October 03, 2022 3 Minute Read
Home Buying with Bitcoin (Part 4): Closing
This post is the fourth and final post in a multi-part series detailing the home buying process for bitcoin investors. The goal for each article is to provide basic information on each step of the homebuying process tailored for the bitcoin community. Read the rest of the series here:
Welcome to the final installment of the “Home Buying with Bitcoin” series! Up until now, this series has covered the home buying process from Pre-approval all the way through key deal terms and contingencies. This post covers the final critical aspect of the contract: the closing date.
When a buyer and seller reach mutual acceptance on a purchase and sale agreement, there are two possible outcomes: the deal closes as expected, perhaps with some minor changes along the way; or something goes wrong during the due diligence process, and the parties go their separate ways. Agreeing on an official closing date is ultimately what determines the fate of any real estate transaction. As one might guess, the closing date is when the transaction becomes final and ownership officially changes hands. Depending on the jurisdiction in question, a closing date is either carried out by the help of an escrow company or, in some states, an attorney must preside over the official closing.
When negotiating a closing date – assuming a buyer will finance the purchase of their home – the standard duration is about 30 days from the date of mutual acceptance. Sometimes a buyer or seller may prefer a longer due diligence period and 45 or 60 days may be more appropriate. Some examples of this are if there are anticipated issues with the property which require additional inspections or if the buyer requires more time to finalize the affairs on their departing residence.
The speed at which a buyer is able to close can help a buyer present a more attractive offer to the seller if they have the ability to close in 10 days, for instance. This is where Bitcoin can play an important role in the evolution of how real estate transactions are carried out. Because Bitcoin has the unique ability to instantly verify a buyer has the funds needed to consummate a transaction and because Bitcoin has near instant settlement. Hoseki can help generate an asset statement for your bitcoin holdings, which is compliant with typical underwriting standards.
There are a variety of labels for describing the official moment a deal is consummated. In addition to the closing date, it is common to hear it referred to as the signing date (typically in attorney states) or the funding date (typically in escrow states). This can get confusing, so buyers should be sure to clarify with their realtor, lender and escrow agent / attorney what they are describing when they say “closing date” so the buyer knows what to expect.
The following paragraphs will describe a standard example of the milestones leading up to and after closing takes place in an Escrow State. Buyers should keep in mind that there are many additional variations and outlier scenarios not described here, but this is meant to provide a high level overview of how things are typically finalized.
Once all contingencies have been satisfied and the buyer’s loan has been fully underwritten and approved, the deal proceeds onto its final steps before officially closing. This phase might be referred to as “Clear to Close,” and it’s similar to starting the initial descent on an airplane: you haven’t arrived yet, but it’s time to prepare for landing. The subsequent milestones are as follows:
- Loan Docs Sent to Escrow: given that the approval of the mortgage can be the biggest obstacle in a real estate transaction, a massive indication that the buyer has cleared all obstacles is when final loan documents are sent to escrow for signatures. Loan docs are often sent to escrow only a day or two before the contract’s closing date which is not always ideal, but not alarming. In a smoother transaction with few issues, it can happen much earlier in the process which makes for a much less stressful closing for all parties. Either way, the next step is for the buyer to sign!
- Buyer Signing: this step is when the buyer reviews all of the paperwork associated with the transaction, including the specifics of the loan terms they’ve agreed to, any seller concessions they negotiated and standard disclosures which are required by law. This section won’t get into those here, but suffice to say, there are often over 100 pages. So, a buyer should prepare to spend 1-2 hours completing the singing process. Additionally, many documents require the presence of a Notary and the buyer typically will be expected to bring their closing funds to the singing table. An experienced lender and realtor will prepare their client in advance for these steps.
- Loan Funding: after a buyer signs all of their documents, they are sent back to the lender for final review. Assuming everything checks out, no other issues arise and the lender has no outstanding conditions, the loan is now ready for funding! This is simply the process of transferring the proceeds from the mortgage from the lender to the seller. This is also the moment where the buyer’s loan obligation is created and they begin accruing interest on their mortgage. The loan funding signals that the transaction is all but complete, but there’s a final step before things become official.
- Recording: the escrow company has now ensured that money has exchanged hands between buyer and seller, and the transaction is ready to be officially recorded at the county office of the subject property. This is the final step in the process which includes physical attestation by the county recorder that the buyer and seller have agreed and finalized the exchange of real property and the official title, which is public record, is changed in the name of the new buyer. This often happens the same day as the loan funding, but can sometimes be a day or two later. The plane has not landed until the escrow company receives confirmation from the county that title has been updated and “recording numbers” are provided, making the deal finally closed.
We hope that readers and prospective home buyers found all parts of this blog series helpful. More importantly, Hoseki is eager to assist in any home buying process by providing the tools to verify bitcoin holdings in a way that the legacy financial world finds acceptable.
Additionally, as more and more options emerge for bitcoiners who are interested in using their holdings either towards the purchase of a new home or as collateral, Hoseki is developing many resources like this blog series to make the process a bit less mysterious. Feel free to reach out to the Hoseki team with any questions, and stay tuned for more blog posts to help bitcoiners demystify real estate with Hoseki.
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