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| A Closing (also referred to as "settlement" or "escrow" in many parts of the country) is the process whereby an impartial third party, such as an attorney, an escrow company or a title company, is entrusted with the job of seeing that the transfer of ownership from the Seller to the Buyer takes place according to the terms of the written contract agreed upon by all parties involved. |
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| The closing agent keeps or holds any funds or documents safely until all the details have been settled and disburses them to the proper parties at the proper time. At the actual time of the closing, whereby all the parties come together to sign their appropriate documents, the seller will be asked to provide clear title to the property and the buyer will be asked to provide the funds needed to close the sale. |
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| If there is a mortgage or loan involved, the closing of the mortgage also takes place at this time. Opening escrow or starting the closing process, simply involves visiting the office of any firm that handles closings, then handing over the deposit money and giving instructions for the transaction. |
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Anyone who is involved in the transaction may "open escrow." Generally, the real estate agent takes the initiative and opens the escrow. In for-sale-by-owner transactions, in which no agent is involved, either the buyer or the seller or both together may open escrow.
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| Either buyer or seller may set the closing date, both parties must agree to the date, and generally the buyer puts his request for a 30, 60 or 90 day escrow in the original purchase agreement. |
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| The seller may request a shorter or longer escrow, depending on his circumstances, and as long as the buyer agreed, that date will be set. Generally, a "financing contingency" is put into the offer to purchase in which the buyer is given a specified amount of time to obtain a mortgage. |
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Once the buyer has a firm commitment from a lender, the actual closing date can usually be set. Be sure, if you are the buyer, to set the closing date prior to the expiration of your lender's loan commitment or lock in date for your interest rate.
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| When you make an offer to purchase a property, you will sign a Purchase or Purchase and Sales Agreement with the Seller. This document will be the binding contract and agreement between you and the Seller and the provisions in that document will spell out certain events which must take place before your escrow can close. |
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Within the Purchase Agreement will be a provision for the scheduled "Date of Closing." A date is normally filled in when the offer to purchase is made by the buyer. Once your offer is presented to the seller, the seller may choose to change this date before accepting your offer. |
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| Both you and the Seller will come up with a closing date which seems reasonable. The closing date should allow you enough time to apply for and obtain a mortgage, if you will be getting a loan to help finance your purchase and the seller will choose a closing date which allows ample time to move out and find a new home or property. |
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| The closing date which is agreed upon should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances, such as one or more parties being out of town or out of the country, an estate or probate situation, or other complications which may involve legal assistance. |
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| To set a reasonable closing date, both parties need to understand what their individual responsibilities are before closing can occur. You and the Seller should list the tasks you each must perform and then try to calculate a time limit for each of these tasks. The Seller, for example, may find that there are liens or other encumbrances on the title of which he was not aware, and these "clouds" on the title will need to be cleared up before the title can be transferred. |
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The property inspection might show up minor defects which the Seller may be required to repair, or major defects might become evident, in which case you and the Seller may need to come to an agreement as to who will pay for these repairs. These types of events are not unexpected in a property purchase and should cause no delay in the closing, as long as they have been provided for ahead of time. Before setting the closing date, try to think of any situations which must take place before you go to closing. |
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| The Seller may request that the closing date be contingent upon the sale of his present home. This date may be rather arbitrary, but a tentative 30, 60 or 90 day closing date could be set and when the actual closing date can be set, then an addendum to your purchase contract can be drawn and signed by both you and the seller. In this case, you would want to be sure to notify your escrow or closing officer of any changes in the date for closing. |
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Keeping the escrow officer informed of exact dates is very important, as she will be prorating and calculating certain expenses and credits, such as interest, taxes, and insurance and these will be calculated right up until the day of closing.
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If any party needs to extend the closing date of the escrow, all parties must sign and agree to an Addendum or Extension to the original purchase agreement contract. Be careful that the extension does not interfere with the lender's obligation for a closing date.
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Generally, your closing costs will come out to between 4 and 5 percent of your purchase price. The closings costs will include title searches, government taxes, notary fees, loan fees, escrow fees, recording fees, reconveyance fees, prorations and sales commissions.
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| When you give your deposit to the real estate agent and the signed sales agreement has been signed by both the buyer and the seller, the agent may then "open" escrow. |
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If there is no real estate agent involved in your transaction, the escrow may be opened by either the buyer or the seller. When you first make your offer to purchase a property, you typically give a good faith deposit check. |
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| The real estate agent will deposit this money into their company "escrow account", to be held until the seller has signed the agreement and all the terms of the purchase have been mutually agreed upon. Escrow is not open until the good faith money is actually placed in the hands of an escrow agent. This may be a title company, an independent escrow company, an attorney, or any other authorized closing agent allowed in your state. |
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Upon depositing the buyer's deposit money with a closing agent, escrow may be considered to be "open" and a file number given for the escrow. An escrow officer or closing agent will be assigned to your account, and this person will follow your escrow all the way through the closing process. |
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| The escrow agent will be your main contact at the title or closing company. Any questions in regard to your title report, escrow money, obligations under the escrow, or progress reports should be directed to this person. Although there are many steps involved in processing your escrow and several different people working on your escrow, such as searching the title, preparing the title insurance policy, processing the loan documents, your contact at the title company will remain the escrow officer. |
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As a party to the escrow, you are entitled to call the escrow closing agent at any time to request information or explanations.
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| Prior to the actual closing day, there are several things you should do to be certain that your real estate transaction will close on time, and that everything will go smoothly. A day or two before closing, you should review your final closing statement or HUD-1 Statement, whichever is used in your area of the country. |
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| You should go over all the calculations and be certain that you are given credit for all your deposits and any other credits due to you from the seller or for other items agreed upon between buyer and seller. Go over all the lender and title and escrow fees, to be sure they are what you |
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| had been told and that you agree to them. Check the math calculations on the closing statement. Errors do occur. |
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Carefully review the preliminary report or the guarantee of title insurance, to verify the exact legal description of the property and any liens, encumbrances or other items which may have been discovered on the property. Be sure that all items are removed that you did not agree to. Verify that the title or escrow agent has your correct vesting, or the way you want to take title to the property. |
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| This is important because to correct a vesting on a deed later on is time consuming and can be avoided if care is taken when escrow is closed. |
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| Besides the paperwork which you must review and verify, you should re-inspect the property once again just prior to closing. Is everything the way you expect it to be? Have all the necessary repairs or other corrective work been done that were promised to you? This is important so that you don't arrive at your new house and find unexpected surprises. |
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The most important thing to remember is that before closing you want to be certain that all the conditions of the purchase contract have been met. You want to be sure that all directions given to the closing agent have been performed. Before signing your name to any closing documents, check and double check that everything is correct, interest rate, fees charged and condition of the property.
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Why the Right Closing Date Can Make a Difference
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A date is normally filled in when the offer to purchase is made by the buyer. Once your offer is presented to the seller, the seller may choose to change this date before accepting your offer. |
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| Both you and the Seller will come up with a closing date which seems reasonable. The closing date should allow you enough time to apply for and obtain a mortgage, if you will be getting a loan to help finance your purchase and the seller will choose a closing date which allows ample time to move out and find a new home or property. |
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| The closing date which is agreed upon should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances, such as one or more parties being out of town or out of the country, an estate or probate situation, or other complications which may involve legal assistance. |
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You can email us regarding your case or your questions to jhentzatty@comcast.net,
call us at (508) 966-2926 or Fax: (508) 966-2955
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