Real Estate Closing & Settlement Procedures & Parties

Instructor: Ian Lord

Ian has an MBA and is a real estate investor, former health professions educator, and Air Force veteran.

The closing or settlement procedure concludes a real estate sale. In this lesson, we will identify who is involved in closing and give a general overview of the process.


Mike and Sally are buying a home from Fred. It is nearly time to close on their new home, but Mike and Sally are first time home buyers and they're not sure what to expect from settlement. Their real estate agent gives them an overview of the closing process. Settlement refers to wrapping up the home buying process and is generally interchangeable with the term closing. Transfer of the property title and receipt of payment for the property are both handled on closing day.

Closing Disclosure

At least three business days before closing day, Mike and Sally will have an opportunity to see the Closing Disclosure for the transaction. This form serves as a final statement which details all funds involved with the transaction and to whom the funds will be allocated. Some buyers use the Closing Disclosure to determine how much to write a check for to pay for the closing costs on the day of settlement, although sometimes other parties will pay closing costs instead, depending on what was decided in the purchase agreement.

Most contracts give the buyer an opportunity to inspect the property after the document is received and before settlement to insure the previous owner has vacated the premises and that the property is in the agreed upon condition.

Who Attends a Property Closing?

Multiple people are involved in real estate sales transactions, especially on closing day. These people can roughly be divided into two categories - those who are directly involved in the sale and those who are neutral third parties helping to facilitate the transaction. Those who are directly involved include buyers, sellers and their real estate agents. Escrow agents, title agents and real estate attorneys are third parties who facilitate the legal transaction. Additionally, loan officers forward paperwork and funds from lenders for the settlement process.

Buyers, Sellers and Their Real Estate Agents

The buyers are the ones who are purchasing the property - in this case, Mike and Sally. Buyers typically use a real estate agent to assist them in finding and negotiating for property, as well as guiding them through the home buying process.

Sellers, such as Fred, own property and wish to sell it. Sellers often work with real estate agents to list a property for sale, negotiate the sale and provide advice on how to prepare and market the home to get top dollar for it. Fred's real estate agent has made a contract to transfer the deed to Mike and Sally in exchange for an agreed upon price.

Closing Agents

A closing agent insures that all steps of a settlement are completed. A closing agent may be an escrow agent or title agent. The closing agent prepares the final paperwork, collects the necessary signatures and records the information with the local government

An escrow agent is a neutral third party who accepts funds on behalf of buyers and sellers for disbursement at closing. Sometimes a real estate attorney conducts the closing and functions as an escrow agent. (Mike and Sally, or Fred the seller, may feel more comfortable having a legal professional oversee the settlement process as closing can be a complex process involving a multitude of legal paperwork.)

A title agent offers research into the title status of the home and insurance services. Title agents insure that the seller is the legal owner of the property and there are no legal defects in the title which would prevent transfer to the buyer.

Loan Officer

For the purposes of closing, the loan officer is responsible for providing mortgage information and funds on behalf of a lender. As a representative of the lender, the loan officer sends the funds that Mike and Sally have taken out as a loan and gives them to the closing agent to complete the sale. The closing agent will also need the supporting documents giving details of the mortgage so that the title acknowledges the mortgage. Loan officers do not normally attend or conduct the closing process.

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