The home buying process is just that, a process, not an event. At the end of the process, all the paperwork is signed and the keys are handed over on closing day. Congratulations are in order because it truly was a journey to get here. What takes place during the settlement or closing? Here are the settlement procedures in Maryland residential real estate.
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Real Estate Settlement Terminology
Preparation for Closing – As part of the preparation for closing, the title company performs a title search to determine if there are any liens or assessments on the title. Provided the title is deemed ‘clear,’ the closing proceeds as planned and the attorney or title company issues a title commitment. All paperwork for changing the title / deed and title insurance is prepared, and a final closing date is confirmed with all parties.
Closing or Settlement – The house is sold when the buyer and seller have reached a “meeting of the minds” and the contract has been ratified, or all signatures are final. This is a “fully executed contract”. The settlement, or closing, takes place when all money is transferred, the new title is transferred and the deed is signed.
In some states the process is “escrow”, where the money is transferred at a later date than the closing, sometimes referred to as a “dry settlement”. In Maryland there are only “wet settlements”, meaning the money must be transferred at the time of settlement.
Settlement Procedures in Maryland
The completion of two basic issues are required before buyers and sellers close on the property:
1. The requirements made in the real estate sales contract are fulfilled,
- The buyer’s issues that need to be resolved: The title, seller’s deed, any documents demonstrating the removal of liens and encumbrances, the survey, the results of any inspections with any repairs completed, and the termite inspection report.
- The seller’s Issues: Receiving payment, compliance with contract requirements.
This part of the process includes lots and lots of signatures.
2. The mortgage lender disburses the loan funds. The buyer, seller, their respective agents, and the closing agent or lawyer are usually at the closing. The settlement should only take about 1 hour, in most cases.
3. The representative from the title company or attorney will then submit the paperwork and deed with the appropriate municipality for recordation.
The Closing Statement
The Buyer and Seller should get the Maryland Closing Disclosure Form 72 hours before the settlement so that they know all the charges that they will be responsible for. The statement is an estimate, but should be very close to the exact amounts, within 10% of moneys quoted.
Buyers should bring a certified check, or will have made a wire transfer, which is more common, with the amount owed. Also, they should bring their checkbook for any small discrepancies, and official ID.
Sometimes sellers will need to bring a certified check as well, but will know ahead of time.
Closing Costs and Fees
There are several categories of closing fees that the home buyers and sellers pay. Even though some things are “traditionally” paid by either buyer or seller, remember that several closing costs can be negotiated. The market dynamics will often determine who negotiates what. Regardless of who pays for what, the settlement procedures in Maryland are the same.
1. Broker’s commission: paid by seller. Plus any Administration Fees.
2. Closing Attorney’s fees: usually covered in other settlement fees
3. Transfer Tax: Split 50/50, unless otherwise negotiated. Maryland waives the first-time home buyer’s half of the fees.
4. County Taxes. Usually paid by the buyer, unless otherwise negotiated.
5. Recording expenses. Deed preparation fee, title binder, courier fee, etc. Usually paid by the buyer.
6. Title expenses: In Maryland the buyer orders a title search and a binder for title insurance.
7. Loan Fees:
- The loan origination fee is 1 to 2 % of the loan, paid by the buyer.
- They may also have discount points to buy down the interest rate.
- There are other survey fees,
- Appraisal fees, paid by the buyer at the time the appraisal is ordered, before the settlement.
- Document fees,
- Certification fees,
- Sometimes banks will have a couriur fee.
- Credit Report charged to buyer,
- Home owners insurance,
- The lender should have given a Closing Disclosure (Here is an example of a CD) to the buyer when they made loan application.
8. Insurance Reserves and Tax Reserves: Most lenders require buyers to provide reserve funds or escrow accounts to pay for future real estate taxes and insurance.
9. Any unpaid or prepaid Items: HOA dues, utilities, fuel and water.
For a detailed explanation with average costs see or article on Newsbreak, Understanding Closing Costs in Maryland
Buyers: Before your lender gives you a good faith estimate, ask your lender for a ball-park estimate.
Sellers: Ask your agent for a seller’s net sheet for a ball-park estimate.
How to Ensure A Successful Real Estate Settlement
Understanding the settlement procedures in Maryland beforehand will help both buyers and sellers anticipate what they need to have done and accomplished to make the day successful. Ensuring a successful real estate closing is the topic of this video chat with Dave Gormley, real estate attorney with Andrews Bongar Gormley & Clagett, Law offices in Southern Maryland. Dave shares tips applicable to all types of real estate transactions, tips for buyers, sellers, commercial real estate and short sales.
To sum up, having your paperwork in order is the best way to make sure your settlement is a success. Whether you are the home seller or the homebuyer, or whether you’re buying commercial real estate, having all the necessary documentation and paperwork in order will help immensely when it comes time to settle. That, as well as having a trustworthy team of professionals working together on your behalf.
A big thanks to Dave Gormley for the great information on real estate settlement procedures in Maryland and how to make it a success!
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Contact Chris Highland to have the Highland Group working on your behalf for a successful settlement.
Settlement procedures in Maryland was written to educate homebuyers and home sellers. Contact Chris Highland to see homes for sale in Frederick Md. We have been helping buyers and sellers in the central Maryland area for more than 32 years. We’re here to help you navigate through any challenges that the real estate market presents.