Closing is the process by which a home sale becomes official. When the buyer makes an offer to purchase a property, they will sign a Purchase or Purchase and Sales Agreement with the Seller. This document will be the binding contract and agreement between the Buyer and the Seller and the provisions in that document will detail certain events which must take place before escrow can close.
A closing, or escrow, agent orchestrates the meeting, obtains signatures needed to transfer ownership of the property and collects and disburses the money. The closing date should be agreed upon and should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances. To set a reasonable closing date, both parties need to understand what their individual responsibilities are before closing can occur.
What Is the Escrow Period?
After the home selling contract has been signed, you’ll enter into the escrow period. This period is about 30 to 60 days long and provides time for several things to happen. Before entering the escrow period, the buyer will provide a deposit on the house, which will be held by a third party, usually an escrow company or the title company.
What Happens During the Escrow Period?
The escrow period can be a very busy time for both the buyer and the seller. Usually, the seller will be working on packing their things and preparing the property for the new owner. The buyer will be working on plenty of things, as well, including:
- Getting an appraisal – Usually, an appraisal will be required by the lender and will be done during the escrow period.
- Getting a home inspection – A certified home inspector will be hired to determine if there are any maintenance challenges a buyer will face with the property.
- Get homeowners insurance – Another requirement of the lender, the buyer will need to get home insurance during the escrow period.
- Negotiate repairs – After the home inspection has come back, the buyer will have the opportunity to negotiate to have repairs done or for a lower price to cover the cost of repairs. This usually happens if a major issue has been uncovered and is less likely with very minor repairs.
- Make arrangements to move in – The buyer will also use this time to pack up their belongings, hire a moving company, and get ready to move in.
What Is the Closing?
Closing a real estate sale is similar to closing the escrow. It simply means that the deal is completed and both parties have come to an agreement as to the selling price of the home and conditions of the sale.
Most likely, the sales contract contains a closing date, which is when the final papers are signed and is the date the buyer becomes the owner of the home. For the closing to proceed, all issues regarding matters such as financing and insurance will need to have already been resolved.
This does not necessarily mean that the buyer can you move into the house on the closing date. The sales contract should state when the seller is to move out and the buyer is to take possession of the property. In most cases, the buyer takes possession at closing, but the parties can also negotiate alternative conditions, such as the seller remaining in the home for a period of time. This is typically the case if the seller is waiting to close on another home purchase or complete the construction of a new home.
Protections for the buyer may also be reflected in an escrow arrangement, such as money being held in escrow to be paid to the buyer if the seller remains in the home longer than agreed.
Who Controls the Closing Date for Escrow – the Buyer or the Seller?
Both the Buyer and the Seller will need to determine a closing date which seems reasonable and is agreed upon by both parties. The closing date should allow the buyer enough time to apply for and obtain a mortgage, and the seller will choose a closing date which allows ample time to find a new home or property.
The agreed upon closing date should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances, such as a probate situation, or other complications which may involve legal assistance.
In most cases, the buyer chooses a tentative closing date and makes it part of the offer. The contract usually states that closing will occur “on or about” that date. If the closing does not occur within a reasonable window, which generally means 30 days from the date noted in the contract, the buyer and seller must agree on a new closing date. If they are unable to, the sale falls out of contract and either party can cancel the sale.
To set a reasonable closing date, both parties need to understand what their individual responsibilities are before closing can occur. Make a list of the tasks you each must perform and then try to calculate a time limit for each of these tasks. The property inspection might show up minor defects which the seller may be required to repair, or major defects might become evident, in which case you and the seller may need to come to an agreement as to who will pay for these repairs. These types of events are not unexpected in a property purchase and should cause no delay in the closing, as long as they have been provided for ahead of time.
The buyer may request that the closing date be contingent upon the sale of their present home. This date may be rather arbitrary, but a tentative 30, 60 or 90 day closing date could be set and when the actual closing date can be set, then an addendum to your purchase contract can be drawn and signed by both buyer and the seller. In this case, you would want to be sure to notify your escrow or closing officer of any changes in the date for closing.
The lender may also have an important role in setting the closing date. If the loan will take longer than traditionally expected due to additional lender requirements, this will most definitely affect the timeline but should not cancel the deal in most cases. To avoid any unnecessary delay in closing by a lender, you might want to consider getting “pre-qualified” by a lender and asking them if they see anything unusual in your credit which could hold up your loan.
Additionally, the closing agent may have a role in controlling the closing day. Check with the escrow officer to get an idea of how long it will take to issue the title reports and how long it will take to prepare the closing documents.
Schedule your closing as soon as possible in the transaction, since escrow officers often are busier on some days than others and you would want to be sure to reserve your time and day. When scheduling your closing with the title or escrow company, let them know that you want ample time to go over and review all the paperwork.
When an attorney is involved in the transaction, whether representing the Buyer or the Seller, normally the attorney will explain each provision in detail. Keep in mind that the escrow officer or closing agent is a neutral third party only. The title company cannot give legal advice or interpret documents for you. The closing officer can explain each item and review how the numbers were calculated, but for any legal opinions, you will want to consult with your attorney.
What Happens at Citrus Heritage Escrow?
During the escrow period, our title department begins researching and examining all historical records pertaining to the subject property. Barring any unusual circumstances, a commitment for title insurance is issued, indicating a clear title or listing any items which must be cleared prior to closing. The commitment is sent to you for review.
Your escrow officer follows instructions on your contract, coordinates deadlines, and gathers all necessary paperwork. For example, written requests for payoff information (called “demands”) are sent to the Seller’s mortgage company and any other lien holders.
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