What Happens at Closing

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What Happens at Closing


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Once your escrow has taken its normal course, the loan documents have been prepared, any defects in the title have been cured, any termite or other structural issues have been resolved, you're ready to close escrow or prepare for "settlement." Depending on your local area, the close of escrow may be called "closing", "settlement" or "close of escrow," but whichever term is used, it is the time when all the final papers have been signed and the closing agent is ready to record the deed, mortgage, and other loan and closing documents and disburses the sale proceeds to the seller.

The escrow instructions you will be asked to sign may be bilateral, that is one set for both the buyer and the seller, or unilateral, as a separate set for the buyer and another set for the seller. In areas where bilateral escrow instructions are used, the instructions are generally drawn up and signed when escrow is first opened. In the case of unilateral escrow instructions, they are normally signed at the end of the escrow period. Be aware that once the escrow documents are signed, you could be subjected to penalties, even legal action, if you attempt to cancel for whatever reason. You will be wise to take the time to carefully read and review all the closing documents. Take them home if necessary and double-check for mathematical or clerical errors. If you are the buyer, pay particular attention to the loan documents. Do they contain a prepayment penalty? Is the interest rate correct? Is the lender impounding or collecting taxes and insurance from you each month? The papers which you will be asked to sign at closing time will vary according to your lender's requirements, and the type of loan you have arranged.

As a buyer obtaining a loan or mortgage, you will be asked to sign the following documents:

  • Escrow instructions
  • Original note and deed of trust or mortgage
  • Fire insurance request form
  • Regulation "Z"(disclosure statement) HUD 1 Settlement Statement
  • Lender's Escrow Instructions
  • Bill of Sale
  • Statement of Information

As a Seller, you will be asked to sign documents as well, and among these will be:

  • Escrow instructions
  • HUD 1 Settlement Statement
  • Grant or warranty deed
  • Bill of Sale
One common issue that can come up to delay closing is that one or the other party may be unavailable to attend or sign papers at the time of closing. This problem can be solved in several ways. A power of attorney can be executed to allow someone else to sign for the absent party, or the documents can be sent ahead of time to the other party and "pre-signed." Either solution is normally acceptable. Another common issue at closing is that the loan documents arrive in closing and they don't contain the same terms and conditions which the borrower had anticipated. This problem is solved by reviewing all the loan documents well ahead of closing and by staying in close contact with your escrow officer or title attorney, asking questions, and verifying that all the terms and conditions contained in the documents are what you expect them to be.

Once the documents are properly signed, your escrow agent will instruct the title company to record the deed, mortgage, deed of trust, deed of reconveyance, and any other pertinent documents that require recordation. She will deliver the "loan package" to the lender, which will include all the executed loan documents. Once the lender has these documents, they will release their loan proceeds to the escrow or title agent. Escrow is a kind of hand-to-hand business. "you give me this and I will give you that." The lender will exchange loan documents for loan proceeds and the seller will release the grant or warranty deed in exchange for his sale proceeds. The escrow officer or title attorney is the one who sees that all these exchanges of documents and money go smoothly.

Your escrow agent will release the monies that have been held in escrow, she/he will pay the holders of old loans, termite companies, real estate agents, if any, and so on, all according to the escrow instructions. Before releasing the sale proceeds to the seller, she/he will be certain the buyer's down payment check has cleared the bank. Many title and escrow companies require the buyer to bring a cashier's check or bank draft to the closing table, rather than a personal check. She/he cannot take the risk of releasing checks without being certain she has sufficient funds to cover them.

After closing, you will receive loan documents, deeds, and other recorded documents in the mail. Be certain to keep your escrow instructions and HUD 1 closing statement, as they will contain the final figures for your purchase or sale. If you have any questions or concerns after closing escrow, do not hesitate to call your escrow officer or title attorney. Just as during the escrow period, they can answer your questions and clear up any concerns which you may have.

Sandy Gadow is the author of All About Escrows and Real Estate Closings published by Escrow Publishing Company. A prominent authority on title and escrow, Sandy is also a licensed mortgage broker and member of the California Escrow Association and American Escrow.

The information is designed to provide accurate and authoritative information in regard to the subject matter covered. It is printed with the understanding that the author is not engaged in rendering legal or accounting service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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