosmetic repairs (paint, caulk) should be visually verified.

Check that all included fixtures and appliances are present. If the contract specified that the refrigerator, washer, dryer, window treatments, or specific light fixtures were included, verify they are still in the property. It is not uncommon for sellers to remove fixtures or appliances that were agreed upon as inclusions.

Check utilities. Verify that water, electricity, gas, and (if applicable) well and septic systems are operational. Turn on faucets, flush toilets, test the hot water heater, run the dishwasher, run the garbage disposal. Confirm the HVAC system heats and cools. Test ceiling fans and light switches.

Inspect for new damage. Walk through every room looking for damage that was not present during the home inspection: new wall holes or stains, flooring damage, broken windows, water intrusion, damage to the garage or outbuildings. In properties where the seller has recently vacated, damage from moving — dents in walls from furniture, scratches on floors — is common.

Confirm the property is vacated. The property should be empty of the seller's personal property (unless a leaseback agreement is in place). Any items left behind by the seller that are not included in the contract could be the buyer's responsibility to remove — or they could indicate the seller is not ready to close.

**Documenting walk-through issues.** Take timestamped photographs or video of anything that needs to be addressed. Send a written summary of issues to your agent and attorney before the closing appointment.

**Leveraging escrow holdbacks.** If the walk-through reveals that a required repair is not complete (the contractor did not finish the HVAC work, for example), the transaction does not need to collapse. An escrow holdback (or repair escrow) is an arrangement where a portion of the seller's proceeds — typically 1.5 to 2 times the estimated repair cost — is held by the closing agent in escrow until the repair is completed and verified. The parties sign an escrow holdback agreement specifying the repair required, the amount held, the deadline for completion, and the release conditions. If the repair is not completed by the deadline, the held funds are released to the buyer to cover the cost. Escrow holdbacks allow transactions to close on schedule while ensuring the buyer is protected.

**When to delay closing.** If the walk-through reveals significant issues that cannot be resolved through an escrow holdback — major new damage, a required repair that was not done and cannot be completed quickly, or confirmation that the seller has not vacated — it may be appropriate to delay the closing rather than proceed. Discuss options with your agent and attorney before the closing appointment. Delaying closing is inconvenient but far less costly than closing on a property with unresolved material issues.

Earnest money is a deposit made by the buyer shortly after the purchase contract is executed, held in escrow as evidence of the buyer's good-faith intention to complete the purchase. It serves two functions: it demonstrates to the seller that the buyer is serious, and it provides the seller with readily available compensation if the buyer defaults after contingencies have expired.

**How escrow works.** The escrow agent (typically the title company, a closing attorney, or an independent escrow company) holds the earnest money in a separate trust account. The escrow agent is a neutral party — they hold the funds for the benefit of whoever is entitled to receive them based on the outcome of the transaction. The escrow agent is not authorized to release the funds without instructions signed by both parties or a court order. This neutral-party structure is critical: it prevents the seller from accessing the earnest money during the transaction period, and it prevents the buyer from withdrawing the funds after going non-refundable.

**Earnest money credit at closing.** If the transaction proceeds to closing, the earnest money is credited against the buyer's cash-to-close amount. If the buyer must bring $45,000 to closing (down payment plus closing costs) and the earnest money is $10,000, the buyer wires $35,000 at closing. The earnest money is not a separate payment on top of the closing costs — it is already incorporated into the closing cost calculation shown on the Closing Disclosure.

**When earnest money is refunded.** The earnest money is refunded to the buyer if the transaction fails because: a contingency was not satisfied (financing was denied, the inspection revealed unacceptable conditions, the property did not appraise at the purchase price, title defects were not resolved, or another contingency trigger occurred); the seller defaulted on the contract (refused to sell, failed to deliver marketable title, could not perform); or both parties mutually agree to cancel the transaction.

**When earnest money is forfeited.** The earnest money is typically forfeited to the seller if the buyer defaults after all contingencies have expired — the buyer simply decides not to proceed, cannot close due to a problem of the buyer's own making (failed to obtain financing due to a new debt incurred after contract, failed to show up at closing), or otherwise breaches the contract without an available contingency as an excuse. Whether the seller's remedy is limited to the earnest money (liquidated damages) or whether the seller can pursue additional actual damages depends on the contract — buyers should ensure that the seller's remedy for buyer default is explicitly limited to the earnest money.

**Earnest money disputes.** When a transaction fails and the parties disagree about who is entitled to the earnest money, the escrow agent cannot resolve the dispute — they require written authorization from both parties or a court order. The standard process: the party claiming the earnest money makes a written demand; the escrow agent notifies the other party, who has a specified period (typically 10 business days) to object; if they object, the escrow agent either (a) holds the funds pending mutual agreement or litigation, or (b) interpleads the funds by filing a lawsuit naming both parties, depositing the earnest money with the court, and letting the court decide. Many earnest money disputes settle at the mediation or demand letter stage because litigation costs often exceed the earnest money amount in smaller residential transactions.

**Escrow holdbacks for repairs.** A separate use of escrow is the repair escrow holdback described in Section 07. This is not the same as the initial earnest money escrow — it is a separate escrow account created at closing to hold funds pending completion of a specific repair. The holdback amount, deadline, and release conditions should be documented in a written escrow holdback agreement signed by both parties and the escrow agent. The holdback agreement should specify: what repair must be completed; by whom; within what time period; how completion is documented; who approves the release; and what happens if the repair is not completed by the deadline.

The deed is the instrument that transfers legal title from the seller to the buyer. Unlike the purchase contract (which creates a contractual obligation to sell), the deed is the document of conveyance — it is the document that, once executed and recorded, makes the buyer the owner of record. Understanding the differences between deed types, the recording process, and transfer taxes is essential for any real estate buyer.

**General warranty deed.** A general warranty deed (the most common form in residential transactions in most states) contains six implied covenants: (1) the covenant of seisin (the grantor actually owns and has the right to convey the property); (2) the covenant of quiet enjoyment (the buyer's possession will not be disturbed by third-party claims); (3) the covenant against encumbrances (there are no undisclosed liens, easements, or restrictions); (4) the covenant of further assurance (the grantor will do whatever is necessary to perfect title); (5) the covenant of warranty (the grantor will defend the buyer's title against all lawful claims); and (6) the warranty is unlimited in scope — it covers defects arising at any point in the chain of title, not just during the seller's ownership.

**Special warranty deed.** A special warranty deed provides the same covenants as a general warranty deed, but limited to claims arising from the period of the grantor's ownership. Claims arising from prior owners' actions are not covered. Special warranty deeds are standard in commercial transactions and are common in bank-owned, REO, and estate sale transactions, where the seller (a bank or estate) is not willing to warrant title against actions of prior owners they have no knowledge of.

**Quitclaim deed.** A quitclaim deed transfers only whatever interest the grantor has — no more, no less. If the grantor has no interest, the deed conveys nothing. If the grantor's interest is subject to a prior mortgage or judgment, the grantee takes the property subject to that encumbrance. Quitclaim deeds are used between family members, to add or remove a co-owner from title (such as adding a spouse), to resolve boundary disputes, and in other situations where the parties know each other and warranty is unnecessary or inappropriate. They are not appropriate for arm's-length purchase transactions unless the buyer obtains owner's title insurance providing the warranty protection the deed does not.

**Recording the deed.** A deed must be recorded in the county land records (typically the county recorder, register of deeds, or clerk of court) to provide constructive notice to the world of the buyer's ownership. Recording does not validate the deed — a deed is effective between the parties when executed and delivered. But recording protects against subsequent purchasers and lienholders. Under the recording acts adopted by all states, a subsequent bona fide purchaser who records first without notice of the prior unrecorded deed typically prevails. This is why recording the deed immediately after closing — ideally same day — is standard practice for title companies.

**Transfer taxes.** Transfer taxes (also called documentary stamp taxes, deed stamps, real estate excise tax, or conveyance tax) are state and local taxes levied on the transfer of real property, typically calculated as a percentage of the purchase price. Transfer tax rates vary enormously by jurisdiction:

No transfer tax: Texas, Wyoming, Alaska, Montana, Idaho, North Dakota, Kansas, Missouri (state level), Mississippi, Indiana, and Louisiana.

Low transfer tax (under 0.5% of price): Colorado ($0.01/100), Georgia ($1/1,000), Arizona, Arkansas, and others.

Moderate transfer tax (0.5%-1.5%): Most states fall in this range. California: $1.10/1,000 county + city taxes in many cities. Florida: $0.70/100 on the deed + $0.35/100 on the mortgage.

High transfer tax (over 1.5%): New York (combined state, city, and mansion taxes can reach 4-5% on high-value NYC properties); Pennsylvania (2% state + local, up to ~5% in Philadelphia); New Jersey (sliding scale, up to 1.21% for sales over $1 million); Washington D.C. (1.45% buyer + 1.45% seller on high-value sales); Connecticut (0.75% to 2.25% depending on price and property type).

**How title is taken.** How you take title — individually, with a spouse, or through an entity — has significant legal and tax implications. Common forms of ownership:

Tenants in common: Multiple owners hold undivided fractional interests. Each owner can sell or will their interest independently. There is no right of survivorship — when one owner dies, their share passes through their estate.

Joint tenants with right of survivorship (JTWROS): Multiple owners hold equal undivided interests with right of survivorship — when one owner dies, their interest automatically passes to the surviving owner(s) without probate. Requires unity of time, title, interest, and possession.

Community property (available in AZ, CA, ID, LA, NV, NM, TX, WA, WI): Property acquired during marriage is owned equally by both spouses. Upon death of one spouse, the deceased's half is treated according to their will or intestate succession.

Tenancy by the entirety (available in many states for married couples): Similar to joint tenancy but only available to married couples, with enhanced creditor protection — a creditor of only one spouse cannot force a sale of the property.

Entity ownership (LLC, trust, corporation): Often used for investment properties, asset protection, and estate planning purposes.

Real estate closing practices vary substantially by state — so much so that a buyer or seller who moves from one state to another may find that what was "standard practice" in their previous state is unrecognized or illegal in their new state. The following covers the ten states that are covered in more detail throughout this guide, organized by the most operationally significant differences in closing practices.

Understanding whether your state is an attorney state, an escrow state, or a hybrid state determines who manages the closing, what documents are required, and how funds flow. Understanding transfer tax obligations is critical for budgeting. Understanding the difference between round-table closings and escrow closings determines when you can expect to receive keys.

Even well-prepared transactions encounter problems in the days immediately before closing. Understanding the most common closing problems — and having a response strategy — prevents panic and protects your legal position.

**Title defects discovered late.** The title company may flag a previously unidentified lien, judgment, or encumbrance during the final title rundown (a search of records filed after the original title commitment was issued). Common late-discovered title issues include: a new judgment lien against the seller filed after the original title search; a mechanic's lien filed by a contractor who performed recent work on the property; an HOA lien for unpaid assessments; or a tax lien from a recently filed tax assessment. Most title defects can be resolved quickly if the amount is known and funds are available — the closing is delayed briefly while the lien is paid off and a release is recorded. If the title defect cannot be resolved quickly (a disputed boundary, a missing heir claim, an unreleased mortgage from a deceased prior owner), a longer delay or, in extreme cases, renegotiation may be required.

**Appraisal shortfall.** If the property appraised below the purchase price and the buyer has a financing contingency that covers the appraisal gap, the buyer has three options: (1) negotiate a price reduction to the appraised value; (2) pay the appraisal gap in cash (the difference between the purchase price and the loan the lender will issue based on the appraised value); or (3) terminate the transaction. If the buyer does not have an appraisal contingency (having waived it in a competitive offer), the buyer is contractually committed to close at the agreed purchase price regardless of the appraisal. In that case, the buyer must either produce the appraisal gap funds or default.

**Financing falls through at the last minute.** Even after receiving a conditional loan commitment or a clear-to-close, transactions can fail if the lender discovers new information in final underwriting — a new debt the buyer incurred after the loan application (a new car loan, a new credit card), a change in employment status, or a bank error. If financing fails after all contingencies have expired, the buyer faces the choice between finding alternative financing quickly, defaulting and losing their earnest money, or attempting to negotiate a short extension with the seller. Buyers should never incur new debt, make large purchases, change jobs, or do anything that affects their credit profile between loan application and closing.

**Seller refuses to make agreed repairs.** If the seller agreed to make repairs as a condition of the sale and refuses or fails to complete them before closing, the buyer has leverage through the earnest money: refuse to close unless the repair is completed or an escrow holdback is established. If the seller's failure to make an agreed repair constitutes a breach of the purchase contract, the buyer may have the right to terminate and recover earnest money or seek specific performance plus damages. Do not close without either completed repairs or a funded escrow holdback.

**Walk-through reveals new damage.** If the final walk-through reveals damage that was not present during the inspection period — typically caused by the seller's move-out or by intervening events — the buyer should not proceed to closing without resolution. Options include: the seller agreeing to a price reduction or credit; establishment of an escrow holdback; or, if damage is severe, termination of the contract based on breach of the seller's obligation to deliver the property in substantially the same condition.

**Wire fraud.** Wire fraud in real estate closing is a multi-billion-dollar annual problem. Fraudsters monitor email traffic between buyers, agents, and title companies; obtain the legitimate wiring instructions; then impersonate the title company and send modified instructions with a fraudulent account number. Once wired to a fraudulent account, funds are nearly impossible to recover. Never rely on email-only instructions for wiring closing funds. Verify wiring instructions by calling the title company at a number you independently verified from the title commitment or the company's official website. Do not use any phone number provided in an email alongside wiring instructions.

**Seller cloudy on title.** In some transactions, the seller discovers during the closing process that their title is not as clear as they believed: a co-owner on the deed who must also sign but is deceased or missing; a divorce decree that affects marital property rights; a trust that owns the property and requires trustee authorization; or a prior deed that was never properly recorded. These issues can delay closing from days to weeks. Buyers in this situation should obtain a written closing extension agreement with a specific outside date and, if the title issue cannot be resolved by that date, consider whether termination and return of earnest money is appropriate.

Closing day feels like the finish line, but there are important steps to take in the days and weeks immediately after closing. Failing to complete post-closing tasks can create financial, legal, and insurance exposure.

**Confirm the deed was recorded.** Your title company should record the deed and mortgage on the day of closing or the next business day. Within 2-4 weeks, you should receive a copy of the recorded deed from the county recorder's office. Keep this in a safe place — it is your evidence of ownership. If you do not receive a recorded deed confirmation within 30 days of closing, contact the title company to verify. In a dry closing (common in Western states), recording may occur 1-3 days after the signing appointment.

**Update homeowners insurance.** The homeowners insurance policy you bound before closing should now reflect you as the owner, with your lender named as an additional insured (a mortgagee). Contact your insurer after closing to confirm the policy is in force, reflects the correct address and purchase price, and names your lender correctly. Review your coverage limits — standard policies cover the replacement cost of the dwelling and standard personal property, but may not cover jewelry, art, or other high-value items without a rider.

**Transfer utilities.** Contact each utility company (electric, gas, water, sewer, trash, internet) to transfer service to your name. In a dry closing state, you cannot transfer utilities until the transaction has funded and recorded. Do not assume utilities will automatically transfer — in many states, new account setups must be initiated by the new owner, and the seller may cancel service immediately.

**File for homestead exemption.** If the property is your primary residence, most states offer a homestead exemption that reduces your assessed value for property tax purposes. In Florida, Texas, and many other states, the homestead exemption is significant — Florida's exemption reduces assessed value by up to $50,000 for homeowners. The deadline to file for homestead exemption varies by state: in many states, you must file by January 1 or March 1 of the tax year following your purchase. File immediately after closing while it is top of mind.

**Save all closing documents.** Your closing package — purchase agreement, closing disclosure, deed, title insurance policy, lender documents, surveys, disclosures, and inspection reports — should be kept permanently. These documents are essential for: calculating capital gains when you eventually sell; filing for homestead exemption or other tax benefits; making a title insurance claim; resolving disputes with prior owners; and establishing your cost basis for improvements. Store both a physical copy and a digital backup.

**Schedule your first mortgage payment.** Your first mortgage payment is typically due on the first of the second month following closing (so if you close in March, the first payment is due May 1). However, if you close very late in the month, the first payment may be due June 1. Your promissory note specifies the due date. Do not miss the first payment — setting up autopay is strongly recommended. Confirm the payment amount matches your Closing Disclosure.

**Change the locks.** Change the locks on all exterior doors immediately after taking possession. The seller may have given keys to neighbors, contractors, cleaners, and others — you have no way of knowing how many copies of the keys exist. This is one of the least expensive and most important security steps a new owner can take.

**Record the final verified address for property tax bills.** Contact the county assessor or tax collector to confirm that property tax bills will be sent to your address. If your purchase was near year-end, be alert for a property tax bill that may arrive before the next annual tax mailing cycle. Missing a property tax payment can result in penalties, interest, and ultimately a tax lien.

**Review your title insurance policy when received.** Your owner's title insurance policy will arrive by mail several weeks after closing. Review it to confirm your name, property description, and coverage amount are correct. Keep the policy permanently — it is in force for as long as you or your heirs hold the property.

**Notify relevant parties of your new address.** Update your address with: the Social Security Administration, IRS (Form 8822 or via your next return), voter registration, DMV/vehicle registration, banks and financial institutions, employer, insurance companies, and subscription services. If you have any federal student loans or retirement accounts, update those as well.