The Preparation for Closing phase of the closing process is the pre-closing period when any loose ends of the transaction are tied up and final preparations are made for the closing itself, including setting the date and time for the closing. It lasts as long as is necessary to get everything tee’d-up for the closing, so that there’s nothing left to do but show up on closing Day, sign the loan package, and receive the Deed and transfer documents from the Seller.
This phase involves heavy participation from all of the main players in your transaction — you, the Seller, the attorneys for each of you, the lender, the title company, and the real estate agents — with everyone having their own specific tasks and to-do items to push through to get to the closing table.
Preparation for Closing is essentially a catch-all period when everything still left to be done in order to make it to the closing table is completed. This might include everything from confirming that the Seller has completed any agreed-upon inspection repairs and the property has passed the municipal fire safety inspection, obtaining final loan approval from the lender, and finalizing the settlement statement for the transaction (so you know how much money you need to bring to the closing!)…to setting up utilities accounts, solidifying moving plans, and performing your final walk-through of the property. By the end of this pre-closing phase, your transaction should be ready to close.
Once any title issues have been cleared, you’ll enter “Preparation for Closing” mode. There are standard pre-closing task items that are common to all transactions, as well as miscellaneous pre-closing items that are specific to the facts and circumstances of your particular deal.
The standard pre-closing task items are described below. Note that, while these steps tend to at least loosely follow the sequence in which they’re listed, their order can vary significantly from transaction to transaction:
By the time the Title phase of the closing process is completed and you’re moving into Preparation for Closing, you most likely will have already received a mortgage commitment from your lender and will be in the process of clearing any remaining conditions listed in the commitment in order to get final loan approval and clearance to close. This is a good time to regroup and make sure you’re on the same page as your lender about the path forward to closing.
Specifically, you should get confirmation that the lender is waiting on any additional information or documentation from you (and if not, what exactly those items are) and that you’re on track to close on the closing date set in the Contract (and if not, then when).
Once you have a clear path forward with your lender, it's time to secure home insurance for your new property. Your mortgage lender will likely require proof of insurance before finalizing the loan, so it's essential to start this process early. Compare quotes from different providers, choose the coverage that suits your needs, and have the insurance in place before closing. Your lender or real estate agent can assist you in finding suitable insurance providers if needed.
Practical tip: This is usually done about 5-7 days before closing. - Holly Tang
During Inspection negotiations, you and the Seller will have reached an agreement as to repairs that the Seller must complete prior to the closing. It is during the “Preparation for Closing” phase that you’ll circle back with the Seller on these items to confirm that the repairs have in fact been completed. Confirmation typically takes the form of the Seller providing you with copies of paid receipts for the work from the contractors that performed it. (You will physically verify the repairs during your final walk-through.)
In addition to confirming repairs, this is the time when you would seek verification from the Seller that any open permits for work performed at the property have been closed. Typically, your Contract with the Seller will have required that the Seller close any open permits before the closing. Your attorney and/or your real estate agent will have obtained the permit history of the property from the municipality at some point prior to this, and if the permit history showed any open permits, your attorney would have advised the Seller’s attorney of them so that the Seller could work on getting the permits closed before the closing. Once they’re closed, the Seller should provide you with copies of the final permit approvals, or verification of final approvals can be obtained from the municipality by your attorney.
Whenever a home is re-sold in New Jersey, state law requires that the property pass a limited fire safety inspection conducted by a municipal inspector. That fire safety inspection checks for the proper functioning and placement of smoke detectors, carbon monoxide detectors, and fire extinguishers in the home. If the property passes the inspection, the municipality will issue a certificate reflecting the same, often referred to as a “Smoke Detector and Carbon Monoxide Detector Compliance Certificate,” “Fire Prevention Certificate,” or “smoke cert” for short.
On top of these baseline fire safety requirements, many municipalities add their own additional requirements that properties must meet to proceed with a closing. These municipalities perform a more robust inspection of each property that includes checking for not only the state-mandated fire safety requirements but also other basic safety issues (like unpermitted work, missing handrails, working sump pumps, etc.), to issue what is most often referred to as a “Certificate of Continued Occupancy” (CCO).