The Closing Process

In a real property purchase or sale transaction, an escrow is opened. The escrow officer receives the executed purchase contract and earnest money deposit and begins collecting and reviewing all required documents, including title insurance. Once the parties are ready to close, a settlement statement is prepared showing what funds are received, all costs required to be paid, and how funds are to be disbursed. All funds are held in an escrow account until closing. Loan documents, prepared by the lender, are executed.

During the course of escrow the escrow agent will order a preliminary title report. This report is based on a search of public records for existing deeds, liens, easements and other possible encumbrances on the real property. Each of these needs to either be approved or removed from title so the owner receives “clean title” at closing. If an existing mortgage is to be paid with loan proceeds, this will be paid by escrow as part of the closing process and will be clearly listed in the settlement statement. The settlement statement is required by law and is referred to as the CD/HUD1.

There is a lot that happens behind the scenes at the escrow office. Once the transaction has closed, the escrow officer forwards payment to any existing lender, pays all parties who have performed services in connection with the closing, pays out any net funds to the seller, and orders a final search of the title to the real property before recording all the documents needed to transfer title to the new owner’s name. These are post-closing items handled by our escrow department. Once the escrow documents are recorded, the final Owner Title Policy is ordered and reviewed.