Closing & Finance

Closing is where every other topic in this exam converges — the contract, the financing, the disclosures, and the deed all come together on one day.

What happens at closing

At a Texas closing, the buyer and seller generally sign the closing documents, funds are disbursed, and the deed is executed and delivered — with recording following shortly after to make the transfer part of the public record.

Why deeds get recorded

A deed is recorded with the county primarily to give constructive notice of the transfer to the rest of the world — protecting the buyer's ownership against later claims and putting future title searches on notice of who actually owns the property. Recording isn't what makes the deed valid between buyer and seller (delivery and acceptance already did that); it's what protects that ownership against everyone else.

Why a survey matters

A property survey is often obtained before closing to confirm the property's actual boundaries, identify encroachments, and reveal easements that might not be obvious from the deed's legal description alone. Skipping it doesn't just risk paperwork trouble — it risks discovering a fence or structure sits on the wrong side of the property line after the deal has already closed.

Proration at closing

Property taxes for the current year are typically prorated between buyer and seller at closing — each side pays their share based on how much of the year they actually owned the property, calculated from the closing date.

Title insurance — two separate policies

Owner's title policy

Protects the buyer's own equity against a title defect that existed before the purchase but wasn't caught in the title search — commonly paid for at closing, often by the seller by local custom, though who pays is negotiable.

Lender's title policy

Protects the lender's security interest in the property, generally required by the lender as a condition of the loan, and generally paid for by the buyer.

These are two separate policies covering two separate interests — a lender's policy existing doesn't mean the buyer's own equity is protected, which is exactly why an owner's policy is worth having even though it's often optional rather than required. Both are typically a one-time premium paid at closing, unlike a hazard (homeowner's) insurance policy, which recurs annually for as long as the owner holds the property.

The Closing Disclosure

For most residential mortgage transactions, federal law (RESPA and TILA together, implemented through the TILA-RESPA Integrated Disclosure rule) requires the lender to provide the borrower a Closing Disclosure detailing final loan terms and closing costs, generally at least three business days before closing — giving the borrower a real window to review the actual numbers against what was originally estimated, rather than seeing final costs for the first time at the closing table itself.

General Warranty Deed vs. Quitclaim Deed