Settlement Date vs. Closing Date

The culmination of a real estate transaction is the settlement or closing, the date on which ownership of the property officially changes hands. At this time, the home seller receives the proceeds resulting from the sale and the buyer pays any associated costs required to complete the transaction. The home sale settlement process typically takes about an hour although it could take longer if the buyer and seller need to work out any final disagreements.

"Settlement date" and "closing date" are synonymous terms referring to the date when a property's seller and buyer meet to finalize the deal. At this time, the deed to the property is transferred from the seller to the buyer and all pertinent paperwork is completed. The settlement meeting may occur in the office of a title company, lender or attorney. Any costs associated with the settlement must also be paid at this time.

The settlement date is usually established when the buyer makes her formal written offer to purchase a property. The seller can accept the date or suggest one more suitable to her and the process will continue until an agreement is reached. However, the buyer's mortgage lender typically has the final say regarding the date, to ensure it has time to complete the underwriting process. A normal settlement time frame is 30 days from the offer to the closing date although it can be shorter or longer.

During the period from the offer to the settlement date, which is referred to as the "escrow" period, the property buyer will incur a number of closing costs. Common closing costs include those associated with obtaining a credit report by the lender, performing a home appraisal and doing a title search as well as mortgage application fees. The total amount of closing costs can vary but a rule of thumb is 3 to 5 percent of the home's purchase price. In some cases, a motivated property seller may offer to pay some or all of the closing costs to facilitate the transaction.

The settlement date is the last opportunity for the buyer to ensure that all figures are accurate and that all conditions regarding the purchase have been met, such as the seller making previously agreed-upon repairs. The property's buyer should bring a cashier's check for the amount of the closing costs indicated in the Good Faith Estimate document he received prior to settlement. It is possible that actual closing costs could be higher than estimated, so the buyer may need to write a personal check to make up for any difference.