The Real Estate Closing Process

The Escrow Closing or Real Estate Closing Process is not as complicated as it seems, with a little help anyone can understand and feel comfortable with the process.

The escrow closing process follows certain steps in a certain order, once you understand these steps, the process becomes clear. Several of the steps are part of every closing; others are optional depending on the circumstances.

Real Estate Contract

The Real Estate Closing process begins when you make an offer by signing a purchase contract, and the offer is accepted by the seller. When this step is completed several people get involved in your closing.
The Title Company begins to research the title of the property. An appraiser and surveyor may also start working on your closing. These happen in the background, all preparing for the signing or closing.

Title Commitment Review

After signing the Purchase Contract, the title company will prepare a Title Commitment. The Title Commitment shows any liens, judgments and other problem with the real estate title or ownership.

It is also a commitment to insure the property in your name at closing, subject to any terms contained in the Title Commitment. Review it carefully and call the title company with any questions.

Disclosures Review

Before closing, the seller is required to make disclosures to the buyer. These disclosures vary from state to state but include any leases that may be on the property as well as other things the seller is aware of.

If there are building on the property the disclosures should also include any problems or required repairs on the buildings.

If the disclosures show significant problems you have a certain amount of time to cancel the deal. The exact amount of time you have to cancel is spelled out in the purchase contract.

Appraisal

An appraisal is performed by a licensed appraiser, who uses recent land sales, to estimate the market value of your land.

If you requested an appraisal on the property, you should receive it before signing. If you do order an appraisal, the purchase contract should be conditioned on the property appraising for at least the purchase price. The appraisal is optional.

Land Survey

A Survey is often part of the real estate closing. The Purpose of a real estate survey is to mark the property boundaries, and map them in relation to the surrounding properties.

If there isn’t an existing survey on the property, and the boundaries are not marked, you need a survey.
Surveys are often required when you build a house on the property. If you plan on building in the future, this is good time to get a survey as the seller may pay all or part of the cost.

Property Inspection

The inspection is your last chance to look at the land again before you buy. This is usually scheduled just before signing.

Depending on what you are buying this could be very important. If you are buying land only, it may be less important, but if you are buying land with buildings, equipment, etc., this is the time to make sure everything is in working condition.

Real Estate Escrow Signing

Finally, it’s time to show up at the designated place to sign the Real Estate closing documents. This is sometimes referred to as the Escrow closing, although the entire process is part of the escrow closing. The previous steps may happen without your knowledge, and explains why it takes so long.

You will need to bring the required money to close. The amount should be certified funds (cashier’s check, wire, etc.).

This is the time to review all the papers and have any questions answered. This is your last chance to have any concerns addressed by the seller or realtor. Once you sign the papers the land and any problems are yours.

Document Recording

After signing, and after the money has been cleared, the title company will record the deed, transferring the property into your name.

If you borrowed money to purchase, the mortgage documents will also be recorded. After the recording is completed, you become the official owner.

Possession

Date of possession will be sometime after Recording. It is usually an agreed number of days after the recording, as agreed in the purchase contract.

Real Estate Closing Document

If you are involved in land you should understand the basics of real estate closing documents. They may not be exciting, but they are the method used to transfer land and secure loans on real estate.

Conveyance Documents

Conveyance documents are those that transfer (or convey) ownership of land. The most common is the Warranty Deed but there are others such as Special Warranty Deeds, Quit Claim Deeds, Grant, Bargain and Sale Deeds.

Each is different in certain ways but each transfers real estate from sellers to buyers. If buying you always want a Warranty Deed, as it transfer the land to you with the greatest guarantees from the seller.

Loan Closing Documents

Loan documents are used to secure the loan. The most common are the Trust Deed and Trust Deed Note. These two go together and are used by lenders nationwide.

Older loan documents include Mortgages and Real Estate contracts. Both are now rarely used, and are not recommended.

HUD 1 Settlement Statement

In buying or selling land the HUD-1 Settlement statement is the most important. All transaction costs are included on this closing statement. Although it looks similar, this is not a balance sheet nor does the bottom figure show the cost of the transaction.

The bottom lines show the amount of cash to be brought in or paid by the buyers and sellers.

Most Important Documents

There are many closing documents involved in a real estate closing. Many of these documents are to gather or disclose information. While all the documents are important a few are the most important and should be reviewed carefully.

These are the HUD1 Settlement Statement, the Warranty Deed and the Trust Deed Note. You should review all figures on the the HUD-1 to assure you are not overcharged and all items are paid correctly.

The Warranty Deed is reviewed to assure that your names are spelled correctly and vesting is correct. If there is a loan involved in the transaction review the Trust Deed Note to insure the terms of the loan are correct. This would include loan amount, interest rate, payments, and payments dates.

Recording Of Documents

After closing, several documents are recorded to transfer ownership to the new owner and secure the interest of the lender. These are the Warranty Deed and the Trust Deed (or Deed of Trust).
The original deed is mailed to the new owner after the closing, although the most important step is the recording at the local County Recorder’s Office.

Review Documents At Closing

A mistake often seen at closing is the buyer or seller rushing through the documents, instead of reviewing them and asking questions. While many of the documents are routine and less important, those listed above is reviewed carefully and you should ask any questions necessary to fully understand them.

Tag: recording