Here are the typical steps that an escrow, closing or settlement officer takes to finalize a real estate transaction. These can vary by state.
- The terms of the sale are outlined in a contract (purchase agreement), which the settlement officer (a title or escrow agent) will review for accuracy, then follow to the letter.A file is set up for your closing with an assigned number that you should always have handy.If a deposit or earnest money is required, the settlement agent deposits the funds in an account until the closing is complete. (If it’s a large sum, ask that the money be deposited in an interest-bearing account.)
- In California, the escrow or settlement officer orders a preliminary report, which addresses the property’s ownership and lists any outstanding debts (liens), judgments or other title defects that could stand in the way of the sale, so that the buyer, seller and others involved in the transaction can resolve any issues early in the process. This can vary in other states.
- The closing agent makes sure that all this paperwork is consistent with the terms and conditions in the purchase agreement and gives copies to the parties involved.This is when you will work closely with the settlement agent or closing attorney to make sure you understand any issues and that the parties involved agree to solve any outstanding problems. Remember that the closing agent is a neutral party and does not represent the buyer or the seller. Your attorney can be helpful at this point, too.
- The closing agent also works with the lender to make sure that any loan issues are taken care of, for example, that a previous mortgage is paid off (if required) or that paperwork for the new owner to assume the current owner’s mortgage gets started (if necessary).
- The settlement agent makes sure that the building and pest inspections  get underway and coordinates any repairs and remedies that need to be addressed before the close.
- Next, the closing agent prepares a settlement statement, known as the HUD-1, which outlines the closing costs. The buyer’s debits and credits total must equal the seller’s total.Usually, you are required to bring a cashier’s check for the amount you owe to the closing when you sign your documents.
- Once all the conditions in the closing instructions have been met, it’s time to sign the prepared documents.These usually include, not just the HUD-1 statement, but the escrow instructions, loan documents, grant deed, deed of trust, a fire insurance requirement form, truth-in-lendingdisclosure statement, and bill of sale (if applicable) among others.
- After all the documents are signed, dated and checked for accuracy, the closing officer delivers them to the lender with the original loan documents. When approved, the lender authorizes the closing agent to file the grant deed and other required documents with the county recorder.
- Once the documents have been recorded, the settlement service provider sends out final closing statements, title and fire insurance policies, promissory notes and other necessary documents to the buyer, seller and lender. The agent disburses the money held in the escrow account according to the closing instructions.The closing is now complete!