What is closing or escrow? What is involved in opening escrow?
What law governs the payment of escrow funds to the proper party?
Who sets the closing date?
What happens if I need to extend the closing date?
What are closing costs and how much will they be?
Financing: Can you help me choose a lender?
What is closing or escrow? What is involved in opening escrow?
Closing (also referred to as "settlement" or "escrow") is the process whereby an impartial third party, such as an attorney, an escrow company or a title company, is entrusted with the job of seeing that the transfer of ownership from the seller to the buyer takes place according to the terms of the written contract agreed upon by all parties involved. The closing agent keeps or holds any funds or documents safely until all the details have been settled and disburses them to the proper parties at the proper time. At the actual time of the closing, all parties come together to sign the appropriate documents. The seller will be asked to provide clear title to the property, and the buyer will be asked to provide the funds needed to close the sale. If there is a mortgage or loan involved, the closing of the mortgage also takes place at this time.
Opening escrow or starting the closing process simply involves (1) visiting the office of any firm that handles closings, (2) handing over the deposit money, and (3) giving instructions for the transaction. Anyone who is involved in the transaction may "open escrow." Generally, the real estate agent takes the initiative and opens the escrow. In For-Sale-By-Owner transactions in which no agent is involved, either the buyer or the seller or both may open escrow.
What law governs the payment of escrow funds to the proper party?
The underlying agreement between parties governs the payment of escrow funds to the proper party. The essential elements of an escrow are the irrevocable deposit of money or documents with a third person and a valid enforceable contract that calls for the delivery of that money or those documents on the occurrence of some condition (i.e. the exchange of deed for money).
Who sets the closing date?
As long as both parties agree, either a buyer or seller may set the closing date. Generally, the buyer puts a request for a 30, 60 or 90 day escrow in the original purchase agreement. The seller may request a shorter or longer escrow, depending on circumstances. A "financing contingency" specifying an amount of time to obtain a mortgage is put into the offer to purchase as well. Once the buyer has a firm commitment from a lender, the actual closing date can usually be set. If you are the buyer, be sure to set the closing date prior to the expiration of your lender's loan commitment or lock-in date for your interest rate.
What happens if I need to extend the closing date?
If any party needs to extend the closing date of the escrow, all parties must sign and agree to an Addendum or Extension to the original purchase agreement contract. Be careful that the extension does not interfere with the lender's obligation for a closing date.
What are closing costs and how much will they be?
Generally, your closing costs will total out to between 4 and 5 percent of your purchase price. The closing costs will include title searches, government taxes, notary fees, loan fees, escrow fees, recording fees, reconveyance fees, prorations and sales commissions.
Financing: Can you help me choose a lender?
Trying to choose a lender can be a difficult task. Start by asking for referrals from friends, family, neighbors and your real estate agent. If you are building, ask the builder for a referral, since most are willing to help you find financing. Find out what kind of rates the lender offers and the terms of various loans, especially on adjustable rate mortgages (ARM).