Frequently Asked Questions: Real Estate Law
What is the closing?
The closing is the final stage of the real estate transaction for both the Buyer/Borrower and Seller, and it is the event at which the parties “pass papers”. At the closing, the documents which the Seller needs to execute in order for the transaction to close and the real estate to be sold, such as title insurance company affidavits, settlement statement detailing the financial terms of the transaction, the tax reporting documents and the deed conveying title to the real estate, get signed, executed, acknowledged and eventually, in the instance of the deed, recorded with the Registry of Deeds or the Registry District of the Land Court.
At the closing, on the Buyer/Borrower’s side of the closing table, the Buyer/Borrower lender’s attorney typically conducts the transaction at which both the Buyer/Borrower and Seller execute these closing documents. The Buyer/Borrower is obligated at the closing to also execute the settlement statement, the title company affidavits and other similar type affidavits, but more importantly, the Buyer/Borrower at the closing executes the promissory note and mortgage to his or her bank/lender, as well as other bank generated documents, which the bank requires the Buyer/Borrower execute at the closing, in order for the bank to provide funding for the purchase or the refinance of the mortgage. The promissory note is the document pursuant to which the Buyer/Borrower is obligated to repay the loan to the lender. The bank’s written security for the Buyer/Borrower’s promise to repay the loan amount, as set forth in the promissory note, is the mortgage, which is the security interest the Buyer/Borrower executes at the closing and which eventually gets recorded with the Land Court or with the Registry of Deeds. The Mortgage secures the Buyer/Borrower’s aforesaid promise to repay the bank loan, pursuant to the promissory note.
At the closing, Buyer/Borrower needs to be assured that the terms and conditions of their Commitment Letter, which is the bank’s written commitment to loan the Buyer/Borrower the money necessary to purchase or refinance the home, is in accordance with the expectations of the Buyer/Borrower. The Commitment Letter contains such critical matters as the interest rate that the Buyer/Borrower will be paying on the promissory note, the term of the loan and promissory note (i.e., a 15-year term or a 20-30 year mortgage), whether the interest rate on the promissory note is a fixed/conventional rate, or an adjustable rate, and whether the Buyer/Borrower will be charged with a prepayment penalty in the event that the promissory note is paid off sooner than the term of the loan. All of these terms and conditions are typically set forth in an outline form by the Bank in its Commitment Letter, and are then more particularly set forth and contained in the Bank’s documents signed at closing.
The closing attorney supervises the “passing of the papers” between the Buyer/Borrower and Seller and the real estate broker, and eventually, the bank attorney is charged with the responsibility of disbursing the loan and/or sales proceeds, and with making sure that the Seller’s Deed and the Buyer’s/Borrower’s mortgage are recorded with the Registry of Deeds or the Land Court, as well as with the recording of any other accompanying documents which may be required to be recorded in order to clear title to the real estate. Such other documents which may get recorded by the closing attorney to clear up issues affecting the title may include instruments such as discharges of mortgages; certificates of compliance for municipal orders such as conservation commission’s wetlands orders of conditions; or releases or certificates of compliance of established private restrictions, all of which, if not recorded, may otherwise impact the quality of the title to the real estate which the Buyer/Borrower is acquiring from the Seller and/or which title the bank/lender is acquiring by virtue of its mortgage on the real estate.