Settlement and Possession
TLDR: Ownership will legally transfer at settlement, commonly referred to as closing. Possession will occur when the buyer physically takes the property.
Settlement is when you sign the paperwork that officially transfers ownership of the property. Settlement is also known as "Closing,” short for closing on a house. Possession is when the buyer actually takes the property, which may or may not be on the day you close. If, for example, you lease back the property until you’ve cleared out your belongings, the buyer might not take possession until you’ve moved out.
While the buyer hopefully closes on the planned settlement date (there are often delays caused by the lender), you can sometimes sign the required paperwork ahead of time. You'll need to remember to bring your ID (not to worry, we'll remind you with a checklist), and if the property is in the name of a legal entity or trust, you'll need a few additional documents to prove ownership or affiliation.
Lastly–and most excitingly–you'll need to select how you would like your funds transferred to you.
When should closing be scheduled?
While you’ll agree on a date to close when you accept the offer, closing usually gets scheduled concretely after the big milestones are hit, such as getting approved for financing and other contingencies are met. Most closings don't get scheduled until later because not every deal ends up closing, and when they do, there are often delays past the initially scheduled settlement date.
Fun Fact
Closings require the coordination of many parties: You, the buyer, 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 all necessary steps and also have availability on the preferred day to close can be cumbersome, which is why closings aren’t typically scheduled until later in the process.
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. However, this is Century 21 (pun intended) and with the rising popularity of online-only title companies, the world is your oyster and you can close anywhere. You pick the location, and we'll bring a notary to you, if your state even requires a physical notary.
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 be owed at closing to prorate costs such as prepaid taxes. If the closing is delayed by a few days or less, it might be worth making accommodations if the buyer is 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, the buyer may end up in breach of contract for not closing by the day you cited in the contract. If this is the case, you’ll have the option to cancel the contract and continue marketing your property.
The buyer and their lender are usually the reason for the delay, but if you need more time to move out your belongings after closing occurs, you can ask if the buyer would 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 you are to close.
How clean does my property need to be upon transfer of possession (which is often at closing)?
Unless otherwise agreed, the condition of your property should be the same as when the contract was signed. Many contracts will specify “broom swept, free of debris and trash.” Failure to get the property into broom swept condition will likely delay closing.