Once your purchase agreement (“the offer”) has be accepted and signed by both you and the seller, generally the agent representing the seller selects an escrow holder and the Buyer’s earnest money deposit and agreement paperwork are submitted to the escrow holder. From this point, the escrow holder will follow the mutual written instructions of the Buyer and Seller, maintaining a neutral stance to ensure that neither party has an unfair advantage over the other. The escrow holder also follow the instructions of the Buyer’s new lender, the Seller’s existing lender, and both parties’ agents. The escrow holder ensures the transparency of the transaction, while carefully maintaining the privacy of the consumers.
What Is An Escrow?
The escrow is the process of having a neutral party manage the exchange of money for real property. The escrow holder is known as an escrow or settlement officer or agent. The Buyer deposits funds and the Seller deposits a deed with the escrow holder along with all of the other documents required to removed all “contingencies” (conditions and approvals) in the purchase agreement prior to closing.
Your escrow professional will:
- Open escrow and, if instructed to do so, deposit your good faith funds in a separate escrow account
- Order a title search to determine ownership and status of the subject real property
- Issue a preliminary report and begin the process of eliminating the title exceptions you and your lender are willing to take title subject to
- Request payoff information for the Seller’s loans, other liens, homeowner’s association fees, etc
- Prorate fees, such as real property taxes, per the purchase agreement, and prepare the settlement statement
- Set separate appointments allowing the Seller and you to sign documents
- Review documents ensuring all conditions and legal requirements are fulfilled; request funds from lender
- When all funds are deposited, record documents with the County Recorder’s Office to transfer the subject real property to you
- After the recordation is confirmed, close escrow and disburse funds, including Seller’s proceeds, loan payoffs, etc
- Prepare and send final documents to all parties involved.
What To Avoid During the Closing Process
Changing Jobs– A job change may result in your loan being denied, particularly if you are taking a lower-paying position or moving into a different field. Don’t think you’re safe because you’ve received approval earlier in the process, as the lender may call your employee to re-verify your employment just prior to funding the loan.
Switching Banks or Moving Your Money To Another Institution- After the lender has verified your funds at one or more institutions, the money should remain there until needed for the purchase.
Paying Off Existing Accounts– If you Loan Officer advises you to pay off certain bills in order to qualify for the loan, follow that advice. Otherwise, leave your accounts as they are until your escrow closes.
Making Any Large Purchases– A major purchase that requires a withdrawal from your verified funds or increases your debt can result in you not qualifying for the loan. A lender may check your credit or re-verify funds at the last minute, so avoid purchases that could impact your loan approval.
Get Your Keys
If the Buyer is obtaining a new loan, the Buyer’s signed loan documents will be returned to the lender for review. The escrow holder will ensure that all contract conditions have been met and will ask the lender to “fund the loan.” If Buyers loan documents are satisfactory, the lender will send the funds directly to the escrow holder. When the loan funds are received, the escrow holder will verify that all necessary funds are in. Escrow funds will be disbursed to the Seller and other appropriate payees. Then, you’ll receive the keys to your home thereafter. This is an exciting feeling and one that will be with you for a long time!