Settlement and Possession

TLDR: Ownership will legally transfer at settlement. Possession will occur when you physically take the property, which may be after settlement if you negotiate a post-occupancy agreement with the seller.

Settlement, sometimes referred to as closing, is when you sign the paperwork that officially transfers ownership of the property. Possession is when you actually take the property, which may or may not be on the day you close. If, for example, the seller is leasing back the property until they’ve cleared out their belongings, you might not take possession until they’ve moved out.

At settlement, the process is usually fairly simple: you transfer the down payment and closing costs to the title company, sign an enormous pile of papers, and get the keys to the property. You'll need to remember to bring your ID (not to worry, we'll remind you with a checklist), and if the property will be purchased in the name of a legal entity or trust, you'll need a few additional documents to prove ownership.

A Note on Selecting a Settlement Date

Lenders are often the most significant factor in scheduling a closing date, so you should consult with them about how fast they can close before making an offer. We suggest a minimum of 30-45 days from the effective date (which is the date you actually sign the contract).

If you’re paying with cash, you can usually close in as little as 10-14 days depending on the title company’s availability.

Note: The true settlement date won't be scheduled until later

While you’ll suggest a date to close when you come to an agreement with the seller, closing isn't usually scheduled until after the big milestones are hit, such as getting approved for financing. Transactions also require the coordination of many parties: You, the seller, the title company, the notary, the lender, the inspector, the appraiser, and any contractors that may be completing repairs. Ensuring that all parties have completed the necessary steps and also have availability on the preferred day to close can be a challenge. 

Where will closing happen?

In short, it depends. Some states require a "wet" signature to transfer ownership so settlement historically occurred in person at title companies. After the global COVID 19 pandemic, however, many states enabled online closings for a limited duration. Some of those altered signature requirements have been permanently extended, and with the rising popularity of online title companies, the world is your oyster.

What happens if there are delays with closing?

This depends on who or what is responsible for the delay, how long the delay is, and how impactful the delay is to the other party.

As far as financial repercussions, the title company will need to modify the amount you'll owe at closing to prorate costs such as prepaid taxes. If the closing is delayed by a few days or less, the seller can typically make do if you're obviously committed to closing on the property. If, however, there is a larger problem such as the sale of another property being significantly delayed or canceled, you may end up in breach of contract for not closing by the day you cited in the contract. If this is the case, the seller has the option to cancel the contract and continue marketing their property.

The buyer and their lender are usually the reason for the delay, but if the seller needs more time to move out their belongings after closing occurs, they may ask if you’d be open to a post-occupancy agreement, which is like a short-term rental lease for after closing.

In summary, it depends on how long the delay is and how pressed the seller is to close.