Escrow & Closing

Opening the Escrow:

After the buyer and seller agree to terms of a sale, the sale goes into escrow, which can take several weeks (30-45 days) to reach closing. Escrow can be opened by the buyer or the seller's real estate agent. The escrow agent and their company act as a neutral third party for serving as custodian for funds and documents, providing a clearing house for payment of demands and performing clerical details for the closing.

What the Escrow Company does:

When the escrow is opened an order for a preliminary report/commitment is placed with the title company which shows ownership of a parcel of land and recorded matters that are relative to the property. Then a plan is set for the necessary action and documents required, such as demands for satisfaction of liens and documents for recording instructions and requirements of the new lender. In most areas buyers and sellers instructions are prepared for signature from the information gathered. The items on the following page represent a cross section of all that an escrow holder does during the escrow process.

The Escrow Holder:

-Prepares escrow instructions as directed by the parties involved.
-Requests a preliminary report.
-Orders a statement of identity (information) on buyer and seller.
-Orders demands or beneficiary statements at client's request.
-Complies with lender's requirements specified in the escrow agreement.
-Receives bills from termite, roof, appliance, inspection and home warranty companies.
-At the direction of the client, receives purchase funds from client.
-Prepares or secures the deed or other documents.
-Prorates taxes, interest, insurance and rents according to instructions.
-Secures release of contingencies/conditions as imposed on any particular escrow.
-Records deeds and any other documents as instructed.
-Closes escrow when all the instructions of buyer and seller have been carried out.
-Disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
-Collects all outstanding fees (i.e. title insurance premiums, real estate commissions, inspection charges).
-Prepares final statements for the parties accounting for the disposition of all funds deposited in escrow.

Escrow Instructions and Your Closing:

When all the title and financial requirements are met and instructions from all parties can be fully complied with, the escrow is ready to close. Then the financial settlement takes place, the documents are recorded and the title insurance policy is issued. Escrow instructions define all conditions that must occur before the transaction can be finalized and a grant deed may be recorded. A grant deed legally transfers the property title to the new owner.

Your escrow officer or real estate agent will contact both the buyer and seller for an appointment to sign your escrow instructions and grant deed. The appointment should probably take anywhere from 30-45 minutes. You will be informed of the amount you will need to pay or will receive, depending on whether you are buying or selling. Bring a legal form of identification with you such as current driver's license, passport or ID card (military or state). You will also need to bring the closing payment if you are the buyer. The seller's closing costs will be deducted from their payment.

If you are the buyer you will be informed about the disbursement of keys. If you are the seller, in some cases, the escrow holder will be instructed to hold funds in escrow to pay off obligations that may not be completed until after the escrow closes. Upon receipt of the proper documentation and releases the escrow officer will disburse the reserved funds including the seller's payment.

Reminders:

-If you transfer funds to another escrow or wire transfer, fund arrangements must be made with the escrow agent/holder.
-If you use a Power of Attorney make arrangements as early as possible.
-If the funds deposited in escrow are insufficient for closing you will need to bring a cashier's check or certified check for the remainder.
-Due to the natural disasters in any State, shop for homeowners or fire insurance as soon as your offer is accepted.
-Your lender continues to accrue interest to the date that they post your loan as being paid in full.
-After your escrow agent/holder sends your payoff check to your existing lender you can expect to get your impound account back direct from your lender within 30-60 days.
-If you are selling do not cancel your insurance until you have received your sales proceeds.
-Sellers are required to have their gross proceeds from the sale reports on the IRS 1099 form.

Taking Ownership:

It is now time for you to take ownership of your new home. You should have already received your homeowners and flood/fire insurance policies. You are now ready to move!

Article provided by Old Republic.