3.3 Closing Procedures
Key Takeaways
- Closings in North Dakota are commonly handled by title companies, attorneys, or escrow agents
- A clear, marketable title is established through a title search, abstract or commitment, and resolution of defects
- TRID requires the Closing Disclosure at least three business days before consummation, and certain changes restart the 3-day clock
- Property taxes and other recurring items are prorated, and North Dakota taxes are often paid in arrears
- Title transfers when the deed is delivered and accepted; recording gives notice to the world
The closing (also called settlement) is the final step where ownership passes from seller to buyer and funds are disbursed. North Dakota closings are typically table closings or escrow closings coordinated by a neutral third party.
Who Handles the Closing
| Closing Agent | Role |
|---|---|
| Title company | Most common; handles title search, escrow, and closing |
| Attorney | May represent a party or conduct the closing |
| Escrow agent | Neutral third party holding funds and documents |
Whoever closes the transaction must remain neutral as to the escrow function and follow the contract's instructions for disbursement.
Pre-Closing: Establishing Marketable Title
Before closing, the parties confirm the seller can convey marketable title — title free of undisclosed defects that a reasonable buyer would accept.
| Step | Purpose |
|---|---|
| Title search | Examine public records for the chain of title |
| Abstract / commitment | Summarize recorded documents; issue a preliminary title report |
| Clear defects | Resolve liens, gaps, or encumbrances before closing |
Document preparation runs in parallel: the deed (transfers ownership), mortgage or deed of trust (secures the loan), promissory note (the borrower's promise to repay), Closing Disclosure (itemizes costs), and various affidavits.
TRID and the Closing Disclosure
For most residential mortgage loans, the federal TRID rule (TILA-RESPA Integrated Disclosure) governs timing.
| Requirement | Detail |
|---|---|
| Closing Disclosure timing | Must reach the borrower at least 3 business days before consummation |
| Who provides it | The lender |
| Triggering re-disclosure | A changed APR (beyond tolerance), a prepayment penalty added, or a change in loan product restarts the 3-day clock |
| Routine changes | Most minor changes do not restart the clock |
Exam point: The headline TRID number is the 3-business-day advance delivery of the Closing Disclosure. Only a few significant changes restart it.
Prorations
Recurring costs are prorated so each party pays only for the period they own the property.
| Item | Basis |
|---|---|
| Property taxes | Current tax year |
| Insurance | If the buyer assumes the policy |
| HOA dues | Assessment period |
| Rent | If the property is leased |
Two common methods: the 365-day (banker's-day = annual/365) and the 30-day month (statutory year = monthly/30). The contract or local custom dictates which to use, and computation is a national-portion math skill that can appear with a North Dakota tax twist.
North Dakota note: Property is assessed as of the lien date and taxes are commonly paid in arrears, which affects whether the seller credits the buyer at closing for the period the seller owned but had not yet paid.
Title Insurance
| Policy | Protects |
|---|---|
| Owner's policy | The buyer against covered title defects |
| Lender's policy | The lender's mortgage interest |
| Typically Covered | Typically Excluded |
|---|---|
| Unknown liens, forgery | Defects the buyer already knew about |
| Undisclosed heirs | Government actions (zoning, eminent domain) |
| Recording errors | Survey/boundary issues (without endorsement) |
Title insurance is a one-time premium paid at closing that protects against defects existing before the policy date — unlike hazard insurance, which covers future events. Who pays for the owner's policy (buyer or seller) is negotiable and often set by local custom.
Closing Costs and the Day of Closing
| Typical Buyer Costs | Typical Seller Costs |
|---|---|
| Loan origination, appraisal, credit report | Real estate commission |
| Lender's (and often owner's) title insurance | Payoff of existing mortgage |
| Recording fees | Deed preparation |
| Inspection fees | Seller's share of prorations |
Closing-day sequence: (1) final walkthrough; (2) review and sign documents; (3) funds delivered to escrow; (4) the deed is recorded with the county recorder; (5) funds are disbursed; (6) keys/possession transfer to the buyer.
Key principle: Title passes when the deed is delivered and accepted, not necessarily at recording. Recording protects the buyer by giving constructive notice to the world. Expect a state-exam question that tests this delivery-and-acceptance rule against the assumption that recording is what transfers ownership.
Settlement Statements and Debits/Credits
At closing, each party receives a settlement statement showing debits (amounts owed) and credits (amounts received). The purchase price is a debit to the buyer and a credit to the seller; the buyer's earnest money and loan proceeds are credits to the buyer; the seller's mortgage payoff is a debit to the seller. Prorated taxes appear as a debit to one party and a matching credit to the other depending on who has already paid and who benefits from the period.
| Entry | Buyer | Seller |
|---|---|---|
| Purchase price | Debit | Credit |
| Earnest money already paid | Credit | — |
| New loan proceeds | Credit | — |
| Existing loan payoff | — | Debit |
| Commission | — | Debit |
Exam tip: A prorated item is always one party's debit and the other party's credit for the same amount — the numbers must balance.
Funding, Recording, and Gap Risk
North Dakota uses lien-theory mortgages, and most residential closings fund and record promptly. Between signing and recording there is a brief "gap" during which a competing claim could theoretically record first; the title company's commitment and gap coverage protect the parties. The buyer should confirm the deed is actually recorded with the county recorder, because an unrecorded deed — while still effective between the parties once delivered and accepted — leaves the buyer exposed to a later good-faith purchaser who records first.
Exam tip: Recording is about priority and notice, not the transfer of title itself.
How many business days before closing must the Closing Disclosure be provided for TRID-covered loans?
When does title to property transfer in North Dakota?
Which type of title insurance protects the buyer against defects in title?