Published by: Daisy Gregg
You are almost there. All you need to do is sign on the dotted line. And deal with the closing and everything that can go along with it! Closing fees can be sneaky and new home buyers don’t always consider them. A good rule is to always make sure your client is aware of them and what they can cost. Often times they are unexpected or higher than the client thinks. They can be as much as 2-3% of sales price! They can impact the buying power and reduce your commission. And these facts are all true and the blog before this one had a quick cheat sheet on fees and who pays them, so check that out! I want to focus on who participates in closings. Below (from our Trusty Austin Title and a little help from Brian Laws from Independent Bank Mortgage) I found a quick guideline for participants in the closing process. These are not hard and fast rules since closing costs and certain participants can change in certain circumstances, so keep that in mind!
First off let’s discuss what Escrow is. Since many hear the name and obviously think of Gilmore Girls when TJ barges into Luke’s and yells “I am in Escrow!”, what? No, it's just me?? (But, seriously If you have no reference to this, please look it up!) Moving on… (This is straight from Austin Title):
an escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. This is where Austin Title becomes involved acting for the buyer, seller, and lender carrying out the instructions of all parties involved.
The neutral, third party simply carries out the instructions. Interesting!
Now what is Title Insurance (and yes you should get it):
It’s an insurance policy that protects owners and lenders against possible losses from claims against real property ownership. For the most part, the policy covers things that happened in the past (prior to close of escrow) that could affect the status of the property’s title.
They can help you if something unexpected happens during the buying or selling process.
Now to the good stuff! Who doesn't love some good bullet points! Below we have listed the participants in the Closing Process and what they can contribute to the closing.
- Tender a written offer to purchase (or accepts the Seller’s counter offer accompanied by a good faith deposit amount.)
- Applies for a new loan, completing all required forms and often prepaying certain fees such as credit report and appraisal costs.
- Approves and signs the escrow instructions and other related instruments required to complete the transaction.
- Approves the preliminary report and any property, disclosure or inspection reports called for by the purchase and sale agreement (Deposit Receipt).
- Approves and signs new loan documents and fulfills any remaining conditions contained in the contract, lender’s instructions and/or the escrow instructions.
- Deposits funds necessary to close the escrow. Approves any changes by signing amendments in the escrow instructions.
- Determines which hazard (fire) insurance agent to use to satisfy requirements of the lender.
- Accepts Buyer’s Offer to Purchase and initial good faith deposit to open escrow.
- Submits documents and information to the escrow holder, such as: addresses of lien holders, tax receipts, equipment warranties, home warranty contracts, any leases and/or rental agreements.
- Approves and signs the escrow instructions, grant deed and other related documents required to complete the transaction.
- Orders inspections, receives clearances and approves final reports and/or repairs to the property as required by the terms of the purchase and sale agreement (Deposit Receipt).
- Fulfills any remaining conditions specified in the contract and/or escrow instructions; approves the payoff demands and/or beneficiary’s statements.
- Approves any final changes by signing amendments to the escrow instructions or contract.
The Lender (When Applicable)
- Accepts the new loan application and other related documents from the Buyer(s) and begins the qualification process.
- Orders and reviews the property appraisal, credit report, verification of employment, verification of deposit(s), preliminary report and other related information.
- Submits the entire package to the loan committee and/or underwriters for approval. When approved, loan conditions and title insurance requirements are established.
- Informs Buyer(s) of loan approval terms, commitment expiration date and provides a good faith estimate of the closing costs.
- Deposits the new loan documents and instructions with the escrow holder for Buyer’s approval and signature.
- Reviews and approves the executed loan package and coordinates the loan funding with the escrow officer.
The Escrow Officer
- Receives an order for escrow and title services. Orders the preliminary report on the subject property.
- Acts as the impartial “stakeholder” or depository, in a fiduciary capacity.
- Prepares the escrow instructions and required documents in accordance with the terms of the sale.
- With authorization from the real estate agent or principal, orders demands on existing deeds of trust and liens or judgements, if any.
- Presents the documents, statements, loan package(s), estimated closing statements and other related documents to the principal(s) for approval and signature.
- Receives the proceeds of the loan(s) from the lender(s).
- Records the deed, deed of trust and other documents required to complete the transaction with the County Recorder and orders the title insurance policies.
- Closes the escrow by preparing the final settlement statements, disbursing the proceeds to the Seller, paying off the existing encumbrances and other obligations.
- Receives an order for title service.
- Examines the public records affecting the property and issues a preliminary report.
- Determines the requirements and documents to complete the transaction and advises the officer and/or agents.
- Reviews and approves the signed documents, and the order for title insurance, prior to the date.
- When authorized by the escrow officer, records signed documents with the County Recorder’s and issues the title insurance policies.
Thank you Austin Title!