Lots of borrowers ask me what and when is the close of escrow. Here is clear explanation.
“Closing an escrow” is a term that creates much confusion for borrowers even if they are refinancing. The general term means when final papers are signed on a loan and the title is transferred to the new owner.
Whether it is a purchase or a refinance, when a borrower enters into a transaction with a property an escrow is opened with a title company. An escrow office is working on the transaction at the same time as the
lender is processing the loan and the real estate agent is ordering any needed inspections.
The escrow officer will be receiving information both from the loan officer and the real estate agent through out the transaction period which is typically between 30 and 45 days. In addition the escrow officer will be checking on anything that affects the title of the property. Existing homeowners often wonder about why this is necessary when they already own the property but things like liens against the property have to be resolved before a transaction can close. Sometimes people don’t even realize that there is a lien against their property.
The
lender typically doesn’t have the final loan documents ready to send to title until somewhere between 3 and 5 days before the close of escrow. When the escrow officer receives those papers and reviews them, they then prepare the HUD I (also called the settlement) that shows the final figures involved such as whether a borrower owes any money or whether they are receiving any cash back.
When the HUD I is ready the borrowers will go in to sign the final loan documents–these are the ones that will then obligate you to that loan. The timing on an escrow is critical but the
lender can’t usually tell you a week in advance exactly when the signing will take place. Just be prepared that you will need to take off a couple of hours to sign those papers so you aren’t rushed. Borrowers often want to sign after work but most title companies close at 5 so their last appointment is around 4.
If taking time off isn’t an option for you there are signers who can go to your home or meet you somewhere but there is an extra charge for this service which is typically $75 or more depending on the title company and where the signing is.
Once signed the papers go back to the
lender where the
funder reviews them for conditions and/or omissions. This can take another day or two because the
funder often receives a lot of files at one time and because they only fund before a certain hour in the day.
When the title company receives the funds they then take the papers to be recorded and title is transferred. This is the actual close of escrow!
Michele Dillingham has been writing the First Lady of Finance™ column since 1997. The column appears regularly in the Saturday Real Estate section of the Sacramento Bee and focuses on financing homes in California. Her column First Lady of Finance on the Real Estate section October 26, 2013 summarizes the differences between Real Estate Agents and Realtors, and how they subscribe to the code of ethics through the
National Association of Realtors,
Sacramento Association of Realtors and
The California Association of Realtors.
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