The Traditional Closing.
In a “traditional” closing, the documents are signed at the closing table near where the property is located at the title company’s office.
When all documents are signed and notarized the title company then reaches out to the lender to advise that they have all the necessary documents and if all is in order then the lender releases the mortgage funding to the title company. When the funds are received by the title company and disbursed to the various parties only then is the property considered “Closed and Funded”.
It is at this point the property officially becomes the property of the buyer.
The Remote Closing.
Because documents are signed remotely (not in the same near geographical vicinity as the property) and are generally sent via FedEx or other carrier, the original signed buyer documents may not arrive at the title company office until the following day or even later.
Unfortunately, the lender very often requires the title company to be in physical possession of the original closing documents to authorize the title company to release the funds. This means that the title company cannot close and fund, and buyer will not own the home, until this process completes.
Obviously, the easy way to deal with this is to get the lender to send out the documents for buyer to sign AHEAD OF TIME, so that buyer has them the on business day BEFORE closing, giving buyer ample time to sign and FedEx the documents back to the title company so that the documents arrive ON THE CLOSING DATE, and the transaction can then close on that date.
HOWEVER, there are TWO problems that often arise on this:
(1) some lenders (but not all) will not ALLOW buyer documents to be signed the day before closing; they must be signed on the actual closing date and
(2) a large number of lenders wait to the very end to prepare closing documents, so the documents are not READY the day before closing to be emailed or FedExed to buyer for execution. As you can tell, this is something of a “Catch-22” that often means that out-of-town buyers CANNOT technically comply with the contract, resulting in a potential default.
Each lender will have its own policy with regards to acceptable conditions to fund. If you require that your property closes and funds on the contracted closing date it is your responsibility to discuss with your lender what their process entails and to request that they send the closing package to the title company at least a day or preferably two days before close. This allows the title company to crate the closing package for lender approval and to be able to send you as buyer the documents either directly or via a mobile notary to sign prior to the closing date.
Again, some lenders insist that closing documents must be signed / dated on the contracted closing date, which may not be possible if you are signing remotely. That makes it imperative to discuss with your lender what is acceptable for their policy and to coordinate with the lender, the title company and your Realtor to find out what will be required to ensure the sale is closed and funded on the contracted closing date.
In some rare cases, it may be necessary to amend your purchase contract to allow for funding the business day after the closing date, or otherwise keep seller informed.