Escrow and closing are part of the real estate transaction process. Once you've accepted an offer on your property, escrow is opened to continue the transaction on through to the closing.
During the escrow process several items of business will need to be completed before the close. These typically include: the financing contingency, appraisal, inspections, title search, a final buyer walk through and possibly several other items.
What exactly is an escrow?
The buyer and seller establish terms and conditions for the transfer of ownership of a particular property. These terms and conditions are given to a neutral third party known as the escrow holder (an escrow company). An escrow officer is assigned to the transaction and they have the responsibility of seeing that these terms of the escrow are carried out. The escrow is an independent third party ? the vehicle by which the interest of all parties to the transaction are protected.
How does the escrow process work?
The escrow officer takes instructions based on the terms of your Purchase Agreement and the lender?s requirements. The escrow officer can hold inspection reports and bills for work performed as required by the Purchase Agreement. Other elements of the escrow include, hazard and title insurance, and the grant deed from the seller to the buyer. Escrow cannot be completed until these have been satisfied and all parties have signed escrow documents.
How long is an escrow?
The length of an escrow is determined by the terms of the Purchase Agreement and can range from a few days to several months. The average length of an escrow is usually 45 days.
- The Financing: You?ll most likely want a buyer with a pre-approval letter accompanying their offer. The financing contingency is the most common of the contingencies that is not met during the escrow process.
- The Appraisal: During the escrow period the lending institution that the buyer is using will require an appraisal to be done on the property. The appraisal is an estimate detailing the properties value based on various criteria at a given point in time. An appraisal of your homes value today may differ from the value sometime in the future.
- The Title search: A title search is a check of public title records to ascertain that the seller is the legal owner and that there are no claims or liens against the property. A lending institution will require a title search be done before it?s able to issue a loan.
- The Inspection: The physical inspection is a n examination of a home's exterior, foundation, framing, plumbing, electrical system, heating, air conditioning, fireplace, kitchen, bathroom, roofing and interior. It's an overall general inspection which in its findings may call for additional more specific inspections to be performed by specialists on chimneys, geology, mold etc. All of their findings will be summarized in an inspection report.
- The Final Walk Through: Before the closing, the buyer is entitled to a final walk-through of the property to inspect that all/any of the repairs requested and items requested are present and complete before signing their closing documents.
How does the closing process work?
The close of escrow consists of three steps: reviewing, signing and exchanging documents; filing of documents and the disbursement of funds.
- Reviewing, signing and exchanging documents : This is when you review & sign the closing documents.
- Filing of closing documents: The escrow officer notarizes and submits all of the paperwork to the appropriate parties involved; the lending institution and government agencies.
- Disbursement of Funds: The escrow officer authorizes the funds of the transaction to be sent to appropriate parties according to the instructions of the transaction.
How is the buyers deed recorded?
The buyer?s new deed gets recorded once the escrow officer sends it to the county registrars office. The new buyer receives a copy of the actual recorded deed in the mail in approximately several weeks after the registrar office files the paperwork.