A recent report found that over half of respondents failed a quiz on basic home buying and real estate terms. For example, many respondents didn’t understand the difference between mortgage rates and downpayments.
Before you start the process of buying a house, it’s in your best interest to brush up on these terms. Otherwise, you may find yourself agreeing to conditions you aren’t aware of.
Today, we’re going to talk about the settlement date vs closing date during the sale of property. Read on to understand what these final steps entail and when you become an actual homeowner.
What Is a Settlement Date?
You’ve put in an offer on a home and the seller accepted your offer. You have both signed a purchase agreement and according to your agent, the settlement comes next.
During the settlement, the seller will prepare documents that reflect the agreement you’ve reached. You will secure your financing. A smooth settlement date can prevent unexpected delays during the closing process.
A settlement agency or title company will oversee the process to make sure you’re both meeting legal requirements to move forward. At this stage, if you are working with a real estate agent, they may step in to make sure the settlement agreement reflects your best interests.
What Is a Closing Date?
Many first-time homebuyers assume closing is synonymous with settling. The reality is that there is no official transfer of ownership until the closing date. On your closing date, you and the seller will sign the:
- Settlement agreement
- Promissory note
- Mortgage deed
This is also when you’ll need to pay the downpayment and closing costs. In some cases, sellers will cover all or part of the closing costs as part of the buyer’s concessions. In either case, this is when you will make your biggest financial commitment.
Does Closing Mean You Can Move In?
Closing does entail the transfer of ownership of the property. In other words, you own your new home when you close on it. However, that doesn’t always mean that you get to move in right away.
There are many contract terms you should not overlook, and this is one of them. Have your agent review the settlement agreement to see what it says about possession.
Possession in real estate is the point at which you can do what you want with the property. Some sellers may include a possession clause that requires buyers to hold off on “possessing” their property for a set amount of time after their closing date.
Settlement Date vs Closing Date: Understanding Real Estate Transactions
If you’re a first-time homebuyer, you’re probably encountering a lot of language that is new to you. Knowing the basics ensures that you know what you’re agreeing to and get the deal you expect. Use this guide to remember the difference between the settlement date vs closing date.
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