Closing and Recording: How a Property Purchase Becomes Final

Closing, sometimes called settlement, is the point at which ownership passes from the seller to you. Several things have to happen together: you pay the price, the seller's existing loans and liens are paid off, your new loan is funded if you have one, the seller signs a deed to you and that deed is recorded in the public records.

Who runs the process depends on where the property is. In some states an escrow or title company handles most closings, and the buyer and seller may sign separately on different days. In others, an attorney is required or customary, and the parties often sign at a single meeting. Either way, the work behind the signing follows the same basic steps.

This guide covers those mechanics. For what to expect on the day itself, including the final walk-through and what to bring, see closing day: what to expect. Bank-owned purchases add their own seller requirements, covered in closing on a bank-owned home.

The closing agent is a neutral party that follows written instructions from the buyer, seller and lender. Depending on the state, this may be an escrow company, a title company or an attorney. The agent typically:

• Holds your earnest money and, later, the rest of your funds.
• Orders a title search and issues a title commitment listing the requirements that must be met before a policy can be issued.
• Requests payoff statements from the seller's lenders and clears other items, such as releases of old liens or unpaid taxes.
• Prepares the settlement statement showing every charge and credit for each side.
• Collects signed documents, then disburses funds and sends documents for recording.

Nothing is released until every condition in the instructions is met. If the lender has not funded or a signature is missing, the money and the deed stay with the closing agent. That is what protects both sides: the seller does not give up title without being paid, and you do not pay without receiving title.

For financed purchases, the costs shown on the settlement statement follow the Closing Disclosure. The guide to closing costs explains each line.

The deed is the document that transfers ownership. To be valid and recordable, a deed generally needs:

• The names of the seller (grantor) and buyer (grantee).
• A legal description of the property, which is more precise than a street address.
• Words of transfer and, in many states, a statement of the price or consideration.
• The seller's signature, usually notarized.

The deed also states how you hold title, called vesting. Options can include sole ownership, several forms of joint ownership with a spouse or partner, or ownership through a trust or company. The choice affects what happens if an owner dies, how the property can be sold and sometimes taxes. Available options vary by state, so decide before closing and ask an attorney if you are unsure.

The type of deed matters as well, because it sets the seller's promises about title. Warranty, special warranty, trustee's and quitclaim deeds differ widely, and distressed sales often use those with fewer promises. The guide to title and liens compares them.

If you have a loan, you also sign a promissory note, your promise to repay, and a mortgage or deed of trust, which pledges the property as security. The note stays with the lender; the mortgage or deed of trust is recorded along with your deed.

Recording means filing the signed deed with the county recorder, clerk or register of deeds where the property sits. Once recorded, the deed becomes part of the public record that future title searches will check.

Recording does two jobs. It gives public notice that you own the property, and in most states it helps establish priority: if the same property is sold or pledged twice, the first properly recorded document generally wins. That is why the closing agent records quickly, often the same day or within a few days, and many counties now accept electronic recording.

The order matters too. Your deed is usually recorded first, followed by your lender's mortgage or deed of trust, so the lender's claim attaches to your ownership. Any releases of the seller's old loans are recorded as those loans are paid off.

Recording fees, and transfer taxes where they apply, are set by state or local government and are collected at closing. The county returns the original deed, stamped with recording details, to you or the closing agent, which can take several weeks.

A few weeks after closing, look up your property on the county's records website or ask the recorder's office to confirm that your deed and loan documents were recorded and that the seller's old mortgage shows a release. If a release is missing months later, contact the closing agent.

The title commitment issued before closing becomes the basis for the actual title insurance policies. Once the requirements listed in the commitment are met and the documents are recorded, the title insurer issues:

• A lender's policy, if you have a loan, which the lender requires.
• An owner's policy, if you or the seller bought one, covering your ownership.

The policies usually arrive several weeks after closing. Check that the names, property description and amount are correct, and that the exceptions match what you reviewed in the commitment. Endorsements, which add specific coverage, should be listed too.

The premium is paid once, at closing. What the policies cover, and why an owner's policy can matter more on a property with a foreclosure in its history, is explained in the guide to title and liens linked above.

Buyers often send the balance of their funds by wire transfer, and criminals target that moment. A common scheme uses a hacked or look-alike email account to send fake wiring instructions that appear to come from your agent, lender or closing agent. Once a wire is sent, recovering it is difficult.

• Get wiring instructions early, from the closing agent directly, and confirm them in person or by calling a phone number you got independently, such as from the company's official website or your purchase contract.
• Treat any change as a warning sign. Legitimate closing agents rarely change wiring instructions at the last minute.
• Do not use contact details from the email itself to verify the email.
• Call to confirm receipt after you send the wire.
• Ask about alternatives, such as a cashier's check, if you are uncomfortable wiring.

If you think you have sent money to the wrong account, contact your bank immediately to ask for a recall, then tell the closing agent and report it to the FBI's Internet Crime Complaint Center (IC3). Speed improves the chance of recovery.

Keep a complete set of closing records, on paper and as scanned copies, for as long as you own the property and for some years after you sell. You may need them to refinance, sell, file taxes or make a title claim.

• The final settlement statement or Closing Disclosure.
• The recorded deed, or a copy with the recording details.
• Your owner's title policy and any endorsements.
• The promissory note, mortgage or deed of trust and other loan documents.
• The purchase contract, addenda, inspection reports and appraisal.
• Receipts for improvements, which may affect your tax basis when you sell.
• HOA documents, warranties and any survey.

A few follow-up tasks are worth doing in the first months. Check whether your state or county offers a homestead or other property tax exemption and how to apply. Make sure tax bills and HOA notices will reach you. If your loan has an escrow account, confirm that taxes and insurance are being paid from it. Ask a tax professional what to keep for tax purposes, since rules depend on your situation.