How does closing escrow work?

How Does Closing Escrow Work?

Closing escrow is the final step in a real estate transaction where all the necessary documents are signed, funds are transferred, and ownership of the property is officially transferred from the seller to the buyer. Here is how the process typically works:

1. **Opening Escrow**: Once the buyer and seller have agreed on a purchase price and signed a purchase agreement, the buyer will deposit earnest money into an escrow account. This indicates their intention to go through with the purchase.

2. **Title Search and Inspection**: The escrow officer will order a title search to ensure that the property title is clear of any liens or disputes. The buyer may also conduct a home inspection to identify any issues with the property.

3. **Mortgage Approval**: If the buyer is obtaining financing, they will need to secure a mortgage loan. The lender will require an appraisal of the property to determine its value.

4. **Signing Documents**: Once all conditions are met, the escrow officer will prepare the closing documents for both the buyer and seller to sign.

5. **Funds Transfer**: The buyer will need to provide the remaining funds for the purchase, including the down payment and closing costs, to the escrow account. The lender will also transfer the mortgage funds to the escrow account.

6. **Recording Ownership**: After all documents are signed and funds are transferred, the escrow officer will ensure that the deed is recorded with the county to officially transfer ownership of the property to the buyer.

7. **Distribution of Funds**: The escrow officer will disburse funds to the seller, pay off any existing liens or mortgages on the property, and distribute the remaining funds to the appropriate parties.

8. **Closing Statement**: The buyer and seller will receive a closing statement detailing all the fees and costs associated with the transaction.

9. **Transfer of Keys**: Once the transaction is complete, the buyer will receive the keys to the property and officially take possession.

10. **Escrow Closure**: The escrow is considered closed once all the documents are recorded, funds have been disbursed, and the keys have been transferred.

FAQs About Closing Escrow:

1. What is an escrow account?

An escrow account is a neutral third-party account where funds and documents are held during a real estate transaction.

2. Who chooses the escrow officer?

The escrow officer is typically chosen by the mutual agreement of the buyer and seller or their respective real estate agents.

3. What happens if there are issues with the title search?

If issues are found during the title search, the escrow officer will work to resolve them before the transaction can proceed.

4. What happens if the buyer’s mortgage is not approved?

If the buyer’s mortgage is not approved, the escrow may be cancelled, and the earnest money may be refunded to the buyer.

5. Can the buyer and seller sign documents separately?

Yes, the buyer and seller do not need to be present at the same time to sign documents. The escrow officer can facilitate this process.

6. How long does it take to close escrow?

The timeline for closing escrow can vary, but it typically takes 30-45 days from the time the purchase agreement is signed.

7. Can the buyer walk through the property before closing?

Yes, the buyer is typically allowed a final walk-through of the property before closing to ensure that everything is in order.

8. Who pays the closing costs?

Closing costs are typically split between the buyer and seller, but this can be negotiated as part of the purchase agreement.

9. What happens to the earnest money deposit?

The earnest money deposit is typically applied towards the buyer’s down payment or closing costs at the time of closing.

10. Can the buyer back out of the purchase during escrow?

Depending on the terms of the purchase agreement, the buyer may be able to back out of the purchase during escrow, but they may forfeit their earnest money deposit.

11. What is included in the closing documents?

The closing documents typically include the deed, bill of sale, loan documents, closing statement, and any other relevant paperwork.

12. When does the buyer officially own the property?

The buyer officially owns the property once the deed is recorded with the county and the keys are transferred, usually on the day of closing.

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