When people talk about a real estate purchase, they sometimes use the terms “signing” and “closing” interchangeably in reference to the event when the buyers sign documents with Escrow. However, there are several events that take place between the buyer’s signing appointment and the actual closing of the real estate transaction.
Closing is officially defined in the state-wide purchase and sale agreement as “the date on which all documents are recorded and the sale proceeds are available to the Seller.” That date is almost NEVER the day they sign papers. Closing usually occurs the day after documents are signed unless the signing happens late on a Friday and the recording office is closed until the following Monday. In that case it can be several days from signing before the closing occurs. When legal holidays occur in the midst of that process, it can delay the closing even further. The point is the signing day is probably NOT the closing day.
What is Escrow?
Escrow refers to a third-party service that is part of every home purchase. When a buyer and seller initially arrive at a purchase agreement, they select a neutral third party to act as the escrow agent. The escrow agent collects a deposit from the buyer that is equal to a small percentage of the sale price. This deposit is known as “earnest money”. In exchange, the seller takes the property listing off the market. Until the final exchange is completed, both the seller’s property and the buyer’s deposit are said to be in escrow.
Escrow accounts are a part of the mortgage process homebuyers typically cannot avoid. With mortgages, home buyers typically pay a little extra into an escrow account every month, along with their home loan payments.
While a mortgage holder (most typically a bank) collects the principal and interest payments each month, they also can collect homeowner’s insurance payments and property taxes. They will then pay those bills when they come due. They do this because when you borrow money from a lender to finance your home purchase, the property becomes the collateral for your loan. Your lender needs to know that the property is adequately insured so that it can be repaired or replaced if damaged. Likewise, they want to prevent a tax lien being placed on the property if you neglect to pay taxes.
Your Signing Appointment
At your signing appointment, you will be presented with all final documents requiring signatures. You will need to have with you any required funds to close as well as an acceptable form of identification for notarization. Check with your Escrow Officer for complete details and always be sure to confirm wire instructions directly with your Escrow Officer before completing any transfer.
Signing of Documents
Most of the documents related to transfer of ownership of the property must be signed by the seller and delivered to the buyer. It is important to review these for accuracy and completeness. With many state and local variations, the main purchase documents in your home purchase are likely to include:
- The Deed: This document transfers the property from the seller to the buyer. State law dictates its form and language, but you can choose the form of ownership in which you take title: individually, in trust, in joint tenancy or in other tenancies. The deed is given to the county recorder of deeds to record, and made public. Recording your deed puts you in the property’s chain of title so that anyone looking at the county records can see that you took your title from the prior rightful owner, and therefore own the property.
- The Affidavit of Title or Seller’s Affidavit: This document is provided by the seller of a piece of property that explicitly states the status of potential legal issues involving the property or the seller. The affidavit is a sworn statement of fact that specifies the seller of a property holds the title to it. In other words, it’s proof that the seller owns the property. It also attests that certain other facts about the property are correct—as sworn to by the seller and duly notarized.
- Transfer Tax Declarations: Many states, counties, and municipal governments charge real property transfer taxes and require the buyer and seller to sign declarations disclosing the purchase price and calculating the tax.
Lender Reviews Documents & Funds the Loan
Once the loan documents have been signed, the escrow officer delivers them back to the lender for review either by email, fax or physical delivery. Once the Lender has completed their review of the signed Loan Documents, and accompanying items provided by the Escrow Officer during the “packaging docs” process, they will issue what is known as the “Funding Condition List”. Upon receipt of the wire from the lender, the escrow officer is authorized to send the transfer documents to the county for recording. The time frame for review is normally 24 to 48 hours.
An excise tax is a tax on the transfer of ownership from the seller to the buyer paid at closing. The tax amount is based on the sale price of the home and varies by state and local government. It’s paid by the seller to the escrow agent or the attorney responsible for closing the deal, who then pays it to the government. Not exclusive to real estate, excise taxes are paid on most goods produced within a country.
Recording is Authorized
Once recording is authorized by the lender, and all funds have been received, documents are either electronically recorded or hand-carried to the county recorder’s office by the title insurance company. The Warranty Deed is recorded first, showing the transfer of the property to the buyer, with the Deed of Trust recorded next. Recording the Deed of Trust just after the Deed insures the lender’s first lien position on the property.
Closed and Recorded
Recording numbers are the unique numbers given by the county recorder’s office to a properly executed legal document thereby making it part of the public record. In other words, when we have recording numbers, the buyer is “on record” as holding title to the property.
Signing the loan and Title documents is preferably scheduled two days before the close date to give a “cushion” day to send the documents back to underwriting for review. You will need to bring identification and a cashier’s check for your closing costs and any other funds needed. You will want to talk to the Escrow officer before for details on wiring funds to and account and actual fund amounts.
If you are fortunate enough to be paying cash, then signing can be done as soon as the Title Company does their search and prepares the documents, usually around two weeks. The documents are few to sign and can be done in less than 15 minutes.
Typically the only people at the signing are the Buyers, Sellers, the Escrow officer, Loan officer, and the Real Estate Agent. Signings for the seller run around 30 minutes and for the buyer can take longer depending on the loan. One hour is more than plenty of time to sign.
On the closing date, underwriting has approved the loan and they release the funds to pay for your home. This is the day that you typically get possession if you are the buyer or need to be out of the house if you are the seller.
When the transaction is “on record” with the county, the ownership of the property has been officially transferred to the buyer and funds are disbursed to the seller. Depending on the specified possession date agreed to within the purchase agreement, the new owner may then receive the keys to their new property and take possession.
Why Choose Citrus Heritage Escrow?
When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you’ve gained the maximum benefit from your home sale or purchase.
Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200