What Happens at Closing
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Title and Escrow
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
As a Seller, you will be asked to sign documents as well, and among these will
- 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
- 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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