Closing a Real Estate Deal: An Investor’s Guide

Key Takeaways

  • Learning how to close a real estate deal is crucial to the success of any investor.
  • Market factors, title issues and HOA approvals can slow down closing a real estate deal.
  • After closing your real estate deal, use a system to track and evaluate your results so you can continuously improve the process.

One of the most important aspects of investing is the art of closing a real estate deal. Learning to master the process can take time, but with the right focus it can be done well.

Many investors wrongfully assume that after an offer is accepted, the deal will go according to plan, however there are so many variables that can stand in the way of a smooth closing process. Whether it is taxes, HOAs or even slow moving paperwork, investors can face a number of challenges when closing a deal.

Luckily, there are a number of things investors can do to help make sure they are ready for any obstacles that come their way. Accurately assessing market factors, building up confidence, and simply knowing what to expect, will help investors close any deal. Read through this breakdown and learn how you can close a real estate deal the right way, every time.


[ Learn how to analyze deals like a pro! Attend a FREE real estate class in your area to learn how to identify the most rewarding investment deals. ]


closing in real estate

Understanding the Process of Closing Real Estate Deals

The closing process can ultimately influence the success or failure of a given deal. That’s why it’s crucial to understand everything that goes into it. No matter where you are in your career as an investor, take some time to familiarize yourself with how to close a real estate deal:

  • Open an escrow account to mitigate risk during the transaction.

  • Conduct a title search to ensure the property is owned free and clear.

  • Get pre approved for a mortgage and lock in your interest rate.

  • Hire an attorney to help review paperwork throughout the process.

  • Reduce administrative costs by negotiating junk fees.

  • Work with a home inspector to review the property’s condition.

  • Double check the home inspection and check for pest problems.

  • Renegotiate the offer depending on the results of the property inspections.

  • Remove the contingencies stated in the offer (after they have been completed).

  • Schedule a final walk through and look for any agreed upon changes.

  • Review all documents with your attorney and sign the necessary papers.

The Changing Dynamics Of The Real Estate Closing

Like everything else in the real estate world, closing time frames are constantly changing. There are regular fluctuations due to recurring factors such as the season, and how busy the market is. Then, there are even larger factors that can come into play. These can include major interest rate and market direction changes, or even new regulations.

While sellers and their agents seem to be more motivated than ever to close faster, many homebuyers may be experiencing longer closing times. Even the National Association of Realtors believes closing times should be extended.

How Long Does It Really Take To Close On A Home?

It can take as little as three days to close some real estate deals, while others may take more than 60 days. To that end, there are many factors that play into how fast you can close on a home.

One of the biggest is whether or not you are using financing, and what type. It might be possible to use a hard money lender and close in a few days, while conventional lenders may be backed up for weeks. Keep in mind that cash usually equals speed, especially when closing in real estate.

What Can Slow Down Your Real Estate Closing?

There are a wide variety of factors that can potentially impact your closing times:

  • The efficiency of your mortgage company and loan officer

  • Waiting on condo or HOA approvals

  • Certificates of occupancy

  • Title and lien issues

  • Backlogs with inspectors and appraisers

  • Trouble producing underwriting conditions

  • Slow and unresponsive agents

  • Parties not prepared for closing with proper IDs

Get an early start, and preempt as many of these issues as you can to streamline your real estate closing. For example, develop relationships with the different parties involved to ensure they have your best interests in mind. A good way to do this is to respond to all communications in a timely manner, and maintain positive relationships with everyone involved.

How to Speed Up Your Closing

The number one thing you can do to speed up the closing process is to prepare for every step of the process. That said, there are additional steps you can take toward an efficient closing. These include:

  • Start looking for properties early

  • Quiz your loan officer on all potential conditions that could come up

  • Get more than the sufficient documents together before signing the contract

  • Push for preliminary title searches, condo docs, and more

  • Build relationships with vendors so they prioritize your orders

  • Double check valid IDs and extra liquid cash for closing well in advance

  • Don’t use your credit, or borrow in a way that could alter your credit

  • Avoid trying to close at the end of the month or during holidays

  • Incentivize those involved to get your deal closed on time

How To Protect Yourself In A Stalled Closing

Closings do get stalled, but you can limit their likelihood by requiring sellers and their agents to demand more ‘skin in the game’ in the form of larger deposits. The further out your closing is, the larger the deposit a seller may try to negotiate for. In some cases, sellers may be willing to provide an extension but this can require additional funds.

The opposite is the case for buyers. The less money you put up, the less you have at risk. If necessary, break up the deposit into several parts, and at key milestones. For example; a second deposit after the inspection, and a third after title, appraisals, and loan commitments come in. Who you deposit with makes a difference. Choose a party that is more likely to side with you, or who is at least truly independent and unbiased.

Knowledge Is Power

There’s no way to predict, with absolute certainty, how long exactly it will take for a real estate deal to close. (Or that it will even close at all.) Many investors have driven themselves crazy trying to play psychic and control every aspect of a real estate closing.

A better course is to be informed by sound principles that guide your actions when closing a real estate deal. Do your best to remove any future obstacles from the real estate closing process, and track your results. If you do encounter a problem, remember to take notes on what went wrong to ensure you avoid repeating the same situation.

By doing this, you’ll not only avoid any possible encumbrances, but also develop a reputation as somebody who is serious about doing business and is easy to work with. And when you do that, you’ll find your ability to close a deal becomes faster and faster.

closing real estate deals

What To Do After Closing A Real Estate Deal

The first thing to do after closing a deal is to make sure you protect your investment. On the day of closing, make sure to get the property insured. If you are using lender financing, you will have to. However, you should take steps to insure the property immediately after the paperwork is signed even if you’re paying in cash. Additionally, you will want to secure the property itself. Start by changing out the locks and putting plywood over any broken windows. Next, put a padlock on any basement or garage doors. By taking the above measures, you can protect yourself from any potential issues.

Ideally, you will already have a few home improvement projects in mind as you close on the property. If not, now is a good time to evaluate what you have to do, who is going to do it, and for how much. Ask your network for reliable contractors, or work with one of your existing contacts. Schedule a walkthrough and review your plans for the property. Be clear about your expectations for the project, and your ideal timeline. Remember, this is your property. You do not have to work with the first contractor you talk to. Instead, take time to find someone you trust to get the job done. With the right plan, rehabbing and selling a property should be easy. However, once the property is sold, you are still not done. There is plenty of work to be done even after you make your profits.

In order to ensure your next deal runs as smoothly as this one, you need to track your results. Going from deal to deal or marketing plan to marketing plan can lead to a continuous cycle, with no real improvements. Even though you may already have your sights on another property, write up the process you followed to close this deal. Make a note of the purchase price, closing timeline, profits and more. Not only can this serve to show you where you can save money and focus your future business, you can use this to gain new contacts as well.

The last step you should take after closing a deal is to add the finished property to your real estate portfolio. If you are not already, you should get in the habit of adding to your portfolio for each deal you are involved in. Your tracking methods could include a spreadsheet, word document, or even a presentation with photographs of your completed properties. Find a system that works for you, and remember to stay organized. This information can be used by any future private money partners, investing partner candidates and anyone that you try to work with. The more detailed information you can provide them, the better they can get a sense of how you operate and what you bring to the table.

Summary

At the end of the day, learning how to close real estate deals will be crucial to the success of your investing career. Familiarize yourself with the ins and outs of the process, and establish a system to track your results. In doing so, you can help keep an eye on your bottom line and increase your business. Closing a real estate deal will get easier every time you do it, and in time you will build a proven track record as an investor.

Which tips helped you learn how to close real estate deals? Share your feedback in the comments below.

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Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies
Real Estate Investing Strategies