You’ve found the home of your dreams and the seller has accepted your offer. The earnest money has been accepted, you have your loan approval in hand, and you and the seller have worked with your real estate agents to set the tentative closing date.
You have a million things to take care of: packing, scheduling movers, utilities and the kids’ school records. But what actually happens in that period between contract and closing?
While there are differences among the 50 states as to “who handles what” in a real estate closing, the basic steps of transferring a land title are used throughout the United States. So whether your closing is handled by an attorney, an escrow company or a title company, there are six basic steps followed in somewhat the same order in every real estate transaction.
1. Opening the Title Order
Upon the execution of an “escrow” or “sales contract,” the road to closing begins with a unique order number issued to the file. A correct legal description for the property is required so the title work can be ordered.
2. Processing the File
At this point, the property’s tax information, loan payoffs, survey, if necessary, homeowner/maintenance fees, inspections/ reports, legal documents, hazard and other insurances as well as legal papers are ordered and title commitments/ preliminary reports are reviewed and sent out.
3. Title Search
Copies of documents are gathered from various public records. Records searched include deeds, mortgages, paving assessments, involuntary liens such as judgments or federal tax liens, wills, divorce decrees and other documents affecting the title to the property. Documents are copied and delivered to the title examiner/attorney for examination.
4. Title Examination
Documents found during the title search affecting the title to the property are examined in order to verify the legal owner of the property. Mortgages as well as other items in the “chain of title” such as easements, set-back lines and rights of way are documented. The title commitment, preliminary report, attorney’s opinion or title report is produced, summarizing all findings affecting the property.
5. Document Preparation and/or Request to Produce
Lender instructions/requirements are received and reviewed in addition to the title information and survey. Charges are assembled and settlement statements are prepared (HUD-1 statement for a residential loan). Affidavits or other forms are prepared by the title company or attorney (depending on the state in which the closing is being held).
6. Settlement/Closing the Transaction
The long-awaited day of closing is overseen by the escrow/settlement officer. The seller signs the deed and the purchaser signs the new mortgage. The current mortgage is paid off and the new mortgage — secured by the real estate and the deed — is executed. The seller, real estate brokers, attorneys and other parties to the transaction are paid.
After the Closing
While you’re shaking hands and exchanging keys, the settlement or escrow officer records the appropriate documents with the county clerk or recorder of deeds. The closing package is assembled and sent to the lender within 24 to 48 hours. Finally, the title policies are prepared and forwarded on to the owner and lender after the recording information is received from the county.
Congratulations — you’re a new homeowner!