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Tip 10. Close

Closing Agents/Escrow Holders

Closing is the successful completion of a real estate transaction, when funds are disbursed and title is transferred from seller to buyer. It involves signing loan documents, paying closing costs, and delivering the deed. Escrow is a type of closing in which documents and/or money are deposited with an escrow holder and released upon performance of certain conditions. Consider using an escrow, although you are not legally required to do so. Lenders usually require escrow as a condition of making a loan. Some states require escrow for the sale of houses only or in cases such as court sales. Check with lenders or escrow companies to determine whether escrow on your home is required by law. Because of the complexity of the process involved, having an escrow holder can do much to protect you when you sell your home.

Selection of an Escrow Holder

Depending on the area, escrow holders can include independent escrow companies, title insurance companies, escrow departments of lending institutions (banks, savings and loans, and so on), or any other party that has a legal right (such as power of attorney) to enter into contracts involving the property.

Title insurance companies issue policies that ensure the title to the house is free of liens (a charge on real property to pay some debt). The nature and extent of any liens depend on the type of policy purchased. In some states, a title insurance policy must be issued before you can close the sale of your property.

In some areas, title insurance companies act as escrow holders.

Title insurance companies often provide other services, usually without additional charge. They can answer questions and give explanations, provide information about houses comparable to yours that have recently sold in your area, and deliver important documents to city, county, and lenders' offices.

For more information please look at our Escrow & Title section.

Functions of Escrow Holder

Preparing escrow instructions

Preparing and assembling relevant documents

Obtaining signatures

Proceeding with title search by:

  • Requesting the title search.

  • Receiving and reviewing preliminary title report to determine what actions are necessary to conform to the condition of title required in the escrow instructions.

  • Requesting demand for payoff from lenders, if you desire to pay off existing loans.

  • Requesting an explanation of liens against the property as listed on the preliminary title report.

  • Analyzing taxes on the report to be sure terms are correct and conform to the escrow instructions.

  • Receiving demands from lenders.

  • Entering demands from lenders into the file.

Proceeding to process a new loan, if any, concurrently with the title search by:

  • Requesting or preparing a new loan application.

  • Obtaining a loan approval in the form of a loan commitment letter from the lender.

  • Examining approved loans to be sure that terms are correct and conform to escrow instructions.

  • Requesting loan documents.

Proceeding with a loan takeover (assumption), if any, concurrently with the title search and the processing of a new loan (if applicable) by:

  • Requesting from lenders beneficiary statements giving transfer terms and payment status for each loan.

  • Receiving and reviewing each beneficiary statement.

  • Entering each beneficiary statement into the file.

  • Reviewing each loan's transfer terms and payment status to determine whether approval is necessary to record.

Reviewing the file to determine that all:

  • Conditions have met.

  • Documents are drawn.

  • Documentation is correct.

  • Documents are available for signatures.

If the file is complete, proceeding by:

  • Calculating costs.

  • Requesting signatures on all unsigned documents.

Completing the closing by:

  • Sending documents to the title company.

  • Requesting and obtaining finds from the buyers.

  • Returning loan documents (usually the mortgage note, signed disclosure statements and instructions) to lender.

Finding the loan (requesting and obtaining loan funds from lender).

Requesting official entry of transactions, liens, satisfaction of mortgages, and reconveyances into the permanent record of a county.

Closing the file.

Preparing buyer's and seller's closing statements.

Disbursing distributing funds.

Completing the closing.

Sending final documents to all interested parties (seller, buyer and lender).

Preparing federal, state, and local tax documents (1099s, FIRPTAs, deed tax stamps, and so on).

After you select an escrow holder, open the escrow by following these steps:

  • Contact the escrow holder and give him or her all of the relevant information regarding the sale (such as property description, your and buyer contact infomration, purchase contract, loans currently on the property, loans buyers want to put on the property, vesting and conditions of the title.

  • Deposit the buyer's earnest money with the escrow holder, preferably in person or if necessary by certified mail.

  • Ask your escrow holder to inform you and the buyer what each of you should do and when you should do it.

  • Follow escrow holder instructions.

Congratulations! You sold your home by owner!

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