The paperwork

B - A Title or Escrow Company: What are their functions?

 Whether you’re selling with an agent or you’re by-owner, once a contract is agreed upon, the next move is to engage the services of a title company and in many parts of the country, an escrow company.

 

Their function:

A title company (title insurance company) or an escrow company refers to the specialists who coordinate the completion of your sale and the closing, or settlement as it is called in some areas.

These two entities are very similar in function. They act as neutral third parties, with the “closer” or “closing agent” at a title company or the ”escrow agent” being your primary contact for any questions concerning the closing.

The paperwork:

The key responsibilities of this closing entity are to make sure that:

• All outstanding property liens and mortgages are paid before or at closing.
• The lender gets a good mortgage. This is one that is endorsed by the proper parties and covers their financial commitments, obligations and remedies (in case of buyer default).
• The various real estate taxes and other costs (transfer fees, survey, attorney, inspection fees, etc.) are paid at or prior to closing.
• Checks are prepared for any real estate commissions due as well as checks for other services that are to be paid for at closing.
• No funds or property changes hands until all of the contingencies and instructions in the purchase contract have been satisfied and all necessary documents have proper signatures.
• A check is prepared for the net proceeds due you.
• The buyer obtains a clean (lien free) title to your property.
• The new deed is properly recorded.

 You should receive a copy of these expenses and disbursements anywhere from a day to a week before the actual closing.

At the closing, you and the buyers both sign documents pertaining to the property. In addition, buyers will sign documents relating to the loan, if any. This process is done with the buyers and sellers together at a “closing table” or the parties could be in separate rooms, or the document signings could be done separately.

The settlement, including title transfer and distribution of the monies is usually done immediately at the closing. However, in some areas, ownership and funds are not transferred until the deed has been recorded in the county, which could take a few days.

A “dry closing” typically refers to a signing of all documents with a delay of time (sometimes up to a few days) until the funds (checks) are disbursed. The actual procedures will vary slightly depending on the customs and laws where the transaction is taking place.

The escrow agent or the contact at the title company will advise you of the procedures used based on where the property is located.

Select a closing company:

Shortly after the contract to purchase has been signed,  the title or escrow company needs to be chosen to coordinate the sale. When you bought the house, what was the process then? When you talk to an attorney or real estate agents, ask them who selects the closing company and how the process works in your area.
 
If it is the buyers’ responsibility to choose the closing company, have them advise you of their choice. Touch base with the contact person there as soon as possible. They may need copies of certain documents from you and will need to communicate with your lender for payoff information (outstanding loan balances on your home).
 
In some areas the attorneys and even a real estate broker can do a closing. The procedure for moving toward the closing varies by state and in some cases, within the state.