Representation of Buyers and Sellers – Title Closing Law Firm provides representation, guidance and advice for buyers and sellers of real estate. Separate from the title insurance, the firm helps buyers and sellers throughout the buying and selling process.
RESIDENTIAL CLOSING – is a closing (see above on what a Closing is) on the sale of residential property. That can be a single-family house, a condominium or a townhouse.
TYPES OF RESIDENTIAL CLOSINGS
CASH CLOSINGS
This is when the Buyer is paying cash for the purchase of the property. Typically, the Buyer paid an Escrow Deposit. At the Closing, the balance of money due from the Buyer is paid in cash. A Buyer does not actually bring a suitcase of cash, bank or wires the money to the Title Company. The money first goes to the Title Company where the funds are allocated in accordance with the Settlement Statement.
Cash Closing Benefits – There can be some benefits to a Cash Closing. For one thing, the Buyer has more negotiating power as part of the deal from the beginning. The increased negotiating power comes from the following other benefits. A Cash Closing is typically much faster from Purchase and Sale Contract to the Closing. The time frame can be much quicker because there is no lender involved, and Lenders have their own procedures, requirements, and time frames. There is also a lot less paperwork involved in a Cash Closing. A Lender like a Commercial Bank Lender has a lot of documents that they need to have signed at a Closing. When a Lender is involved, more steps come into play. There is also the fact that with a Cash Closing, there is no Financing Contingency. So the deal is expected to close as long as other requirements are met such as confirming that Marketable Title can be transferred and Property Inspections pass. There may also be charges or points due a mortgage broker as part of a Lender Closing which do not come into play with a Cash Closing. A Buyer may have to show a Proof of Funds prior to Closing, but that is a reasonable request usually since all of the parties involved in the closing process want to know that the Buyer has the cash on hand and is financially available to close on the purchase.
There can be however some negatives to a Cash Closing. For example, when you purchase the real estate with cash, all of that money gets tied up into a rather illiquid asset. That means if the owner needs cash, the owner cannot tap into the real estate to get money very easily or quickly. The money could be used for other investments such as stocks and bonds, and a Lender could be utilized for the purchase. It is also possible that a Cash Closing means the Buyer/ owner may miss out of tax deductions that could be available under the mortgage interest deduction for Federal Income Tax purposes. Also, if the property being purchased is for investment purposes, using some cash on hand to buy one property means the owner could use cash remaining available to acquire another property or properties.
LENDER CLOSINGS
With a Lender Closing, the first step is typically a pre-approval the Buyer obtains from a Lender. The application process can be time consuming with the documentation required as part of the application. There may also be charges or costs the Lender charges as part of its agreement to loan proceeds to the Buyer. Once the Purchase and Sale Contract is signed by the Buyer and Seller, then the Lender gets to work, going though its loan process. That can take an appreciable amount of time. For the Buyer, there is also the issue of interest being due on the loan on top of the principal Purchase Price. If there is a lot of time that passes between the execution of the Purchase and Sale Contract and the Closing, it is possible that the Lender will add requirements to close. Of course, using a Lender has its advantages too. For one thing, if the property is intended to be for investment purposes, then a loan may allow a Buyer to use available cash on hand along with the help of a Lender in order to buy multiple properties. It is also a possible economic cost benefit to having a monthly payment, even if it includes an interest payment too, and keep the hundreds of thousands of dollars in other investments such as the stock market. Plus, some people may not have the few hundred thousand dollars on hand to buy their most valuable physical asset, a house to live in with their family. Therefore, using a Lender to accomplish the goal of buying a house can be necessary.
CASH PURCHASE vs. LENDER PURCHASE
| Cash Purchase | Lender Purchase |
| No monthly loan interest payments | Purchase price paid out over time |
| Could use the equity to acquire a loan | Leaves cash available for other investments |
| Faster Closing | Tax deductions available |
| Lower Closing Costs | Buyer to negotiate with a lender |
| More leverage in negotiating the purchase | Buyer has lender fees to pay |