On Real Estate & More – March 2020

When people talk about a real estate transaction being “in escrow,” they often assume it is about to close. However, there are several events that normally take place after escrow is opened and before the actual closing of the real estate transaction. This article covers the details of the escrow process, especially the final items prior to closing.

After the buyer and seller agree to terms of a sale, the transaction goes into escrow, which can take several weeks (30-40 days or more) to reach closing. Escrow is opened with the title company by the buyer or the seller’s real estate agent, which includes providing a copy of all contract documents and depositing earnest money. The escrow officer acts as a neutral third party for maintaining all funds and documents, providing a clearing house for payments and performing clerical details for the closing.

When escrow is opened, an order for a preliminary report is placed with the title company, which shows ownership of a parcel of land and recorded items that are relative to the property. Then a plan is set for the necessary action and documents required, such as demands for satisfaction of liens, instructions for recording documents and requirements of the buyer’s lender if a loan is involved.

Additional sale terms and appropriate invoices from companies such as homeowner associations, home warranty companies, etc. are forwarded to the escrow officer.

For buyers who have applied for a loan, a Loan Estimate must be provided to the buyer no later than three business days after they submit a loan application (for most mortgages). The Loan Estimate provides information about key features, costs and risks of the loan.

In 2015, one aspect of the closing process changed. The Consumer Financial Protection Bureau created a Closing Disclosure (CD) to improve mortgage disclosure forms to make it easier for buyers to understand the terms of their loans and closing costs. The buyer must receive the Closing Disclosure (CD) at least three business days prior to the date the buyer is scheduled to sign the loan documents.

During the waiting period, the escrow company can prepare the necessary escrow and title transfer documents. After the required waiting period, the lender will then forward the documents for signature to the escrow company, so that the signing appointments can be scheduled.

The escrow officer or real estate agent(s) will contact the buyer and seller for an appointment to sign escrow instructions and supporting documents. A legal form of identification needs to be brought to the signing appointment, such as a current driver’s license or passport. At this time, you will normally be advised of the amount of money you will need to deposit and/or receive depending on if you are the buyer or seller (an Estimated Settlement Statement).

Once the loan documents have been signed, the escrow officer delivers them back to the lender for review. When the lender is satisfied that all required documents have been signed and all outstanding loan conditions have been met, the lender will notify escrow that they are ready to disburse the loan funds to escrow.

Funds are received from the lender and documents sent to the County Recorder for recording. At this time, the ownership of the property is transferred to the buyer. Based on the possession date in the purchase agreement, the new owner may take possession and proceeds are disbursed to the seller. Congratulations!