8 Common Real Estate Closing Myths

Myth #1: Always Close on the Last Day of the Month

Your buyers may aim for month-end closings to save on prepaid interest costs since mortgage interest is paid in arrears. At closing, borrowers prepay interest from their closing date through month-end.

For example, closing on May 31st means paying just one day of prepaid interest, while closing on May 5th means prepaying for 26 days. On a $300,000 loan at 6%, this difference equals approximately $430 in upfront costs.

However, help your clients understand the potential drawbacks of end-of-month closings. Title companies experience their highest volume during these periods, resulting in limited scheduling options and a higher risk of delays pushing closing to the next month. Consider suggesting the 25th-28th of the month as a balance between interest savings and scheduling flexibility.

Early-month closings offer different advantages: though clients pay more prepaid interest, they'll gain a longer grace period (up to 45 days) before their first mortgage payment. This extra time can help them manage moving expenses.

Remind clients that the ideal closing date depends on their specific financial situation and priorities rather than a universal rule.

Myth #2: All Real Estate Closings are the Same

Clients often approach closing assuming every transaction follows an identical process, possibly due to limited personal experience or hearing about friends' closings. The phrase "a closing is a closing" perpetuates this misunderstanding.

While all closings share the goal of transferring property ownership, the similarities often end there. Help your clients understand that their closing experience will be shaped by several key factors:

Type of transaction: Different property types require unique documentation, inspections, and legal considerations, from residential protections to commercial due diligence to specialized investment property requirements.

Financing method: Loan types significantly affect closing requirements, from VA and FHA loans with specific documentation and appraisal standards to cash purchases with simplified processes. Each lender may also impose unique verification steps and timeline considerations.

Geographic location: State and local regulations dictate closing procedures, including attorney requirements, recording fees, transfer taxes, and regional customs that can substantially change the closing experience.

Special circumstances: Unique situations like divorces, estate sales, short sales, and foreclosures introduce additional complexities, requiring special documentation, third-party approvals, or court interventions.

By educating clients about these variables early in the process, you can help set realistic expectations and reduce stress when their closing doesn't precisely match previous experiences.

Myth #3: All Closing Costs are Negotiable

Your clients may believe every fee on the settlement statement can be negotiated, reduced, or eliminated. This misconception often stems from their experience negotiating purchase prices and certain closing costs, leading them to assume all expenses follow the same pattern.

Help your clients understand the distinction between negotiable and non-negotiable closing costs:

Negotiable closing costs include certain lender fees like origination and processing charges; the distribution of expenses between buyer and seller; real estate commissions; and optional home warranty fees.

Non-negotiable closing costs include government recording fees set by local jurisdictions; transfer taxes established by state and local governments; title insurance premiums; prorated property taxes and HOA dues that reflect actual costs; and required inspection fees with standard market rates.

Remind your clients that negotiations surrounding closing costs must be specified in the purchase agreement. Once they receive the settlement statement or closing disclosure, negotiations are essentially complete, with changes only possible to correct errors.

Setting clear expectations about which costs can and cannot be negotiated helps your clients approach the transaction realistically and focus their efforts where they'll have the most impact.

Myth #4: The Closing Process Only Takes a Day

Your clients likely believe "closing" is simply the appointment where papers are signed and keys exchanged. This narrow view focuses solely on the visible culmination of the process, missing the extensive work that happens before and after the actual closing day.

Help clients understand the full closing timeline:

• Contract to closing preparation: Once a purchase agreement is accepted, the title company begins a thorough title search and exam to ensure a clear ownership chain. Any discovered issues—from boundary disputes to unknown liens—must be resolved. Meanwhile, the mortgage process continues with appraisals, underwriting, and final loan approval.
• Document preparation: Closing professionals prepare documents, calculate figures, and coordinate between all parties—buyers, sellers, lenders, agents, and sometimes attorneys.
• Closing Day: While this appointment typically takes less than an hour, it represents the culmination of weeks of preparation. Buyers receive their closing disclosure three days prior to review all financial details.
• Post-closing activities: After closing, funds are disbursed to various parties, deeds and mortgage documents are recorded with government offices, and title policies are issued.

While a cash purchase with a clear title might move more quickly, typical financed transactions require 30-45 days from contract to completion.

Myth #5: Buyers and Sellers Must Close at the Same Time (in the Same Place)

Your clients likely envision closing as everyone gathered around a conference table, signing documents and exchanging keys in a single event. This mental image creates the expectation that all parties must physically meet in the same location at the same time for a valid closing.

Help your clients understand that real estate closings offer much more flexibility:

• Split closings: Buyers and sellers can sign their respective documents at different times, in different locations, and even on different days, accommodating varied schedules and circumstances.
• Mail-away closings: For clients who have relocated, documents can be sent to their location, signed in front of a notary, and returned to the closing company.
• Travel closings: For clients with health or mobility issues, a closing agent can bring documents to them, whether at a hospital, nursing home, or other location.
• Staggered appointments: When buyers and sellers prefer not to meet—such as in contentious transactions—one party can complete their portion in the morning while the other arrives later.

Remind clients that most title companies will arrange a traditional closing with all parties present unless specifically requested otherwise. Knowing these options lets your clients choose a closing process that best fits their unique circumstances, often reducing stress and logistical challenges.

Myth #6: Closing Costs are a Fixed Percentage of the Purchase Price

Your clients may believe closing costs can be calculated simply as 2-5% of the home's purchase price, a misconception reinforced by online calculators and general guidelines. Help them understand that closing costs are much more nuanced.

Some expenses remain relatively constant regardless of purchase price—recording fees, title search costs, and settlement services typically don't vary much between a $200,000 condo and a $600,000 house. Other costs, like transfer taxes and title insurance premiums, do scale with property value, though not always proportionally.

Location significantly impacts closing costs. Identical properties in different counties or states can have substantially different closing costs due to varying tax rates and recording fees. The mortgage type also affects which fees apply.

Instead of relying on percentage estimates, advise your clients to request a loan estimate from their lender and consult with their title company for an accurate breakdown of their specific closing costs.

Myth #7: You Can Bring a Personal Check for Closing Funds

Many clients often assume they can simply write a personal check at closing for their down payment and closing costs. Prepare them by explaining that personal checks are rarely accepted except for very small amounts.

Personal checks aren't typically accepted because they take days to clear and could potentially bounce, delaying the transaction and preventing funds from being disbursed to sellers, lenders, and other parties. Instead, clients need to provide "good funds" through cashier's checks, certified checks, or wire transfers for amounts above the title company's threshold (usually a few thousand dollars).

If your clients choose to wire funds, stress the importance of verifying wire instructions by calling the title company directly using a number they've independently verified.

Advise clients to confirm the exact amount needed and acceptable payment methods with the title company at least one day before closing to avoid any last-minute complications that could delay their home purchase.

Myth #8: All Closing Delays are Preventable

Clients often believe that if everyone does their job correctly, closing will happen exactly as scheduled. When delays occur, they may assume someone dropped the ball or failed to prepare adequately.

Help them understand that while proper preparation and communication minimize many potential delays, some factors remain beyond anyone's control—like the difference between planning around routine traffic versus encountering an unexpected multi-car accident that shuts down all routes.

Some unpredictable challenges include:

• Title issues requiring extensive research, like discovering undisclosed heirs
• Appraisals coming in lower than expected, necessitating renegotiation
• Lenders imposing last-minute underwriting requirements
• External circumstances like severe weather events, sudden illness, or technology failures

Encourage clients to build some flexibility into their timeline and understand that real estate transactions involve numerous moving parts. Explain that when everyone communicates openly about issues as they arise, even unavoidable delays can be managed with minimal stress.

Remember that an educated client is typically a more satisfied client. Taking time to explain the realities of the closing process helps establish trust and positions you as a knowledgeable guide through what can be a complex transaction.

Understanding the realities behind these common real estate closing myths helps you guide your clients through transactions with realistic expectations. While the closing process has standard elements, each transaction is unique, with its own timeline and requirements. Your role as an informed advisor who can separate fact from fiction adds tremendous value to the client.

At South Oak Title and Closing, we're committed to helping you educate your clients about the closing process and ensure that closings are smooth, transparent, and as predictable as possible, even when unexpected challenges arise.

Have questions about these myths or want to discuss a specific client situation? We're here to partner with you. Contact your local South Oak office today, or order a title and schedule a closing.