Home buyers and home sellers often head into closing day with a mix of feelings, from excitement and gratitude to overwhelm and exhaustion. Most closings go well, but there’s always the chance of a mistake, especially when dealing with financial transactions. It could be someone’s first week on the job, a time zone miscalculation, or an innocent flip-flop of numbers. These are common pitfalls but aren’t obstacles that can’t be overcome—even from afar.
Prepping ahead of closing day is the best tactic for easing nerves about the settlement process. As a servicemember or military spouse, you’ve often practiced for uncertainty. Think of closing day as if it were similar to the weeks before a deployment; prepare for the best, but anticipate the unexpected.
What Home Sellers Should Expect
For home sellers, closing represents the long-awaited day when you officially transfer ownership of your house to the buyer. After exhausting rounds of listings, showings, negotiating offers, and preparing the home for sale, you can relax and solidify your plans for the sale proceeds.
Preparing for Closing Day
If you're using the services of a real estate agent, they will coordinate all the closing logistics and paperwork. Their role is even more critical if you’re closing remotely. We'll cover more about this below. If you’re selling your home as a For Sale By Owner, it's up to you to coordinate with the buyer's agent and hire a team of real estate professionals that you’ll need to keep the process legal, such as a closing agent.
Since the closing process has so many working parts, it’s helpful to start gathering information and preparing the house for departure weeks in advance to ensure a smooth closing.
- Complete any agreed-upon repairs, hire a cleaning service, and pack all belongings.
- Confirm with your agent if there are special requirements, such as termite inspections, well certifications, and fuel storage tank checks.
- Collect all relevant documentation, such as the purchase contract, home repair records, homeowners insurance policy, warranties, HOA, and information.
- Schedule cancellation for utilities, cable, insurance policies, and other home services.
- Submit a change of address form with USPS.
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What to Know About Your Mortgage Payoff
Request a mortgage payoff statement at least two to three weeks before your closing date. The statement notes the precise payoff amount to pay your loan on or before closing day. You should also investigate well before closing day if your lender charges any prepayment penalties for paying the mortgage early. If there aren’t penalties, you can pay the balance early; however, most sellers pay off the existing mortgage balance at closing using the proceeds from the sale.
On Closing Day
When closing day arrives, you'll sign the paperwork needed to transfer ownership to the buyers legally. Part of the process is also paying closing costs, which can add up to 6 to 10% of the total sale price and may be negotiated between buyers and sellers.
If you aren’t familiar, closing costs can include:
- Title search and lender's title insurance fees
- Loan payoff amount and prepayment penalties
- Outstanding fees owed like property taxes, HOA dues, and utilities
- Recording fees to file the new deed and ownership transfer
- Transfer taxes or other taxes leveraged on the sale
- Real estate agent’s commission
You Might Need a Remote Closing
Military buyers and sellers frequently face long-distance hardships, including real estate transactions. Remote closings have been the solution to many difficult geography-driven real estate roadblocks. While not always the norm, remote closings are increasingly commonplace thanks to digital tools.
Your agent will talk to you about the documents that you can electronically sign ahead of time using email or approved e-signature tools. They’ll request that any documents requiring written signatures be sent to you directly via a secure, trackable method. Finally, they’ll coordinate wire transfer instructions to pay funds or receive sale proceeds.
Work with a real estate agent experienced with military moves who is prepared to coordinate all logistics remotely. There’s some finesse needed to successfully close the deal that some less experienced agents might not have.
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What Buyers Should Expect
On closing day, you take full ownership of the property, including the keys to your new home. At the closing meeting, your main task is reviewing and signing the mountain of mortgage paperwork from your lender. The documents include the note, deed of trust/mortgage, and dozens of other legal disclosures transferring the property to you.
Remember to bring:
- Government ID matching how your name appears on all loan documents
- Proof of homeowner's insurance policy
- All home inspection reports
- Cashier's check or confirmed wire transfer for your down payment and closing costs
Your agent will discuss closing costs well before closing day so you’ll know what to expect. But for reference, closing costs range from 3% to 5% of the total mortgage loan amount.
Common closing costs buyers pay include:
- Lender fees like origination charges, underwriting, and tax services
- Upfront costs like prepaid interest, mortgage insurance, and HOA fees
- Title insurance policy to protect your lender's investment
- Pro-rated amounts for property taxes and HOA dues
- Escrow amounts for taxes and insurance
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Don't Forget About Taxes
If you’re a home seller, keep future taxes in the front of your mind when planning what to do with your proceeds. Most homeowners can exclude up to $250,000 (or $500,000 for married couples filing jointly) of capital gains from income taxes. This is thanks to the principal residence exemption from the IRS.
Military families also benefit from an additional exemption. If you received a PCS order requiring you to relocate, any profit from the resulting home sale is exempt from capital gains taxes. However, you must meet specific "time tests" for how long you owned and lived in the home..
Home buyers, be aware that your mortgage interest and property taxes may make you eligible for key tax deductions. Discuss optimal strategies with a tax professional to maximize your savings.
Stay Prepared and Informed
The home closing process involves many interrelated moving pieces, paperwork requirements, fees, and buyer and seller obligations. Proper preparation, attention to detail, and guidance from your lender and real estate agent can help you navigate closing on a home confidently. This holds true even if you need a remote closing while managing a PCS. Staying informed and hiring the right professionals can help you successfully clear this final hurdle so you can move on to your next duty station.
