Closing The Sale:  Signing / Settlement / Escrow

 

It might seem as though once a sale agreement has been signed that the selling process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.

 

Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. We help you complete the transaction process by assisting with the many requirements found in a typical sale agreement and the details of the transaction process.

 

What’s in a Sale Agreement?

A sale agreement sets a purchase price for the home and a series of terms and conditions. For instance:

  • Contracts routinely depend on the ability of a buyer to obtain financing and/or sell their current home, which is why most sellers prefer buyers with mortgage pre-approval letters.
  • Most transactions involve a home inspection, or a physical review of the home by a trained and independent observer on behalf of the buyer.
  • Lenders will establish numerous conditions before granting a loan. They will at least want a title exam, title insurance to protect against title errors and an appraisal to assure that the home has sufficient value to secure the loan.

 

When Should You Close?

With online transaction management now available, closings can occur within a couple of weeks in some areas - at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.

 

While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it's possible that the buyer will no longer be able to afford the home and thus the deal may fall through.  And you don't want to wait that long anyway :-) The result of these considerations is that most homes close 30 to 45 days after a sale agreement has been signed.

 

What is Escrow?

Escrow is a licensed and bonded fee service company that acts as the closing agent for the transaction.  They receive and hold the buyer’s earnest money, order and check title, identify any liens that have to be paid to clear title, prepare the closing documents, get the signatures and checks, orchestrate the transfer of funds, and submit the mortgage and title documents to the county recorders office.

 

What Happens during Closing?

“Closing” usually has two steps.  First is a brief meeting at the escrow office to sign the paperwork needed to complete the legal documents for the transaction and to set up the required funds transfers. All necessary papers have been prepared by the closing agents(escrow), title companies, lenders and lawyers. This paperwork reflects the purchase and sale agreement and allows all parties in the transaction to verify their interests. The signing meetings at escrow are generally scheduled a day or two before the closing date, and are usually scheduled separately for the convenience of the buyer and the seller. 

 

At the signing, or preferably the day before, escrow will provide a settlement document called the HUD-1, which details all the items of expense and payment that are being done in the transaction, the net amount that the buyer has to bring a check for, and the net proceeds that the seller will receive after closing.

  

The second and final closing step is the Closing itself:

  • The buyer pays the balance due on down payment and fees into escrow
  • The lender transfers the mortgage funds into escrow 
  • From the amount credited to the seller, the closing agent subtracts money to pay existing mortgage and other transaction costs.
  • Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
  • Transfer taxes are paid and other claims settled (including closing costs, liens, legal fees and adjustments).
  • Property title is transferred from seller to buyer.
  • The buyer receives the keys
  • You, the seller, receive the net proceeds – cash deposited to your account