What is Closing Transaction?

The fulfillment of a contract that causes an existing investment to end. A sale could be a closing a transaction for a long position, and a purchase could be a closing position for a short position.

In other words, The final legal procedure by which a company changes hands is a business settlement or closing. Good settlement solicitors may be acquired to represent all parties and solve the final barriers.

After a buyer and seller have entered into a contract of sale there are then a number of conditions which must be met before the sale can be closed. These may address issues such as the assignment of lease, verification of financial statements, transfer of licenses or obtaining financing. The agreement will become invalid if these conditions are not met within the date specified.

A number of documents are also required to close a transaction. The purchase and sale agreement (discussed in ‘Making and evaluating offers’) is the basic document from which all these are drawn. These may include:

  • A settlement sheet
  • Bill of sale
  • Promissory note
  • Security agreement
  • Promissory note
  • Security agreement
  • Financing statement
  • Covenant not to complete
  • Employment agreement

Basic Steps of Closing:

Starting the Process

A sales contract is signed by the buyer and seller and delivered to the closing agent, usually with a deposit check. The escrow is accepted by the escrow agent, often by written notation on the contract. The escrow agent starts the closing process by opening a title order. The file begins to be processed. Tax information, loan payoffs, survey (if necessary), homeowner/maintenance fees, inspections/reports, and hazard and other insurances, as well as legal papers are ordered. A title search is ordered.

Title Search and Examination

This is a search made of the public records. Records searched include deeds, mortgages, paving assessments, liens, wills, divorce settlements and other documents affecting title to the property. Title examination is the examination of the documents found during the title search that affect the title to the property. This is when verification of the legal owner is made and the debts owed against the property are determined. Upon completion of the search and examination, a title commitment/ preliminary report is prepared, reviewed and sent out to interested parties.

Document Preparation and/or Request to Produce

The closing agent reviews the new lender’s instructions and requirements, reviews instructions from other parties to the transaction, reviews legal and loan documents, assembles charges, prepares closing statements, and schedules the closing.

Settlement or Closing the Transaction

The escrow or settlement agent oversees closing of the transaction. The seller signs the deed and closing affidavit. The buyer signs the new note and mortgage. The old loan is paid off. The seller, real estate agents, attorneys and other parties present at the closing of the transaction are paid.


After the signing has been completed, the escrow or settlement agent will forward payment to any prior lender, and pay all parties who performed services in connection with your closing (if they have not been paid). The transaction documents are recorded in the county in which the property is located. Title insurance policies are prepared and sent to the new lender and to you. This all happens without any further actions by the buyer or seller.

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