Real Estate Closings

At Polishan Solfanelli, we provide personalized guidance for real estate closings throughout Scranton, Pennsylvania. Our attorneys have years of experience navigating the settlement process and ensuring all necessary documents are properly prepared, signed, and recorded. We help buyers, sellers, and lenders protect their interests, from the initial contract review to the final transfer of ownership. Our focus is to address potential issues before they arise, such as title defects or financing complications, while safeguarding your financial and legal positions. By working closely with clients, we facilitate open communication and strive to create a smooth closing process for residential and commercial transactions. Whether you are purchasing your first home or expanding your investment portfolio, our team delivers thorough attention to detail and reliable guidance. Call us at 570-562-4520 today to learn more about our comprehensive real estate closing services and how we can assist with your next property transaction in Scranton.

Closing Documents 

Real estate closings in Pennsylvania necessitate a series of important documents and disclosures that confirm ownership transfers, outline financing terms, address local and federal requirements, and protect the interests of both buyers and sellers. Below is an overview of common documents used during a Pennsylvania closing, including notes on certain exceptions and additional requirements:

• Deed:

The deed is the chief legal instrument transferring title from the seller to the buyer. In Pennsylvania, typical deed forms include:

  – General Warranty Deed: Offers the broadest grantor assurances, covering title defects that may have arisen before or during the seller’s ownership. 

– Special Warranty Deed: Narrows the warranty to the seller’s period of ownership only, guaranteeing that the seller has not done anything to encumber the property beyond what is already recorded.

  – Quitclaim Deed: Transfers whatever interest the grantor holds without any warranty of clear title. 

Valid deeds in Pennsylvania must accurately describe the property’s boundaries (generally by referencing a prior deed or an official survey), be signed by the seller, and be notarized. Once notarized, the deed is submitted to the county Recorder of Deeds office to complete the ownership transfer.

• Mortgage (rather than Deed of Trust):

While many states use deeds of trust, Pennsylvania primarily relies on mortgages for residential property financing. A mortgage creates a lien on the property, giving the lender a security interest until the loan is repaid. This distinction is significant because Pennsylvania foreclosure procedures differ from those in states using deeds of trust.

• Promissory Note (Note):

The promissory note details the borrower’s commitment to repay a loan under specified terms, including the principal amount, interest rate, payment schedule, and consequences of default. Although the mortgage secures the property, the note creates the personal obligation to repay the debt.

• Seller’s Property Disclosure Statement (With Exceptions):

Pennsylvania’s Real Estate Seller Disclosure Law requires most residential sellers to complete a written statement outlining the property’s condition. Elements covered generally include roofing, plumbing, electrical systems, structural concerns, and other material factors. If sellers know of defects, they must disclose them. Failing to do so can lead to potential liability. However, certain transfers are exempt under Pennsylvania law. Such exemptions may include:

  – Transfers by an executor, administrator, or similar fiduciary handling an estate. 

– Foreclosures or sheriff’s sales.

  – Some transfers of new construction that has not been occupied. 

Buyers should review the disclosure statement carefully, assessing any noted defects and verifying that all essential points have been addressed. Although many transactions mandate this statement, buyers and sellers involved in exempt transactions should confirm whether the disclosure requirements apply to them.

• Lead-Based Paint Disclosure (for Older Properties):

If a home was built before 1978, federal rules typically require the seller to provide a lead-based paint disclosure. In Pennsylvania, this disclosure applies along with all other state-specific documents. This disclosure informs the buyer of any known presence of lead-based paint or lead-based paint hazards, and it grants the buyer an opportunity to conduct further inspections or risk assessments.

• Closing Disclosure:

For financed transactions subject to the TILA-RESPA Integrated Disclosures, the lender must issue a Closing Disclosure (CD) at least three business days prior to closing. The CD itemizes all costs, including the loan’s interest rate, the total amount financed, and fees such as origination charges and prepaid taxes. Buyers should compare the CD to the Loan Estimate they received earlier and note any variances.

• Title Insurance (Owner’s and Lender’s Policies):

Pennsylvania buyers typically encounter two types of title insurance:

  – Owner’s Title Insurance: Protects the buyer against undiscovered claims, liens, or encumbrances that might not have surfaced during the title search. 

– Lender’s Title Insurance: Protects the mortgage lender by safeguarding its lien position if title issues emerge.

  Most lenders require a lender’s policy before completing a loan, whereas an owner’s policy is optional but strongly considered prudent. These policies can be vital in avoiding or mitigating legal and financial burdens in the event of a title defect. 

• Affidavit of Title:

A seller often signs an affidavit of title, attesting to ownership and the absence of undisclosed liens, pending legal actions, or potential claims against the property. Title companies rely on this sworn statement as an additional measure of security for the transaction.

• Release of Liens:

If any debts against the property exist—such as a seller’s outstanding mortgage, judgment, or other lien—those must be released at or before closing. A release of lien confirms the debt is satisfied and removes the encumbrance from the property’s title.

• FIRPTA Affidavit:

The Foreign Investment in Real Property Tax Act (FIRPTA) may come into play if the seller is a foreign individual or entity. The affidavit clarifies whether withholding is necessary, ensuring the buyer meets any tax obligations related to the seller’s status.

• Proof of Homeowners’ (Hazard) Insurance:

Lenders generally require that buyers obtain and maintain homeowners’ insurance covering the property. Buyers must often provide evidence of an active policy, typically listing coverages, the insurance provider’s details, and the effective start date. If the closing is completed without an adequate policy in place, the lender may delay or cancel funding.

• Loan Application:

The application for a mortgage loan memorializes the borrower’s financial details, income, employment status, debt obligations, and assets. Though often completed early in the process, verifying its accuracy at closing is vital because misstated information could lead to future legal or financial repercussions.

• Home Warranty Information (If Applicable):

A home warranty might be included as part of the purchase agreement, especially if the parties negotiated it as an incentive or as a safeguard. This document will detail the coverage limits, duration, and provider responsibilities, helping the buyer with maintenance issues during the initial period of ownership.

If you have questions about any closing documents or need additional guidance, you can consult with a lawyer in Scranton, Pennsylvania.

Title Commitments vs. Final Policy 

In Pennsylvania, title companies customarily issue a title commitment on behalf of the insurer as a precursor to providing the final title policy. The title commitment:

• Outlines the terms under which the insurer agrees to issue coverage.
• Lists exceptions (matters the policy will not cover) and requirements (steps that must be satisfied, such as resolving outstanding liens).
• Establishes a roadmap for what must be cleared before the final policy is issued.

At closing, once all the requirements have been fulfilled and any curative measures for title defects are completed, the commitment converts into the final policy. Buyers should examine the title commitment carefully to verify whether items like unpaid taxes, homeowner association liens, or prior mortgages are still showing. Clearing these matters is essential for ensuring the buyer receives a relatively clean title and that the insurance coverage is sound. After closing, the buyer will typically receive an owner’s title policy (if purchased), often mailed once the official recording process is complete and all conditions are satisfied.

A Scranton, Pennsylvania attorney can assist buyers and sellers with reviewing title commitments and addressing title issues during the closing process.

Earnest Money Deposits 

In many Pennsylvania real estate transactions, a buyer provides an earnest money deposit—sometimes referred to as “hand money”—to demonstrate good faith and commitment to the purchase. Key points to consider include:

• Holding the Deposit:

The deposit is commonly held in escrow by the listing broker, the buyer’s broker (less frequent), or the settlement agent. The agreement of sale should clearly state who will hold this deposit and under what conditions it could be disbursed.

• Refund or Forfeiture:

Standard agreements of sale set forth circumstances under which the buyer may receive a refund or, conversely, lose the deposit. Common contingencies include financing, inspection, or appraisal clauses. Should the buyer lawfully terminate the contract under a recognized contingency, the deposit is typically returned. Conversely, if the buyer breaches without an applicable contingency, the seller could be entitled to retain the deposit.

• Timing:

In Pennsylvania, earnest money is often delivered soon after the parties sign the purchase agreement. The agreement might specify additional deposit deadlines or mention if a portion will be delivered at a later date.

• Impact on Closing:

At closing, the earnest deposit generally applies to the total funds the buyer must pay. Proper tracking of these funds ensures both parties understand how they factor into the final settlement calculations.

Closing Costs 

Pennsylvania closing costs can comprise various fees, taxes, and prepaid expenses in addition to the property’s purchase price. Understanding these obligations helps buyers and sellers budget for effective settlement. Common categories include:

• Pennsylvania Realty Transfer Tax:

The state imposes a 1% transfer tax. Most municipalities add a local component of 1% or more. Philadelphia, for instance, enforces a higher local transfer tax rate, raising the total tax above 2%. By typical convention, the 1% state tax is equally split between the buyer and the seller (0.5% each), unless the agreement of sale says otherwise. Exceptions may apply for certain familial transfers or specific property transfers related to divorce.

• Appraisal Fee:

To confirm that the home’s projected value aligns with the requested loan amount, lenders require an appraisal. Buyers generally pay this fee, which can vary from a few hundred dollars upward, depending on a property’s location and size.

• Origination and Underwriting Fees:

Financial institutions may add fees for evaluating the buyer’s application and generating the loan. These expenses, sometimes a flat fee or a percentage of the loan, pay for underwriting reviews and processing costs.

• Discount Points:

A buyer may pay discount points at closing to secure a reduced interest rate. One point usually equals 1% of the loan amount. Although this lowers future mortgage payments, it increases the initial cost.

• Title Search Fee and Title Insurance Premiums:

A title search examines the property’s recorded history to detect any outstanding liens, mortgages, or judgments. Title insurance premiums, for both the owner’s and lender’s policies, are often quoted together with the title search fee. The final cost depends on coverage levels and the specific rates of the title company.

• Recording Fee:

Recording fees help county governments file documents—including deeds and mortgages—into the public record. The expense depends on the number of pages, the type of document, and the county-specific fee schedule.

• Attorney Fee or Settlement Agent Fee:

Pennsylvania does not mandate that parties hire an attorney for a standard residential closing, as licensed title agents can handle closings. However, many buyers and sellers choose to consult with an attorney for assistance if the transaction involves unique considerations or complexities. Attorney or settlement agent fees differ based on the scope of services provided.

• Credit Check Fee:

This generally modest charge covers obtaining the buyer’s credit report and score, which lenders rely on when deciding whether to approve the mortgage.

• Prepaid Taxes and Insurance:

When creating an escrow, lenders often require the buyer to contribute several months’ worth of property taxes and homeowners’ insurance premiums upfront. This ensures that funds will be on hand to pay these obligations when they become due.

• Real Estate Agent Commissions:

Sellers generally pay commissions to the listing agent and buyer’s agent combined as a percentage of the selling price. While commission rates can be negotiated, they are customarily in the range of a few percent of the final price.

• Survey Fee:

Some lenders or title insurers may need a current survey to confirm boundary lines and confirm there are no encroachments. If required, this fee will appear in the closing costs.

• Flood Certification Fee:

This covers an evaluation of whether the property lies in a flood zone designated by federal guidelines. Mortgage lenders want to confirm if flood insurance is needed. Buyers and sellers who have questions about these expenses can discuss them with an attorney in Scranton, Pennsylvania.

Municipal Requirements 

Local rules and regulations can significantly impact a home purchase. Pennsylvania municipalities—whether large metropolitan areas or smaller boroughs—may impose additional obligations on buyers and sellers. Common examples include:

• Municipal Certifications and Use-and-Occupancy Permits:

Certain municipalities mandate a use-and-occupancy inspection before closing. An inspector may check elements such as smoke detectors, carbon monoxide detectors, railings, and structural safety. For instance, Philadelphia often requires a certificate confirming the property meets the city’s code standards. Suburban townships in Allegheny County might ask for similar verifications. If any deficiencies are found, the seller may be required to fix them before settlement or place money in escrow while the repairs are completed.

• Sewer Lateral or Septic Inspections:

Municipalities, particularly those with older infrastructure, may require sellers to have a sewer lateral inspection to ensure no leaks or blockages. In rural areas, properties may have on-lot septic systems needing an inspection before transfer. If problems arise, repairs or replacements might need to be completed or escrowed for future remediation.

• Additional Local Assessments:

Some municipalities also levy distinct local transfer taxes or special assessments to fund projects, such as sidewalk improvements. Others may require sidewalk inspections to ensure compliance with local ordinances. Buyers and sellers should check with the municipal offices or the local zoning department to understand precisely what is required prior to closing.

Offering a few examples—like Philadelphia’s higher transfer tax, certain Allegheny County municipalities’ demand for dye testing (checking for illegal sewer connections), or suburban townships’ occupancy certifications—highlights how location can dictate extra steps and fees. Being aware of these requirements early reduces stress and last-minute expenses.

Seller Concessions 

“Sellers’ concessions” describe situations where the seller accepts responsibility for paying certain costs that conventionally fall on the buyer. In Pennsylvania, concessions can be negotiated to ease a buyer’s immediate financial burden:

• Types of Possible Concessions:

A seller might cover a portion of the buyer’s closing costs, loan origination charges, or property tax prepayments. Alternatively, concessions could take the form of a set credit at closing to fund repairs or improvements requested during the inspection phase.

• Impact on Purchase Price and Appraisal:

Often, parties may increase the agreed-upon purchase price if the seller is making concessions, ensuring the seller’s net proceeds remain acceptable. However, the property must still appraise at or above the adjusted price. Should the appraisal come in low, buyer and seller may renegotiate.

• Loan Caps and LTV Considerations:

Various financing programs cap the percentage of concessions based on the loan-to-value ratio. Conventional loans typically allow concessions from 3% to 9% of the purchase price, depending on the buyer’s down payment. Federal Housing Administration (FHA) loans often limit concessions to around 6%, while Veterans Affairs (VA) loans cap certain concessions at about 4%. Sellers, buyers, and lenders must confirm that any planned concession comfortably fits within these caps.

Settlement and Closing Logistics 

The final stage of a Pennsylvania real estate deal typically takes place at a title company’s office or, in some cases, an attorney’s office. During closing, both buyer and seller sign documents, funds are collected and disbursed, and the transaction is legally concluded:

• Preparation and Review of Closing Disclosure:

Buyers entitled to a Closing Disclosure under federal law must receive it at least three business days before settlement. This period permits the buyer to confirm the loan terms, final costs, and any changes since receiving the initial Loan Estimate. If significant modifications arise—such as a major shift in the annual percentage rate—another review period might be triggered.

• Role of the Settlement Agent or Attorney:

A settlement agent, often a title company professional, orchestrates the closing. This individual confirms that all documents—especially the deed—are properly signed, witnessed, and notarized. The agent also collects money due from the buyer, oversees the payoff of any seller liens, and ensures that fees (e.g., transfer taxes, recording costs) are accurately allocated.

• Paying Off Liens and Disbursing Proceeds:

Any outstanding liens, including prior mortgages, judgments, or other encumbrances, are settled from the seller’s proceeds at closing. Once paid, the remainder of the proceeds goes to the seller. The buyer’s funds pay for the purchase itself, various closing fees, and any prepaids or escrows.

• Recording of Documents:

After signing, the settlement agent (or attorney) promptly files the deed, mortgage, and other pertinent records with the county Recorder of Deeds. This ensures the world at large recognizes the new owner’s title and the lender’s mortgage lien.

• Prorations:

Certain costs, like real estate taxes, homeowner association fees, or shared utility fees, are prorated based on the closing date. Each party only pays for the share of the expense that corresponds to their period of ownership. For example, if property taxes are paid annually, the seller might reimburse the buyer for the time extending after closing, or vice versa, depending on when taxes are due.

• Post-Closing Follow-up:

Once documents have been officially recorded, the buyer will generally receive a copy of the recorded deed, the final owner’s title policy (if purchased), and information about handling escrowed items. Retaining all final paperwork in a safe place is recommended, as these records verify ownership and can prove crucial later. A Scranton, Pennsylvania lawyer can provide guidance on settlement and closing logistics.

Role of Legal Counsel in Pennsylvania Real Estate Closings 

Although Pennsylvania does not require an attorney for routine residential closings, many participants find hiring counsel beneficial when the circumstances warrant personalized legal insights. Here are scenarios where buyers or sellers often seek legal counsel:

• Complex Loan Structures:

If a buyer is entering into less common financing arrangements—such as seller financing, private loans, or adjustable-rate mortgages with significant variables—an attorney can help interpret the terms and highlight potential legal or financial risks.

• Title Issues or Curative Work:

When the property has clouds on title—such as unresolved judgments, multiple liens, boundary disputes, or old mortgages—clearing these matters can be legally involved. Attorneys frequently help research, negotiate resolutions, and file any necessary court documents, if required.

• Unique Transactions:

Properties changing hands under unusual circumstances, including estate proceedings or divorce-related transfers, may demand additional documentation to ensure the proper individuals are signing and that the transaction itself is prepared in accordance with Pennsylvania legal requirements.

• Commercial or Mixed-Use Properties:

For properties used partly or fully for commercial purposes, additional zoning, licensing, or regulatory constraints may apply. The complexities can outstrip typical residential closings, encouraging professional review.

• Buyer or Seller Preferences:

Even in straightforward residential deals, some participants prefer the added security of legal guidance. Counsel can review the agreement of sale, explain obligations set by local ordinances, advocate during negotiations, and confirm that documents match the parties’ intentions.

If an attorney is involved, the attorney’s office can serve as a settlement location, with the attorney taking on many of the same tasks that a title company settlement agent would perform, plus offering legal opinions and representation. In this setting, lines of communication between the real estate agent, lender, buyer, and seller can often be streamlined because of the attorney’s direct involvement.

By considering whether an attorney’s review and guidance is helpful, buyers and sellers can make more informed decisions about how to proceed, especially if the transaction holds unusual challenges.

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Collectively, these sections form a roadmap to Pennsylvania’s real estate closing process. From assembling essential documentation (like deeds, mortgages, and disclosures) through addressing municipal requirements and final settlement tasks, each step demands diligence from every party. Pennsylvania’s particular rules—such as local use-and-occupancy inspections or the emphasis on a mortgage (instead of a deed of trust)—underscores the importance of understanding local practices. By confirming compliance with disclosure statutes, resolving title contingencies, negotiating potential seller concessions, and coordinating closing logistics, buyers and sellers enhance their chances of a smooth transition of property ownership.

Knowledgeable Guidance in Real Estate Law

When you’re ready to conclude your real estate transaction, Polishan Solfanelli can provide careful support to guide you each step of the way. Our experienced Scranton, Pennsylvania attorneys recognize that every property transfer involves distinct goals and circumstances. Whether you’re navigating the complexities of closing documents, addressing local regulations, or resolving title concerns, we strive to identify the most advantageous strategies for achieving a successful settlement. We encourage open communication with clients, so questions can be promptly addressed, and potential issues can be anticipated and avoided. By focusing on thorough preparation and personalized service, we help foster clarity and peace of mind for buyers and sellers alike. Please consider reaching out to discuss how we may serve your specific needs. Call 570-562-4520 today to learn more about the ways in which we assist Pennsylvania residents in protecting their interests and finalizing their transactions. We look forward to hearing from you.